IPI Pipeline: India wants to resume dialogue

After a two-year lull, India has proposed to resume talks with Iran on importing gas through a pipeline passing through Pakistan, but the Persian Gulf state wants the meeting to happen in Tehran.

India in April proposed a meeting of the India-Iran Joint Working Group (JWG) between May 23 and 28 in New Delhi to discuss the Iran-Pakistan-India gas pipeline project, but Tehran has not yet confirmed the dates.

Now Iran has told India that the meeting of JWG should happen in Tehran, a source close to the development said.

"New Delhi has accepted the condition, but Iran has so far not indicated any dates for the meeting," the source said.

India has been boycotting project talks since 2008 over concerns on safe delivery of gas and frequent changes in price of gas. New Delhi wants Iran to stick to the price agreed between them in 2007 and also wants it to be responsible for safe passage of gas through Pakistan.

The pipeline has been on the drawing board since the mid-1990s, when Iran and India inked preliminary agreements to transport gas through Pakistan. It was dubbed the "Peace Pipeline", because of hopes it would lead to a detente between neighbours India and Pakistan.

India fears for the safety of the pipeline in Pakistan's Baluchistan province, home to a militant Islamist separatist movement, and wants Iran to take responsibility for safe passage of the gas through Pakistan. It wants to pay for the fuel only when it is delivered at the Pakistan-India border.

New Delhi is also upset with frequent changes in the gas price. Iran had originally priced the gas at $3.2 per mmBtu, but in 2007 revised the rates to $4.93 per mmBtu at $60 a barrel crude oil prices, which was accepted by India.

Last year, it unilaterally revised the rates again and according to the new pricing formula, the fuel would cost New Delhi $8.3 per mmbtu at an $60 per barrel oil price at the Iran-Pakistan border.

Added to this would be $1.1-1.2 per mmBtu towards the transportation cost and transit fee that India would have to pay for wheeling the gas through Pakistan, the source said.

Tehran, he said, wants to transfer ownership of the gas to India at the Iran-Pakistan border, while New Delhi wants it to be at the Pakistan-India border, thereby making Iran explicitly responsible for safe delivery of gas.

While the 1,100-km-long pipeline from the South Pars gas fields in the Persian Gulf to the Iran-Pakistan border would be laid by an Iranian firm, New Delhi wants to take stake in the 1,035-km pipeline section in Pakistan.

India feels that its participation in execution of the pipeline in Pakistan would make the project more bankable, reduce the financing cost, ensure timely execution and ensure transparent and efficient management of operations, the source said.