India once pursued Iran gas pipeline via Pakistan: What went wrong

India once explored Iranian gas imports via Pakistan through the $7 billion Iran-Pakistan-India (IPI) pipeline. Here's why India exited the project

The ongoing crisis in West Asia has exposed India's dependence on energy imports, with the shortage of liquefied petroleum gas (LPG) and liquefied natural gas (LNG) hitting multiple sectors. While India has diversified its energy imports over the years, it still imports over 60 per cent of its domestic gas requirement from West Asia.

 

Years ago, this diversification bid also prompted New Delhi to consider joining a gas pipeline project from Iran. The $7 billion Iran-Pakistan-India (IPI) pipeline, once seen as a potential game changer for India’s energy mix, ultimately failed to materialise. 

 

Let us revisit what the IPI project was and why India did not join it.

 

 

What was the IPI pipeline project?

 

The proposed IPI pipeline was conceived in the 1990s to transport natural gas from Iran — which has the world’s second-largest natural gas reserves — to countries in South Asia that are developing and energy-starved. The pipeline would run 2,775 km when linked with the three countries.

 

The idea originated from a Memorandum of Understanding between India and Iran in 1993 for the construction of a natural gas pipeline, though Iran's initial discussion for the project was with Pakistan. Iran later proposed that India join the project to reach the wider South Asian market.

 

The project aimed to supply up to 60 million standard cubic metres per day (mmscmd) of gas each to India and Pakistan, with Islamabad earning a separate transmission fee from New Delhi.

 

Why did India join the IPI talks?

 

Through the 90s and early 2000s, India's tense ties with Pakistan, including the 1999 Kargil conflict, prevented it from furthering the talks on the IPI pipeline. By 2004, however, the tensions eased following a peace initiative by then prime minister Atal Bihari Vajpayee and Pakistan's general Pervez Musharraf.

 

In 2005, the Congress-led UPA came to power and then petroleum and natural gas minister Mani Shankar Aiyar visited Pakistan. At a joint press statement issued in Islamabad, both sides agreed to give “top priority” to transnational pipeline projects, explicitly reviewing the IPI proposal and framing it as significant for both countries’ energy security. They also agreed to exchange information on financial structuring and legal and commercial issues and set up an ongoing joint working group. 

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India’s participation was driven by a combination of economic and strategic considerations. During the early 2000s, natural gas demand was rising rapidly, especially in the power generation and fertiliser sectors.

 

Pipeline gas from Iran was expected to be more cost-effective than LNG, which involves liquefaction, transport, and regasification costs.

 

Why did India exit the IPI project?

 

While India did not formally exit the project, it did not join negotiations after 2007 due to unresolved key concerns. A Ministry of Petroleum and Natural Gas statement from 2014 reads, "Several critical issues, viz., the delivery point of Iranian gas, the project structure including project finance, guarantees related to safety of the pipeline and security of supply, pricing of gas, location of international seat of arbitration, etc. are yet to be resolved."

 

Pricing disagreements were central. India sought a formula linked to international crude benchmarks to ensure affordability, while Iran pushed for higher prices. According to a 2007 PTI report, Iran wanted to sell natural gas to India and Pakistan at $4.93 per million British thermal unit (at $60 per barrel crude oil price), which was higher than New Delhi's estimates.

 

Security concerns were another major factor. The pipeline was to pass through Pakistan’s Balochistan province, where insurgency risks raised concerns about supply disruptions.

 

The most significant reason, however, was pressure from the United States. Washington had imposed sanctions on Iran, cautioning countries against involvement in trade or any economic activity with Tehran.

 

Ahead of his India visit in June 2008, Congressman Gary Ackerman, then chairman of the House Foreign Affairs Subcommittee on the Middle East and South Asia, had said that New Delhi's interest in the IPI pipeline could "jeopardise" its relationship with the US.

 

Unresolved issues around transit fees and delivery guarantees from Pakistan further complicated the project. According to a 2007 PTI report, Pakistan demanded $1.57 per million British thermal unit per mBtu as transportation tariff, while India was willing to pay not more than $0.55 per mBtu. While Pakistan later offered $0.70–$0.75 per million British thermal unit per mBtu, India did not accept the offer.

 

What happened to IPI after India's exit?

 

Following India’s exit, the project was recast as the Iran-Pakistan (IP) pipeline in 2013. Iran has completed its section of the pipeline with an investment of $2.0 billion, but Pakistan has faced delays due to financing constraints and sanctions concerns. No gas flows have commenced, and the pipeline remains largely dormant. 

 

Why did India shift to TAPI?

 

After stepping away from IPI, India prioritised the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, seen as a more viable alternative.

 

The TAPI project aimed to transport gas from Turkmenistan’s Galkynysh field through Afghanistan and Pakistan to India. The pipeline is expected to span about 1,800 kilometres and supply 33 billion cubic metres of gas annually.

 

India signed the intergovernmental agreement for TAPI in 2010, with the Asian Development Bank (ADB) acting as the transaction adviser.

 

Unlike Iran, Turkmenistan was not under comparable international sanctions, making TAPI more acceptable diplomatically. This reduced the risk of friction with Western partners, particularly the United States.

 

The project also benefited from backing by the United States, describing it as part of a broader “New Silk Road” strategy aimed at linking Central Asia to South Asia. The Asian Development Bank’s involvement improved financing prospects and institutional credibility.

 

Is TAPI operational today?

 

Despite over three decades since it was conceptualised, TAPI is not operational. Construction has progressed in Turkmenistan, but work in Afghanistan and Pakistan has lagged due to security concerns, funding challenges, and political instability.

 

In October 2025, Turkmenistan and Afghanistan jointly inaugurated a small section of the TAPI pipeline between the Turkmen–Afghan border in Serhetabat and the city of Herat. The initial gas transmission is active between the two nations, but bringing Pakistan and India back on the board remains an elusive dream for now.