India and Pakistan agreed to Transit Fee Formula for Tapi Gas Pipeline Project

In New Delhi, India and Pakistan on 25 January 2012 agreed in New Delhi to transit fee formula for Tapi(Tajikistan, Pakistan and India) gas pipeline project. On the Transit Fee, India and Pakistan agreed that the negotiations would be conducted in a transparent manner keeping in mind the overall economics of the Project, keeping in mind the landed cost of gas, and in accordance with the relevant international practices. Since there is a need to expedite the signing of the Gas Sale Purchase Agreement (GSPA), both sides agreed to settle the Transit Fee issue at the earliest. Pakistan agreed in-principle that whatever fee formula is eventually settled between India and Afghanistan would also be acceptable to Pakistan subject to approval of their competent authority. The two Ministers also discussed other issues of bilateral interest such as trade in petroleum products. Jaipal Reddy offered export of Petrol, Diesel, Aviation Turbine Fuel and Fuel Oil besides Sulphur, Polyethylene and Polypropylene since Pakistan is importing these products currently. It was pointed out that the main advantage for Pakistan will be the savings in freight cost since several refineries in India are located close to the India-Pak border.

The Indian side offered to export refined petroleum and petrochemical products by road, rail and by sea. It was also mentioned that Indian refineries would be willing to look at the feasibility of constructing product pipelines to Pakistan provided long-term guarantees for product offtake can be given by Pakistan.

Both sides noted that India-Pakistan Joint Working Group (JWG) on Petroleum & Petrochemical Products has been constituted recently to go into the specific details of facilitating trade in this sector, including infrastructure upgradation and augmentation in respect of railways, customs facilitation, setting up of banking channels, etc. Both Ministers agreed to advise their respective officials to hold the 1st meeting of the JWG at the earliest.

Apart from G2G efforts, both sides agreed on the need to activate industry and business associations in the petroleum sector for confidence building. Jaipal Reddy informed Hussain that India’s oil companies would be participating in the India Show at Lahore on 11-13 February, 2012 being organized by the Govt of India and FICCI to showcase the strength of India’s petroleum refining sector and what India’s oil companies can offer to Pakistan.