India to step up pressure for Iran gas line

“The trilateral mechanism has to ensure that our liability to pay for the gas supplied arises only after delivery of gas at Pakistan-India border and also that the gas is safely transported through Pakistan territory,” says the letter sent today, a day before Mukherjee arrives in Tehran for the 15th meeting of the India-Iran Joint Commission.

Deora’s stand is that the proposed trilateral mechanism would have to be tweaked to get Pakistan — which would get half the piped gas as well as pipeline transit fee — to provide safe passage to gas. “There should be provision for suitable penalty measures to provide for defaults,” he adds.

“With regard to the suggestion of fine being imposed in case of any delay or technical problem in the project caused by any country, we would like to clarify that India being a buyer of gas and not being a transit country, its liability should be limited to taking the gas as per the contract,” says Deora, taking forward the contentious issues both nations have discussed through exchange of Non Papers.

Iran submitted its Non Paper in July after Prime Minister Manmohan Singh handed one to President Mahmoud Ahmadinejad in April. Iran’s Non Paper identified the gas blocks for feeding the pipeline and said it was willing to examine a trilateral framework for the delivery of gas at the Pakistan-India border, as suggested by India.

Welcoming Iran’s assurance that gas would come from South Pars phases 19, 20 and 21, Deora wants Tehran to ensure that the development of these blocks is synchronized with gas supply in the pipeline, and there is no supply disruption.

“It is also necessary that the Inter-Governmental Framework Declaration and other agreements provide for ‘Supply or Pay’ obligations implying that the events of failure to supply gas are covered by adequate payment guarantees to provide for cost of alternative fuels and/or losses suffered by downstream industries,” he adds.

The minister’s stance on the vexatious price review clause too is more categorical than before. “The issue of pricing needs to be settled amongst the parties at the earliest…Our view is that price review is not required since it is in-built in the pricing formula. This issue needs to be deliberated upon between us.”

Claiming that gas prices were climbing steeply, Iran introduced this clause in May last year seeking a price revision every three years. But the reversal of fortune due to the global meltdown and a plunging crude oil — which funds Tehran to run its economy — now gives India the opportunity to take a new hard look at the project.