Five years after reviving talks on a gas pipeline from Iran through Pakistan, India is harbouring second thoughts on continuing with its participation in the proposed project.

A status report from the petroleum ministry has sought a review of the 2005 Cabinet approval on the Iran-Pakistan-India (IPI) pipeline, citing the stand-off with Iran on pipeline security and gas pricing as well as the increased domestic availability due to start of Reliance Industries’ Krishna-Godavari D6 (KG D6) field.

“There is a need to develop a common understanding of the project and to evolve (an) agreement on the path ahead amongst the stakeholders. The ministry proposes to convene a meeting with concerned ministries/ organisations such as Ministry of External Affairs, National Security Council Secretariat. Subsequently, the issue could be put for decision to Cabinet Committee on Security, if necessary,” the note says.

In February 2005, the Cabinet approved India’s participation in the IPI pipeline provided gas was delivered at India’s border to ensure supply security for downstream investments. To that end, New Delhi suggested a trilateral mechanism with suitable penalty measures to provide for defaults. It clarified that while there should be payment guarantees in the event of supply failure, India’s liability should be limited to taking the gas as per contract.

It also pitched for the Pakistan leg of the pipeline being built by “a consortium of technically competent and financially capable international companies with experience in implementing similar projects” with GAIL (India) getting an equity in that project segment. However, even as these and other supply issues remained unresolved, Tehran sprung a new gas pricing formula in January 2008 with a clause that the price from the new formula should not be less than the average price it charges other countries. India contends that the price formula agreed between Iran and Pakistan in January 2007 should be adhered to.

... contd.