Pakistan and India set to announce IPI gas transit fee

May 1st, 2008 Sana · No Comments

*Expected to agree on 40 cents per mmbtu

By Zafar Bhutta

ISLAMABAD: Pakistan and India are set to announce the gas transit fee within a week for the transmission of gas to India under the billion dollar Iran-Pakistan-India (IPI) gas pipeline project, sources told Daily Times on Wednesday.
The sources said that Pakistan and India are expected to agree on 40 cents per million British thermal units (MMBTU) as the gas transit fee. If both countries agree to this rate, Pakistan would receive around $148 million per annum from India in transit fee.
If international norms applicable to gas transit fees are adhered to, the transit fee under the IPI deal will amount to $180 million per annum. But the two countries are expected to sign the agreement at the lower rate, the sources said.

India sought Pakistan’s agreement on a transit fee lower than international standards in talks between two sides on April 25 in Islamabad. The Pakistani side had argued for a transit fee corresponding to international norms, but agreed to fixing the transit fee a little lower than international standards for the sake of inking a deal it termed as a ‘peace pipeline’ between Pakistan and India.
Sources also said that India wants Pakistan to fix the transit fee for the lifetime of the project, without any further revisions to the transit fee. However, Pakistan is of the view that the mechanism for determining the transit fee should be linked to the international gas sales price, and that the transit fee should also be open to revision according to variations in the gas price charged by Iran.
The sources said there had never been an agreement anywhere in the world where a transit fee was fixed and did not allow for revisions. International norms require revisions in transit fees as the gas price is revised by gas exporting countries, they added.

The sources also said transportation charges would be determined after the project feasibility report was finalised, and that a company would be set up to implement the project and ensure its security according to a mutually agreed framework.
Meanwhile, Pakistan and Iran have agreed on the draft of the Gas Sales Purchase Agreement (GSPA) for the IPI project, and both sides are ready to sign on it. The Cabinet Economic Co-ordination Committee (ECC) has also received of the copy of the GSPA draft, the sources said.