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JUN 15 2012

Petro trade talks deadlock: Pak pushing for better price, says India

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 15th JUN 2012

Despite the new-found bonhomie, the old habit of mutual distrust seems to be creeping into India-Pakistan talks.

The bilateral negotiations on trade in petroleum products are now treading on slippery grounds with Islamabad indicating that it does not want to be overly dependent on India for its energy security.

Though it makes better commercial sense to buy petroleum products from India and save around 50 per cent of the current import bill due to lower transportation costs, Pakistan fears that excessive dependence on India to source petroleum products may prove to be costly from a strategic point of view, official sources told Business Line.

(Average transportation cost to import petro products from West Asia to Karachi is $12 per tonne as against $6 per tonne for the same from Gujarat to Karachi.)

Islamabad apprehends that such a move could in turn give New Delhi an upper hand in several other issues confronting the two neighbouring countries and therefore, has hinted that it would go for a diversified approach, including continued sourcing of petroleum products from West Asia, they said.

However, New Delhi sees Islamabad's apprehensions only as an aggressive negotiating stance to get a better deal on quantity and price of these commodities — diesel, petrol as well as furnace oil for Pakistan's power units.

Both sides had recently commenced talks to explore the possibility of India exporting petroleum products to Pakistan. The next round of talks, expected soon, would be on quantity and price. However, industry sources said a price assessment can be made only when commercial discussions start.

The Indian oil companies, which are part of the bilateral talks, include Reliance Industries, Indian Oil, Hindustan Petroleum, Bharat Petroleum and Essar Oil. These companies are keen on doing business with Pakistan as it is a lucrative market, which imports around 70-80 per cent of its domestic requirement of 22 million tonnes of petroleum products.

Since Pakistan's petroleum products market is poised to grow due to the increasing energy needs, India does not foresee any grounds for cutting back on supplies, the sources said, adding that Islamabad's apprehensions seem to be misplaced.

India, which has excess refining capacity of around 70 million tonnes, is also in a position to export furnace oil for Pakistan's power plants and help boost that country's manufacturing output, which has been hit by a severe power shortage.

The recent talks made some progress on the possibility of transporting furnace oil and petrol through the Wagah border, while diesel would be exported to Pakistan through Karachi. India has also offered to lay an oil pipeline till the Wagah border.


Delhi Gujarat Essar Electric Power Development Corporation Limited Oil Pakistan Asia Petrol Petroleum Hindustan Petroleum Corporation Limited Indus Essar Essar Steel Essar Oil Ltd.

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