India should stop vacillating and make up its mind about whether it wants to join a planned gas pipeline project from Iran, a senior adviser to Pakistan’s prime minister said yesterday.
Speaking exclusively to Emerging Markets, Salman Shah, who is here to attend an informal meeting of South Asian finance ministers, said: “The door is still open. A second pipeline is always possible.“ The top finance adviser declined, however, to comment on the speculation that India is under political pressure from the United States to back down from the controversial $22 billion, 25-year mega-deal, under which gas would be pumped from Iran to Pakistan, via Afghanistan, with the possibility of a connection to India.
His comments come a day after Iranian deputy oil minister Hadi Nejad Hosseinian indicated on a trip to New Delhi that Tehran would like to renegotiate the price of LNG supplied under the deal signed in June last year. Indian oil and natural gas minister Murli Deora Tuesday rejected the Iranian proposal and said that India fully expects to pay the price originally contracted in the deal, capped at $3.2 per million British thermal units.
Asked about India’s concerns over the high prices, Shah said that Pakistan had no issues with the gas purchase price. Long-term gas prices will be contracted as part of the proposed gas pipeline from Iran, and will go a long way in securing Pakistan’s energy security, he said.
With the Iran-India deal now in the balance, India’s bid to secure nuclear energy from the US has assumed renewed significance. But that deal will not reduce India’s dependence on imports of oil and gas in the short to medium term, according to a leading Indian energy expert.
Kirit Parikh, a member of India’s Planning Commission, a government panel chaired by Prime Minister Manmohan Singh, told Emerging Markets on Tuesday that if the Indo-US deal does goes through (the US Congress as well as international energy authorities must clear it), the landmark deal signed during President George Bush’s visit to India last March, “will not change India’s energy fuel mix in the short to medium term.”
India imports about three quarters of its crude oil consumption, and rising global oil prices are the biggest threat to its booming economy. A large oil import bill, currently reckoned at $41 billion, will widen the country’s current account deficit and put pressure on interest rates.
On the technical feasibility of having gas supplied through a pipeline from Iran, Parikh said “it was technically feasible, and the economies of scale make it an attractive option.” The critical issue for India is the price at which imported gas is available. “It must be available to us at a reasonable price. We have to look at the opportunity cost; at what cost an alternative fuel like coal is available to us,” Parikh pointed out, hinting that price might still be an issue if the politics over the controversial project are ironed out.