India, Pakistan agree on uniform transit fee

In a breakthrough that will take forward the ambitious $7.6-billion TAPI (Turkmenistan, Afghanistan, India and Pakistan) pipeline project, India and Pakistan on Wednesday agreed to have a uniform transit fee to ferry natural gas from Turkmenistan. This was decided at a meeting between Petroleum and Natural Gas Minister Jaipal Reddy and visiting Pakistan Energy Minister Asim Hussain here.

Under the in-principle agreement, India will pay transit fee to Pakistan and Afghanistan to get its share of 38 million standard cubic metres a day of gas through the pipeline, while Islamabad will pay ferrying charges to Afghanistan.

“Pakistan agreed in principle that whatever transit fee formula is eventually settled between India and Afghanistan will also be acceptable to it and is subject to the approval of the competent authorities,” a statement issued by India after the meeting said.

Later, at a joint press conference, Mr. Reddy said: “There can't be one transit fee for India and Afghanistan and another for Pakistan and Afghanistan. It should be the same in-principle.”

His sentiments were echoed by Mr. Hussain. He said it was among India, Pakistan and Afghanistan to agree to a uniform tariff. It was subject to the approval of the competent authorities of both the governments. The formula to fix the transit fee had not yet been arrived at and both sides would sit together to resolve the issues related to it.

“We have not yet decided on what will be the method of indexation, but our groups are going to meet. We have to sort of formalise and come out with the strategy on what it should be based on and what the indexation formula should be,” he said.

The 1,735-km-long pipeline will run from Turkmenistan's Yoloten-Osman gas field to Herat and Kandahar province of Afghanistan, before entering Pakistan. In Pakistan, it will reach Multan via Quetta before ending at Fazilka (Punjab) in India. The project envisages a total throughput of 90 million standard cubic metres a day (MSCMD) of gas, of which India is expected to receive 38 MSCMD after it becomes operational.

Fixing the transit fee that is to be paid to Afghanistan was one of the major issues. “The transit fee should be reasonable and there should be an element of predictability in it,” Petroleum Ministry Additional Secretary Sudhir Bhargava said.

The statement said both sides agreed to settle the transit fee issue at the earliest, as there is need to expedite the signing of a gas sales purchase agreement (GSPA) for the project.

Referring to the security concerns pertaining to the pipeline, Mr. Reddy said, “It is only through development of common economic stakes, we can reduce tensions and suspicions. As time goes by, we are confident about dealing with security issues as the government of Afghanistan and their people are keen on this.”

Both sides also agreed in-principle to jointly explore opportunities in Turkmenistan's upstream oil sector.

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