India-Pakistan talks on petroleum trade hits roadblock

India-Pakistan talks on export and import of petroleum products, including petrol and diesel, have hit a roadblock with India expressing its inability to offer big discounts to Islamabad in this sector.

The issue came up for discussion during the talks between the Petroleum and Natural Gas Minister, Jaipal Reddy, and the visiting Pakistan Petroleum and Natural Resources Minister, Asim Hussain, on the sidelines of the Petrotech 2012 conference being held here. The Pakistan side was clear that it wanted the price formulations to be put on the table before it took a call on importing petrol, diesel or aviation turbine fuel (ATF) from India.

India is understood to have conveyed to Pakistan that it had facilities and oil depots near the Pakistan border and was in a position to export petroleum and petrochemical products. However, they said that they could not sell petrol or diesel or even ATF at lower rates than what they charge domestic consumers and that is where the whole issue had got stuck.

Hindustan Petroleum Corporation Ltd (HPCL) has a refinery at Bhatinda in Punjab while Indian Oil Corporation (IOC) has an oil depot at Jalandhar, from where products can be moved into Pakistan. “We have stated that we want to look into price formulations before deciding. We are looking at prices to be offered by Indian oil firms,” Mr. Hussain told reporters.

Pakistan imports 4-5 million tonnes of diesel from Kuwait every year and gets discounts of payments and products. India has maintained that state-run oil firms were commercial enterprises which cannot sell products to Pakistan without a margin or at rates that are lower than domestic prices. Also, Pakistan has not indicated volumes it wants to import from India.

Mr. Hussain said Pakistan could look at import of all petroleum products once prices were decided. The visiting Pakistani Minister had, on Tuesday, talked of the possibility of fuel imports from India only if offered at right price. Also, the issue of movement of fuel by road or rail remains to be resolved. While Pakistan has permitted fuel imports from India, road/rail movements are not allowed. Fuel can only be shipped to Karachi port.

It is also understood that officials of Indian oil companies are likely to visit Pakistan soon to discuss the issue of pricing. Pakistan has, during recent times, liberalised its trade with India. This year, it slashed the negative list allowing increased number of items that can be traded between the two countries.

India had already indicated to Pakistan that it was ready to lay a 200 km pipeline from Bhatinda in Punjab to Lahore to move the fuel. India has surplus refining capacity and is a major exporter of oil products, while Pakistan meets most of its needs through imports from West Asian countries. “As a nation we are definitely surplus in product. But as public sector companies, we are deficit in product in north India. We buy products from Reliance Industries and Essar Oil and so we cannot be buying at market rates and then selling to Pakistan at lower than imported cost,’’ a PSU oil company official said.

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