Oil exports from India to Pak stuck on price issue

Talks on petrol and diesel exports to Pakistan today appeared to have hit the price bump with India expressing inability to offer big price discounts that the fuel-deficit Islamic neighbour is seeking.

During talks with Oil Minister S Jaipal Reddy, Pakistan’s Petroleum and Natural Resources Minister Asim Hussain wanted price formulations to be presented before his nation can decide on importing petrol, diesel or jet fuel (ATF).

State oil firms, who have refineries and oil depots near the border, can export fuel to Pakistan but they cannot be selling petrol or diesel at rates lower than what they charge domestic consumers.

“He (Hussain) is insisting on pricing (of fuel). We have not made any progress on the issue,” said an Indian official who attended the 45-minute long meeting Reddy had with Hussain on the sidelines of the Petrotech 2012 oil and gas conference here.

Hindustan Petroleum Corp Ltd (HPCL) has a refinery at Bhatinda in Punjab while Indian Oil Corp (IOC) has a 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,” Hussain told reporters here. "We are looking at prices (to be offered by Indian firms)".

Pakistan imports 4-5 million tonnes of diesel from Kuwait every year. It has preferred the fellow Islamic nation over India as it gets a substantial discount as well as an extended credit period to make payments.

Indian officials, however, insist that the state-owned firms are commercial enterprises who 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.
Hussain said Pakistan can look at import of all petroleum products once "prices are decided".

"We are looking at prices,"he said. The visiting Pakistani minister had yesterday 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 remained 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.

Indian firms see exports to Pakistan profitable only when they are moved by road or rail across the border as it provides cost advantage.

Hussain said the modalities of imports can be decided once price is decided.
Officials of Indian refiners would visit Pakistan soon to discuss pricing.

Pakistan has during recent times liberalised its trade with India. This year, it changed the structure of its list of items that can be traded between the two countries.

Earlier, there was a ‘positive list’ that listed items that could be traded. This restricted trade to only some items. Now, it has moved to a new ‘negative list’ which specifically identifies products that cannot be traded, leaving room open for many more items to be traded.

Some Indian officials said Pakistan was demanding "impractically" low prices.
If Pakistan agreed for fuel imports, India planned 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 them (Pakistan) at lower than imported cost", an official said.