India, Pakistan push talks on gas pipeline from Iran

India's oil minister told Pakistani Prime Minister Shaukat Aziz yesterday that talks on a proposed gas pipeline from Iran to India through Pakistan should go ahead as part of a push for more regional trade.

"We did repeat what we have said earlier about using Pakistan as transit corridor (for sourcing gas from Iran)," Oil Minister Mani Shankar Aiyar told reporters.

"Notes were exchanged on the gas pipeline issue and the energy security situation in our respective countries."

Aiyar met with Aziz, who arrived Tuesday for his first official visit to India, for 45 minutes and indicated his willingness to push the pipeline proposal with the Pakistani oil minister.

The negotiations on the 1,600-kilometer (1,000-mile) pipeline estimated to cost more than four billion dollars began in 1994, but little headway was made due to tensions between Pakistan and India and the project's massive cost.

However, warming ties between India and Pakistan since April 2003 have revived hopes the project could go ahead.

India could save millions of dollars in gas import costs and Pakistan could meet its own energy needs while earning millions of dollars annually in transit fees, analysts note.

The Indian government has been looking at the alternative of importing the gas by ship, but that would be more expensive.

India, which is able to produce only 30 percent of its energy requirements, has been scouting around the globe for oil and gas sources, including projects in Sudan, Myanmar and Russia. India's appetite for gas has grown following court orders to switch public transport in major cities to the clean-burning fuel instead of diesel.

Indian officials also say another aspect that will need detailed scrutiny is whether the pipeline will have to pass through violence-racked regions of Pakistan before it can enter Indian territory.

Aiyar said the "mutual dependency" being envisioned in the energy sector needed to be replicated in other areas so that there is cooperation in the wider trade and economic relationship."

India granted Pakistan Most Favoured Nation (MFN) status in 1995 but Islamabad has been reluctant to reciprocate, linking trade to settlement of the Kashmir dispute. As a result, Pakistani goods can be exported to India at concessional duty rates, but Indian manufacturers do not get matching privileges.

"The relations between India and Pakistan can not be limited to a few areas. It should form part of wider trade and business relationship and MFN encompasses that," Aiyar said.

Trade between India and Pakistan stands at more than 200 million dollars annually but could easily jump to three billion dollars within a year if the two neighbours open up their markets to each other.

Illegal trade between the two is estimated at around two billion dollars, 10 times more than legal commerce.