Commencing work on Iran-Pakistan gas pipeline

After the withdrawal of sanctions imposed on Iran the way has been cleared for the commencement of construction of Iran-Pakistan gas pipeline (IP). While Iran has already completed its part of the pipeline, Pakistan has yet to begin the work. The pipeline originally included India, which later on backed out due to the US pressure and Pakistan also didn’t go ahead, fearing it may also face economic sanctions.

Three key issues were raised regarding IP: 1) probability of imposition of sanctions, 2) security of pipeline and 3) mobilizing funds for the construction of pipeline. Initially Iran had offered to provide US$250 million loan to Pakistan but the ruling junta didn’t accept it under the pressure of the US.

With the withdrawal of sanctions there remains no hitch except security of pipeline, particularly the portion passing through Baluchistan. If India-Pakistan relationships improve and India also agrees to join the project the threats to pipeline will be minimized. It was often alleged that the militants operating in Baluchistan were supported by anti-Iran and anti-Pakistan elements.

Even since the talk began about import of LNG, I have been the most vocal opponent. This opposition was mainly due to: 1) the pipeline is a symbol of friendship between three countries - Iran, Pakistan, India) enjoy common borders and also have connecting rail and road networks, 2) Pakistan being deprived of huge transit fee, 3) mobilizing capital and 4) delicacies of the technology.

As the entire scenario has changed the outlook and working parameters have also changed. Pakistan could now seek funds from China, Russia and multilateral financial institutions for the construction of the part of pipeline passing through the country.

Despite the most fervent opponent of LNG import, I will still not recommend abandoning LNG project and suggest completing the construction of terminal in Karachi on top priority. However, the project should be constructed by the private sector only without any involvement of the government. This option is another option to boost availability of gas in Pakistan to meet future requirements.

The top beneficiaries of enhanced availability of gas should be industrial units (fertilizer plants and textile units) and not the power plants. Burning gas at power plants is complete waste of this precious resource. Pakistan should also expedite work on hydel power plants, which will also enhance water storage capacities in the country.

Circular debt issue of power sector just can’t e resolved by running power plants on gas. It could only be overcome by containing blatant theft of electricity and recovering all each rupee of the outstanding amount running into billions of rupees.