India examines fuel exports to Pakistan

India examines fuel exports to Pakistan

New Delhi: India is considering exporting fuel to Pakistan if allowed, to help its neighbour meet a shortfall, an Indian official said on Monday, a move that could bring a new market for refiners such as Reliance Industries and Essar Oil .

Like much of their commerce, fuel trade between the two nuclear-armed neighbours has been held hostage to their years of hostility, with Pakistan intermittently lifting a ban on imports of Indian petroleum products when relations have improved.

The issue of fuel trade between the two rivals came up in the middle of 2008, but has been on hold as relations deteriorated following the November 2008 attacks in Mumbai that killed 166 people.

The possiblity of the ban being lifted again comes as the two countries, which have fought three wars since their independence from Britain in 1947, are trying to revive a sluggish peace process derailed by the Mumbai attacks.

“It’s a possibility that is being looked at with a positive frame of mind from our side," an Indian government official said on condition of anonymity given the sensitiveness of relations between the two nations.

It was not immediately clear how much fuel could be exported by India and from when.

On Monday, the Economic Times newspaper said New Delhi had agreed to export fuels to Pakistan and provide a new market for large refineries of Reliance Industries and Essar Oil .

“Pakistan is ... keen to import refined petroleum products from across the border to save cost," the newspaper quoted an Indian government official with direct knowledge of the matter as saying.

“The Indian side will firm up the proposal in an internal meeting on Monday before the bilateral meeting," the unnamed source told the paper.

At the end of March, the prime ministers of the two countries watched their teams in a semi-final of the cricket World Cup in India, fanning hopes of further improvements in relations.

Pakistan has about 12 million tonnes of refining capacity, which meets only half of its annual requirements. India exports about 25% of its 185 million tonne refining capacity, the Economic Times said.

A decision to import from India could help Pakistan cut its widening trade deficit and reduce rising transport costs on imports from far-off countries such as Kuwait.

Officials at Reliance Industries and Essar Oil could not immediately be reached by Reuters for a comment.

But a top executive at state-run Indian Oil Corp. told reporters his firm may consider fuel exports to Pakistan if an import ban by that country of Indian petroleum products is lifted.

IOC’s head of refineries, B.N. Bankapur, said if Pakistan lifts the import ban it would provide an opportunity to expand IOC’s 300,000 barrels per day (bpd) refinery in Panipat.