An Indian army official keeping an eye on the India-Pakistan border says that over a 100 trucks cross the border every month at the point where he stands. This is just a small part of the unaccounted cross-border trade between the neighbours. Add to this the trade going through third ports like Dubai and Singapore and the total India-Pakistan “unofficial” trade is several times the lowly official estimate of $2 billion. So, when the commerce secretaries of both countries agree to improve the bilateral trade relationship, they are partly helping legitimise the existing trade. This is good. Hopefully, the trade talks will also focus on issues like granting India the most favoured nation status, increasing service-sector exports to Pakistan, allowing the transit of Indian goods to Central Asia, while also addressing Pakistan’s concerns about what it perceives as non-tariff barriers imposed by India on its exports. However, acceptance of the Indian proposal to resume exporting petroleum products to Pakistan, an idea first mooted in 2004, will be truly path breaking for both countries. In virtually any other situation, the Indian proposal would be a no-brainer! With an existing capacity of 190 million tonnes per annum (expected to increase further as mega projects like the HPCL-Mittal joint venture in Bathinda come on stream), India is a global refining powerhouse. Approximately 25 per cent of refined output is exported. Pakistan, on the other hand, imports 50 per cent of its annual requirement of 24 million tonnes. If there was ever a case for trade based on the theory of comparative advantage, this is it!
Therefore, Pakistan’s stubborn refusal to allow the import of diesel and petrol from India on grounds of energy security and making fuel imports conditional upon India’s participation in the Iran-Pakistan-India (IPI) or the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline is unfortunate and can only hurt its own people. India’s misgivings about the viability of the two pipelines are fundamentally more grounded in geo-political reality than Pakistan’s fears about India disrupting fuel supplies in the event of a conflict. The prospect of fuel exports to Pakistan has both private and public sector players in the refining space excited. Resumption of fuel exports to Pakistan will provide Reliance Industries Limited and Essar Limited, both of which have extensive refining facilities in Jamnagar, and Indian Oil Corporation, with a refinery in Patiala, with business opportunities across the border. Looking ahead, the output from the HPCL’s Bathinda refinery could be transported to Lahore by simply laying a 100-kilometre pipeline. These are not pipe dreams, but techno-economically feasible solutions, provided the political will to move forward is in place. Amid the euphoria, a note of caution is in order. Pakistan’s fuel imports are heavily subsidised by “friendly” Gulf states, notably Kuwait. Indian firms may be unwilling to offer competing subsidies. As a related matter, the parlous finances of Pakistan’s oil marketing company will also need to be carefully scrutinised. It would be interesting to see how both sides get around this potential dampener. For the “Mohali spirit” to sustain, concrete steps on the ground are needed. Laying the foundation for a win-win relationship, which would ensure uninterrupted fuel supplies to Pakistan while providing Indian refiners with economies of scale and hard currency earnings, would be a wonderful way to begin.
