Sunday, June 5 2005 17:59 Hrs (IST) - World Time -

Islamabad: Indian Oil Corporation (IOC) has offered to sell 320,000 tonnes of diesel to Pakistan via the Wagah border at a discount, company officials said in Islamabad.

Petroleum Minister Mani Shankar Aiyar, who flew into Islamabad from Lahore today (Jun 5, 2005), is likely to ask Pakistan to remove diesel from its negative list of imports from India when he meets Pakistani Commerce Minister Humayun Akhtar tomorrow.

Aiyar is on a state visit to Pakistan from June 6-8.

In order to woo Pakistan's diesel import order, IOC is willing to sell the product below the current landed price, irrespective of the production cost incurred by Indian refineries, the official said.

Pakistan, which imports 2.5 million tonnes of diesel from Kuwait per annum, does not have any refinery in Lahore-Multan area which receives products either from inland refineries or from Karachi (imported products) by rail or road.

"IOC can supply diesel across the border by land route and reach it straight to Lahore. The diesel can be piped from Panipat refinery to Jalandhar, from where it can move by road/rail to Lahore," he said.

The company offered 320,000 tonnes of diesel for six months beginning July.

The official said the product would be priced in such a way that the landed cost at Lahore is at least 50 cents lesser per barrel than the landed cost presently incurred by Pakistan at Lahore. Actual saving shall, however, be decided after negotiations with Pakistan Oil Companies before the contracts are finalised.

"Apart from lower cost of diesel, India's surplus capacity and its proximity to the consumption points of Pakistan, shall provide adequate energy security and a lot of flexibility to Pakistan," he said.

Besides, Pakistan also stood to gain from not being required to carry high inventory, lesser ocean loss and minimal transit time.

Petrochemicals

The official said IOC is also looking at petrochemicals export to Pakistan. Aiyar is taking up IOC's cause for Linear Alkyl Benzene (LAB) exports from Gujarat and PTA and Polymers trade through Wagah border from Panipat by road into Pakistan.

"All these products have considerable demand in Pakistan and are currently being imported by them from various sources. Imports from India would mean freight advantage to the consuming industries in Pakistan by way of road movement through Wagah Border from Panipat," the official said.

At present, imports of LAB in Pakistan from India is on negative list. PTA and polymers are on the positive list.

Initial discussions for LAB with manufacturers of detergents like Colgate Palmolive and Unilever in Pakistan have been encouraging.

"Quality has also been found acceptable," he said hoping Pakistan may consider putting LAB imports from India in positive list and movement by road from Rajasthan border.

LAB is an essential input for manufacture of detergents. Currently, there is no production of LAB in Pakistan and the total requirement is imported. Pakistan currently imports approximately 15-20,000 tonnes of LAB.

Purified Terephthalic Acid (PTA) is an essential input for polyester. Pakistan's PTA demand is estimated to be 718,000 tonnes. With a production capacity of 453,000 tonnes, the country is likely to import 257,000 tonnes in 2005.

In Lahore and Islamabad, polyester plants like Rupali Polyester, Rupa Fil, ICI-Pakistan, Ibrahim Fibres & Dewan Salman have considerable requirement of PTA which is imported through Karachi port. Similar to LAB, these companies can also have advantage of freight, transit time and inventory optimisation.

Pakistan imports about 300,000 tonnes of polymers every year. Import through Wagah border would facilitate development of downstream industry in Lahore and adjoining areas. Other advantages as mentioned in LAB and PTA would also apply.

"We can supply whatever quantities they want," the official added.