ISLAMABAD: Iranian President Mahmoud Ahmadinejad is scheduled to visit Pakistan next week to sign Inter-Governmental Cooperation Agreement (IGCA), an accord that will pave the way for Iran to extend financial and technical assistance for laying Pakistan’s portion of the gas pipeline between the two countries, officials say.
Under the assistance programme, the Iranian government will provide a loan of $250 million for Pakistan and another $250 million will be arranged through Iranian commercial banks for engineering, procurement and construction works on the gas pipeline.
Pakistan is scrambling to secure funds for the pipeline project amid fierce US opposition in the wake of sanctions imposed on Iran for its alleged nuclear programme.
Before the arrival of Ahmadinejad, Iranian Vice President Ali Saeedlou was due to visit Pakistan from November 5 to 9 along with a high-level delegation to finalise a draft of cooperation agreement. However, due to a hand injury, the vice president postponed the trip.
“An Iranian team was scheduled to come early this week, but it has not arrived so far,” a source said. “Pakistan government has sent a reminder to the Iranian energy ministry, asking it to send a team of experts to finalise the draft of cooperation agreement so that the two countries could sign it during Ahmadinejad’s visit,” he said.
Though the government had issued a tender for engineering, procurement and construction (EPC) contract for laying the pipeline in Pakistani territory, now an arrangement has been finalised with Iran, which will provide technical and financial help for the project. Targeted to be completed by December 2014, the pipeline will bring 750 million cubic feet of gas per day (mmcfd), which can be increased to one billion cubic feet of gas per day.
The government of Balochistan wants 250 mmcfd for the Gwadar Port, which will prompt the central government to seek an increase in supply from Iran to meet the province’s requirements, sources say.
Besides Iranian financing of $500 million, the Government of Pakistan will raise funds through the Gas Infrastructure Development Cess (GIDC), a kind of tax being charged from domestic gas consumers. The government expects to receive Rs30 billion from the consumers on this account in the current financial year.
Under a proposed plan, Pakistani and Iranian companies will form a joint venture to lay the pipeline. Sources say the cost of the project will come down if local companies participate in construction of the pipeline from the Iranian border. The Iranian side will also provide material support for the pipeline.
German-based firm ILF has already completed detailed engineering design of the project and according to the interim feasibility report, the cost of the project will be in the range of $1.2 to $1.5 billion.
Earlier, China and Russia had committed to financing the pipeline if they were awarded the construction contract without bidding, but no progress could be made apparently due to US opposition.
During President Ahmadinejad’s visit, the two countries will also discuss how to clear the outstanding amount for power import from Iran. Additional import of 100 megawatts will also come up for discussion.
Pakistan and Iran have already signed a memorandum of understanding (MoU) for supply of 1,000MW. Under this project, Iran will build a powerhouse in its Zahedan province bordering Pakistan to generate electricity and has also expressed its willingness to provide $800 to $900 million for the project.
A 700km transmission line of 500 kilovolts will be laid from the Pak-Iran border to Quetta.
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