Saarc co-operation prospects have always suffered due to bilateral issues and conflicts among two of its major members - India and Pakistan. There is no denying the fact that there is a tremendous scope for mutually beneficial co-operation among the member countries in trade, technology and social sectors. However, the debate has been whether conflicts should be removed first to open the doors of co-operation or mutually beneficial co-operation would create incentives and compulsions for conflict resolution. Perhaps the truth is in between, as always; hence the rationale for initiatives on both the political and economic sides. This has been the policy of successive governments in Pakistan for more than two decades including the present one and around which there appears to be a consensus in Pakistan. One area where almost all SAARC countries, especially, Pakistan, India and Bangladesh, are having problems of various natures is of Energy. We will examine in this article the commonality of issues and scope and potential of co-operation in Energy sector among Saarc member countries.
There is potential in Energy Trade, Technology and Policy areas. There have been initiatives for trade in electricity. In the immediate aftermath of Hub Power project in Pakistan, there were voices for export of electricity from Pakistan to India. The surplus was short-lived, however. For the last many years, there has been talk of export of electricity from India to Pakistan. Most recently, there were negotiations on gas exports from India to Pakistan. Both initiatives died down on the altar of pricing. The problem is that all the three countries are suffering from both gas and electricity crisis. There is loadshedding in all the three countries. These countries used to be self-sufficient in natural gas production; all of them are turning to LNG imports due to dwindling gas supplies and growing gas demand. India used to be surplus in Coal but now it is importing coal due to production shortages, despite having massive reserves. Bangladesh has coal but has not been able to exploit it due to technology and finance reasons. Pakistan has Thar coal but has failed to utilise it in an adequate manner and had to launch projects on imported coal.
In policy context, there is a lot of benefit in mutual consultation and co-ordination. GIDC (Gas Infrastructural Development Cess) have been raised in Pakistan and had to be partially withdrawn under severe pressure from Textile Industry; the argument being that natural gas is cheaper in competitor countries like India, Bangladesh and China. Pakistan will lose markets to these countries in case gas prices are raised. However, what happens if all the three countries adopt a unified policy in this respect under some protocol of co-operation.
China, India, Pakistan and Bangladesh are suffering from the same syndrome; they are transitioning from low cost producers to imported expensive gas importers and have to adjust prices .China reportedly has already increased gas prices to international level of 10 USD per mmBtu excepting the domestic (residential) sec International export prices of textiles are in large measures influenced by the cost of production from these countries. If they increase gas prices in unison, they achieve their price reform objective while not losing market share to each other.
It may be noted here that Pakistan's gas market is relatively larger. In terms of almost all other economic or energy parameters, India weighs 8-10 times larger or heavier than Pakistan. However, in case of natural Gas, India's market is relatively smaller; India's gas production being only 25% higher than Pakistan and consumption only 50% higher than Pakistan. Following table provides some useful data in this respect.
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Comparative Gas Markets in selected countries
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Production Consumption Trade as % of Market Ranking
BCMY BCMY Consumption
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India 52.8 64.9 18.64 151
Pakistan 42.9 42.9 - 100
Bangladesh 19.75 20.1 1.74 47
Turkey 0.674 38.12 98.23 89
Turkmenistan 42.9 22.6 (89.82) 53
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Note: market ranking is based on comparative consumption.
Trade as % of consumption in brackets means exports and vice versa.
BCMY=Billion Cubic Meters per year
Source: Index Mundi(compiled by the author)
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In case of LNG a significantly important market is developing in the region. India is already importing 12 billion CM of LNG per year. Its LNG imports are projected to increase manifold in future. It is already in the process of installing several LNG project and has reached agreements with US companies to get 25% cheaper LNG than the rates from Qatar and elsewhere. It is going as far as to Australia to get its LNG and bring diversity in its LNG portfolio. Pakistan is poised to significant LNG imports. With the launch of Engro project in Pakistan and a similar size project in Bangladesh and further increases in latter's portfolio, the combined size of LNG import market would be significant. Co-operation and co-ordination in LNG procurement policies, arbitrage (diverting LNG from one to another country for mutual advantage and scheduling) and other possibilities are there. For example, GAIL India is already in the market to sell off some of its expected surplus in LNG imports from the US to third parties. That third party/country could be Pakistan. Let me clarify that it is not the expensive regasified LNG from Gujarat that I am talking about. This is direct diversion/sales of cheaper LNG from the US. In an earlier article I had discussed the issue and potential of getting cheaper LNG from the US. I hope the minister Khaqan Abbasi launches a suitable initiative in this respect. As mentioned earlier, this would require interest and support from the highest level in the country and a major diplomatic initiative. Saarc LNG initiative might serve as an additional sweetener to suitable incline Washington towards broadening LNG supplies to the whole region than to one country. Additionally, the benefits of LNG co-ordination and co-operation would remain as mentioned earlier.
India has an installed coal power capacity of 75,000 MW or more. It has also acquired and developed technology of coal power plants and produces complete plants and equipment. None of the SAARC countries have know-how in this respect. India also has experience with lignite, the kind of coal Pakistan has in Thar. Similarly, Bangladesh has some resources of coal situated at Indian borders that have not yet been utilised for a variety of reasons, although, there is bilateral co-operation between India and Bangladesh wherein India is assisting Bangladesh in installing a major coal project. In Pakistan due to unhelpful political and security climate, a major Indian investment project activity may not be feasible. A novel approach has been adopted by Saarc Energy Centre (SEC) which is located in Islamabad. SEC has proposed a project under which Thar coal from border region in Pakistan would be transported to border regions in India via a dedicated rail link and burnt in a Saarc coal power plant and the electricity thus produced would be fed back to Pakistan, charging Pakistan for CPP and O&M charges only. A similar project has also been proposed for Phulbari coal that is situated on western border of Bangladesh with India.
In India, remarkable developments have been done in Wind the area of wind power. Wind power tariff in Pakistan is 50% higher than in India. Transportation of bulky wind turbines costs a lot of money. In case of imports from India, such costs would be very low, as it is wind turbines are manufactured very cheaply in India. Cheaper wind power would significantly benefit Pakistan's economy which is suffering under an excruciating energy crisis. Similarly in solar power sector, India has been able to attract direct foreign investment at remarkably low solar electricity prices of 10 cents per kWh in its latest Solar PV auction. Our relevant officials and institutions can learn many useful lessons from their experience in organising a remarkably effective competitive process. Saarc/SEC can play a useful role in organising the mutual sharing and learning process.
However, there is a strain in Saarc that discourages bilateralism. Small networks can build and lead into a larger network(s). It is well nigh impossible to actualise a grand ring/link of gas or electricity that connects all or most SAARC countries. Energy market in Europe has developed in sub-regional /bilateral context. EEX, EPEX, PXE, NORDPOOL etc have developed essentially to link border markets. These networks are moving towards integration which may take some time. Similarly, bilateral/sub-regional energy networks would be feasible initially within Saarc framework; India-Pakistan; India-Bangladesh, India-Sri Lanka, India-Nepal and Pakistan-Afghanistan. CASA-1000 is a living example and so would be TAPI and so would have been the IPP. In case of TAPI and IPP, Bangladesh could not have been involved and in case of CASA, India is not there; these projects are not Saarc projects but do indicate the role of geographical contiguity. In all these cases, there are two SAARC countries and other partners are non-SAARC members. Even if Saarc would have sponsored these projects, it could not have possibly included Nepal or Bangladesh or Sri Lanka. One may be inclined to posit a question: is Saarc useless in energy sector or Saarc should be flexible enough and be open to support two-country projects instead of endlessly looking for a grand approach and projects.
Concluding, it may be right time to develop a framework under Saarc in LNG co-operation that may benefit three countries; India, Pakistan and Bangladesh. Consultations for synchronisation in gas price reforms may be another immediate pursuit. Co-operation in coal and Wind Power technology may also be put on fast track that may bring down the cost of production of electricity.
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