ISLAMABAD: India and Pakistan ended their fourth bilateral negotiations on the Iran-Pakistan-India pipeline on Friday with an agreement on the principles for calculating transportation costs, but buying time until mid-March to examine each other's proposals for the separate issue of transit fees.

Pakistan Petroleum Secretary Ahmed Waqar said at a press conference after the two-day talks that the two sides agreed on a timeline so that all the paperwork is signed and the documentation is ready by June 2007. Pakistan is hopeful that the first supplies of gas will flow in at the Pakistan-Iran border by 2010 or 2011.

The two sides reached agreement that in the first phase of the project, the pipe would transport 60 million cubic metres a day to the Iran-Pakistan border, which Pakistan and India will share on a 50-50 basis.

An earlier bilateral meeting had determined that Pakistan would need 60 mcmts a day, while India's requirement would be slightly over 90 mcmts a day.

Mr. Ahmed, who led the Pakistani delegation at the talks, said phase 2 of the project would handle the remaining volume.

For India, two of the main issues at the meeting were transportation costs and transit fees, both payable to Pakistan, and that will ultimately go into deciding how much it can pay Iran for the gas.

The transportation costs have to do with the construction of the pipeline through Pakistan, and will be determined by several technical and financial factors, such as terrain, maintenance costs and rate of return on investment. While both sides have worked out and are agreed on the principles for calculating this, the actual transportation cost will be known only when the pipeline is constructed.

The transit fees are a kind of royalty or license fee that India will pay Pakistan to transport the gas through its territory up to the Indian border.

"This we definitely have agreed that it will be based on best international practices," Mr. Waqar said.

Although he declined to reveal the proposals that the two sides had made about the transit fees, official sources said Pakistan proposed 57 cents per million British thermal units, while India has proposed 15 cents.

Both sides have agreed to consider the two sets of proposals and revert to each other by mid-March on the issue

Pakistan and India have also agreed to conduct a feasibility study of the pipeline which will determine the creditworthiness of the project. At this time, the total cost of the project is estimated at $ 7 billion, but this would depend on the future prices of construction material, Mr. Waqar said.

Both sides agreed to exchange drafts of their pricing agreements with Iran. They also agreed to exchange the draft of a joint declaration and framework agreement for the trilateral ministerial meeting scheduled in June.

The Pakistan Petroleum secretary said a consultant had suggested two different routes that the 2,200-km pipeline would take in Pakistan and a choice would be made in keeping with its viability.

Both he and the Indian Petroleum Secretary, M.S. Srinivasan, who led his country's delegation at the talks, reaffirmed their commitment to the project.

Iran attended the talks as an observer, but made a presentation on the construction of the pipeline through its territory.

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