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Indo-Pak power deal off, a victim of Kargil

George Iype in New Delhi

India is on the verge of dropping the proposed power purchase agreement with Pakistan as relations between the South Asian neighbours have deteriorated in the wake of the conflict in Kargil.

A top official in the Union power ministry disclosed that the government is no longer keen on finalising the power deal with Pakistan and has even cancelled a meeting of key energy officials of both countries meant to have been held at the end of July, "all because of Kargil".

"In the aftermath of the border conflict, we have been told to keep the proposed energy deal in limbo. It seems the proposal will either be shelved or considerably delayed," the official told rediff.com

He said the Union Cabinet is likely to decide "to suspend" the deal till foreign secretary-level bilateral talks to improve the diplomatic relations between the two countries resume. "It is unlikely that the deal will materialise in the next one year," he added.

In the last five years, Pakistan's power privatisation policy has been quite successful and the country has begun generating excess electricity. On the other hand, the north Indian states have a total shortfall of 4,000 MW.

Therefore, Pakistani Prime Minister Nawaz Sharief offered to sell 2000 MW of electricity to power-starved North India when he met Prime Minister Atal Bihari Vajpayee in September last year in New York.

Following this, while the Pakistani government sent details of the deal to the Indian government, Vajpayee sent a high-level team of officials led by Pradip Baijal, special secretary in the prime minister's office, to Pakistan in December to finalise the power purchase agreement.

As per the initial agreement, 500 mw of electricity were to start flowing from Pakistan to the north Indian states of Punjab and Haryana in the first stage.

According to details of the agreement worked out by the power ministries of India and Pakistan, the first link with Pakistan's power grid would have been between the neighbouring cities of Lahore in Pakistan and Amritsar in India.

But in the wake of the Kargil conflict, the power ministry is expected to write to Pakistan's Water and Power Minister Gohar Ayub Khan "to keep the proposed power agreement suspended" for the time being.

Officials said Pakistan is also not keen to sell electricity to India at this juncture, as there is a strong group of private companies that has been lobbying to stall the agreement.

Moreover, the proposed agreement had failed to materialise in the past six months as both countries differed on the cost of the power.

Forced by the private firms, the Sharief government has been pressing India to produce counter-guarantees to underwrite the deal as many Indian state electricity boards are making heavy losses.

The power ministry official said that since there is strong public opposition to Sharief's unilateral decision to pull the Pakistani troops out of Kargil to settle the conflict, his government might not now like to examine any commercial deal with India.

India and Pakistan have so far signed no trade or commerce agreements in the last 50 years, except for a treaty on sharing the waters of the Indus.

Therefore, both countries had hoped that the power purchase deal - the first commercial agreement - would give momentum to the diplomatic peace initiatives on Kashmir.

India and Pakistan had also hoped that an energy agreement between them could ultimately result in the creation of a South Asian power grid for sharing electricity among India, Pakistan, Bangladesh and Nepal.

But while diplomatic shadow boxing and political unwillingness stalled the power deal for many months, the battle in Kargil over the last two months has virtually killed it.

The Kargil Crisis

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