ISLAMABAD: The News reported on Tuesday, citing senior officials at the Energy Ministry, that the Federal Board of Revenue (FBR) is avoiding the inclusion of the Turkmenistan–Afghanistan–Pakistan–India (TAPI) gas pipeline project in the Foreign Investment Promotion and Protection Act (FIPPA) 2022 because it may require a tax exemption of $40 to $50 million, which is impossible because Pakistan is currently under the International Monetary Fund’s watch.
The authorities state that the tax collection agency has “already refused to give tax exemptions to local refineries on the amount of the incentives from the ESCROW account to be given by the government to refineries under the refinery policy for upgradation.”
They also mentioned that the Petroleum Division distributed the draft summary to the Economic Coordination Committee (ECC).
During its meeting on December 28 of last year, the ECC discussed the aforementioned topic and instructed the Petroleum Division officials to have a close discussion about it with FBR employees and the Finance Division.
Mentioning that the Parliament adopted FIPPA to give legal support for the Reko Diq project—a copper and gold mine being built by a group of international businesses in the province of Balochistan—might not be out of place.
Turkmenistan has previously asked Pakistani authorities to include the TAPI gas line project under the FIPPA, citing Pakistan’s purported prior sovereign guarantee of protection for Turkmen investment under the Host Government Agreement (HGA).
But the only benefit Turkmen Gas Company would receive from the FIPPA is the additional assurance that foreign investment in relation to the Reko Diq project would be protected by guaranteed legislation.
According to the officials, Turkmen gas businesses may have greater credibility with banks for bankable feasibility and loans as a result of the FIPPA.
But according to analysts, Pakistan should also make sure that other gas-buying nations, such as Afghanistan and India, are treating the TAPI project similarly to FIPPA. If not, Pakistan shouldn’t grant the project FIPPA status.
Since the Taliban took over in Afghanistan, the project has been delayed for approximately seven years due to a lack of financial closures. In the most recent development, the Asian Development Bank (ADB) has stopped processing the TAPI project and conducting due diligence until the UN and major international economies recognize the legitimacy of the Taliban regime. According to the officials, the project’s implementation is not expected to happen, and the Pakistani government shouldn’t grant the TAPI gas line project FIPPA certification.
According to the Host Government Agreement (HGA), which was signed in 2016 along with the Gas Pipeline Framework Agreement (GPFA), “Pakistan has already assured the protection of Turkmen investment with a sovereign guarantee,” the authorities stated.
The gas pipeline project would follow a 30%:70% loan and equity business plan for construction and commissioning. Turkmenistan holds 85% of the 30% stake, with the remaining 5% coming from Afghanistan, Pakistan, and India. Pakistan now has $200 million in equity.
The TAPI consortium will obtain loans from foreign financial institutions for the remaining 70% of the funding.
A Joint Implementation Plan (JIP) was signed by Pakistan and Turkmenistan on June 9, 2023, to expedite construction of the TAPI Gas Pipeline project in Islamabad. To secure ownership from the Taliban and advance the project, Pakistan has recommended to Turkmenistan that a segment of the gas line be laid up to Herat in Afghanistan.
The goal of the TAPI gas pipeline project is to use an Afghan pipeline with a 56-inch diameter to transport natural gas from Turkmenistan’s Galkynysh gas production to Pakistan. Turkmenistan’s Galkynysh gas field is situated in its eastern region.
With a pipeline length of 1,849 kilometers, the suggested route of the supply source is Herat, Kandahar, Chaman, Zhob, DG Khan, Multan, and Fazilika. Over a 30-year period, it will carry up to 33 billion cubic meters (bcm) of natural gas annually (an average of 3.2 BCFD), of which 1.35 BCFD will be used by Pakistan.
