India’s Decision Making on Cross Border Natural Gas Pipelines (1989-2012)

Chair: Dr. Gulshan Dietl
External Discussants: Ms. Lidya Powell and Mr. Ragunatha Mishra
Internal Discussants: Dr. Smriti Pattnaik and Dr. Uttam Kumar Sinha

In the 21st century a nation’s economy thrives on its efficient and boundless use of energy. In this context, India holds one of the largest markets of energy consumption in the world. Therefore, energy security has become the paramount focus of Indian Foreign policy. To achieve this goal, India is pursuing a broad range of options to diversify its energy sources. It ranges from LNG deals, buying oil and gas spot markets, acquisition of oil and gas fields abroad, etc. One of the options is sourcing of energy supplies from neighbours (immediate and distant) through pipelines because of India’s comparative advantages in transportation costs as compared to other modes such as LNG. In this frame of reference, Government of India identified three natural gas pipeline options: IPI (Iran-Pakistan-India), TAPI (Turkmenistan-Afghanistan-Pakistan-India) and MBI (Myanmar-Bangladesh-India). Kulkarni’s paper focuses on the decision making process involved on these natural gas pipeline projects from 1989 to 2012 and the factors that have influenced India’s decision making on cross border natural gas pipelines.

The paper examines the decision making process in this regard by using “Rational Actor Model Theory”, which is based on cost benefit analysis and Masuda’s condition for Cross Border Pipelines. Kulkarni investigates the rationale behind India’s joining these projects which are costly and geopolitically controversial. The paper also attempts to understand India’s reasons for pursuing TAPI over IPI and MBI.

Kulkarni acknowledges that there is a clash between India’s need for energy security and its strategic interest. Hence, taking this into account, he recommends evolving a balance between the two.

Key Points from discussion:

• The paper discuss appropriate financial regime and commercial viability through cost benefit analysis. At the centre of any such decision making exercise should be the evolution of a balance between the management of geopolitical risk and commercial viability.
• The energy demand in India is huge. However, the demand is unmet because it cannot be transformed into purchasing power. Absence of stakeholders for using LNG to generate power is one example.
• Why is the government reluctant to pursue gas projects as it has simultaneously pursued projects for LNG ports?
• Any analysis of decision making must include the agencies, organisational structure and authorities involved in decision making. A critical examination of the decision making process is required.
• Whether any inter-ministerial conflict existed in the government during the course of decision making and implementation of the projects has to be taken into consideration.
• The decision on applying the Rational Actor Theory and ‘Masuda’s’ model in the context of South Asia must be taken into consideration. A special focus is needed to understand the TAPI gas pipeline given the internal dynamics of India and Pakistan. One of the decision making models that is well suited for the conditions prevailing in South Asia is Richard Snyder’s.
• The reasons for the government to opt for IPI, TAPI and MBI rather that Oman–India pipeline or SAGE Pipeline should be carefully analysed. The analysis should also include the costs involved.
• Any decision making process on energy projects must include the following:
  • Provision of providing excess to energy to every one
  • Securing energy supply
  • Trying to limit carbon emissions
  • Implementation of choices and alternatives of decision-making process must be in compliance with India’s fiscal and environment policies.
  • Gas pipeline construction must be looked at from the perspective of strategic investment. The presence of Iran and Unites States in this region should be taken into consideration.

(Report prepared by Satyam Malaviya, Research Intern, IDSA)