India halts diesel pipeline extension project citing political crisis in Bangladesh

The India-Bangladesh Friendship pipeline (IBFP) construction project has been halted by the Indian government in the wake of the political instability in Bangladesh, says The Mint. 

The pipeline will be used to transport diesel from India to Bangladesh.

Three people aware of the development said there had been a proposal to extend the 131-km pipeline beyond Parbatipur in Bangladesh, where the pipeline currently ends. However, the government has now pressed the pause button on this.

"Since the project has been operating well and has been largely successful, there was a consideration as to why not further extend it to cater to more places in the neighbouring country. Now, after the political situation somewhat destabilised, India would like to wait for the situation to stabilise for any further consideration and talks. No specific timeline can be given," said one of the people cited above.

The cross-border pipeline inaugurated in March last year by prime minister Narendra Modi and his erstwhile Bangladeshi counterpart Sheikh Hasina stretches from Siliguri in West Bengal to an oil depot in Parbatipur in Dinajpur district of Bangladesh. 

IBFP has the capacity to transport 1 million metric tonne per annum (MMTPA) of high-speed diesel (HSD) to the neighbouring country and currently supplies the product to seven districts in northern Bangladesh.

This is the first cross-border energy pipeline between India and Bangladesh, built for an estimated ₹377 crore, of which the portion in Bangladesh accounts for ₹285 crore—borne by India through grant assistance.

Another person said that along with diesel, India was also considering a proposal to send high sulphur fuel oil (HSFO) and furnace oil to Bangladesh. HSFO is largely used in the maritime industry while furnace oil is used for heating homes, businesses and industrial units.

Apart from retail demand, the supply of petroleum products is crucial for industries as Bangladesh is heavily dependent on diesel to power its key textile industry.

Since 2015, the Numaligarh Refinery in Assam has been providing petroleum products to Bangladesh by rail. The pipeline is also key to Numaligarh Refinery Ltd's (NRL) expansion with Bangladesh being the most suitable market for the offtake.

Queries sent to the Union ministry of petroleum and natural gas and the ministry of external affairs remained unanswered till press time. The spokesperson of the external affairs ministry on Friday had said that "development projects" in Bangladesh have been impacted due to the law and order situation in the country.

Also on Friday, after its annual general meeting, NRL chairman Ranjit Rath said that there has been "no impact" of the current situation in Bangladesh on either the IBFP or the company's operations in the country. 

"Rather, we are scaling up operations in northern Bangladesh from our Siliguri terminal and northeastern Bangladesh from terminals developed near Silchar," he said. Rath is also also the chairman and managing director of state-run Oil India Ltd, the largest shareholder of NRL.

NRL plans to augment its capacity from 3 MMTPA to 9 MMTPA. In line with the expansion plans, the company is also executing more projects, including Paradip Numaligarh crude oil pipeline and crude oil import terminal at Paradip and setting up of a second generation bio-refinery at Numaligarh, Assam.

Key source of energy requirements

India is a key source of energy requirements for Bangladesh. The Godda plant of Adani Power in Jharkhand supplies power exclusively to that country. Economic Times recently reported that Bangladesh owes over $1 billion to Indian companies for supplying power including around $800 million to Adani.

The anti-discrimination student movement which started in July over a controversial quota system, led to a crackdown by government forces and clashes leading to over 1,000 deaths and 400 people including students going blind, according to the Bangladesh government. Hasina fled Bangladesh on 5 August.

An interim government replaced the regime with the Nobel laureate Muhammad Yunus at its helm.