Pigeons fly as the Taj Hotel continues to burn during terror attacks in Mumbai, India. Photo by Gautam Singh: AP

The long-discussed, much-delayed Iran-Pakistan-India (IPI) gas pipeline will be delayed yet further. The $7.5 billion pipeline is just one of many casualties of the November terror attacks in Mumbai which left more than 173 dead and 300 wounded.

Indian officials are now saying that the only possible route for the IPI line is by laying the pipeline offshore south of Pakistan. Given the tenuous situation of conflict and security between India and Pakistan New Delhi cannot risk the country’s key energy source being routed via an overland pipeline that traverses the militancy-prone region of Balochistan and Elsewhere.

The US has long opposed the pipeline, taking the view that efforts to isolate Iran must continue until Tehran gives up its nuclear program.

Prior to the November attacks, there were indications that the culmination of the Indo-US civilian nuclear pact could have led to a more determined push by New Delhi for the pipeline, to also show for an independent and balanced foreign policy, unencumbered by US dictates. For instance, India’s Foreign Minister, Pranab Mukherjee, made a high-profile visit to Iran, highlighting India’s intentions to push IPI.

Keen to push the sales of its gas and to ensure supplies, Tehran offered to include a specific provision in the gas sake and purchase agreement which would enable it to deny gas to Pakistan in the event that Pakistan tried to halt deliveries to India.

Officials in New Delhi are concerned that Islamabad will not be able to extend the kind of security needed to ensure the supplies, given the free play that terror groups continue to enjoy in Pakistan. “The clause of stopping equivalent gas to Pakistan may be a deterrent to the Islamabad government from snapping the gas, but will count for nothing to rein militants,” an official said.

Sources say that New Delhi has spoken to Pakistani officials about deployment of Indian security personnel along the pipeline. This measure will be politically suicidal for Islamabad which has rejected the same as infringement on its sovereignty and internal security.

Other issues are slowing the IPI. And the main one, of course, is price. Iran has reportedly raised the price of the gas by 20%. Under Iran’s new terms, if crude stays under $50 per barrel, the gas to be shipped to India could cost $5.90 per MMBtu at the Iran-Pakistan border. At that price, the gas would be very costly for India. And on top of that price, India would also need to shell out transit and transportation fees to Pakistan, which is continuing price negotiations with Iran on the Iran-Pakistan stretch of the pipeline.

But India needs more gas. It is currently importing large quantities of LNG. And it is importing about 70 percent of its crude.

There has, however, been some good news on the energy front. Reliance Industries Limited (RIL) has begun producing gas from the Krishna–Godavari (KG) basin. Production is expected to hit 40 million cubic feet per day this summer and output could hit 80 MMcf/d by 2012. RIL has invested over $11-billion in the main KG D-6 block and tied up $6 billion to develop nine satellite discoveries in the basin. The project could supply as much as 40% of India’s gas and oil needs in the next 18 months.

But the KG project is only one of many gas projects that needs to get moving. India’s booming population needs more natural gas. And if it is not going to come from Iran, then India will have to find other foreign suppliers who can come up with the supplies it needs.