OREANDA-NEWS. April 25, 2011. The thaw in relations between India and Pakistan, which started with cricket diplomacy in Chandigarh in March, could soon see India exporting petroleum products to its neighbour.

India, which has surplus refining capacity, has agreed to export fuels such as petrol and diesel to Pakistan to help the neighbouring country meet its fuel shortfall and provide a new market for large refineries of Reliance Industries , Essar Oil and a new unit in which the LN Mittal group is a co-promoter, government officials said.

"Pakistan is too keen to import refined petroleum products from across the border to save cost. The Indian side will firm up the proposal in an internal meeting on Monday before the bilateral meeting," said one of the officials with direct knowledge of the matter.

India imports about three quarters of the oil it consumes but its refining capacity has expanded rapidly making it a key player in the international market. Exports of refined products have risen to 51 million tonne in 2009-10 from 746,000 tonne in 1999-2000 according to government data.

The commerce secretaries of the two sides are meeting in Islamabad on April 27-28 to renew trade ties between the two countries, which has been at a standstill since November 2008 after the terrorist attack in Mumbai.

The acrimonious relation between the two neighbours eased at Mohali where prime minister Manmohan Singh and his Pakistani counterpart Yusuf Raza Gilani together watched the Indo-Pak world-cup semi-final last month. The two countries have fought three wars since both became independent in 1947, besides a major skirmish in Kargil between May and July 1999.

Indian officials said increased trade inter-dependence would force the two nations to keep friendly relations, and India was in a position to meet Pakistan's fuel demand. Pakistan has about 12-million-tonne refining capacity, which meets only half of its annual requirements while India exports about 25% of its 185-million-tonne refining capacity. India's export of refined products is expected to jump further with expected addition of 30-million-tonne new capacities by March 2012 when the Bathinda, Bina and Paradeep refineries are commissioned.

The nine-million-tonne Bathinda refinery near the Indo-Pakistan border is expected to be commissioned this year. Co-promoted by LN Mittal group and Hindustan Petroleum Corp , the refinery has been eyeing the Pakistan market for its products, officials in the oil ministry said.

ET had quoted ArcelorMittal group management board member Sudhir Maheshwari on April 6 last year that Pakistan was "a natural export market" given the proximity to the refinery. Talks between India and Pakistan to start trade of petroleum products were initiated in 2005 by the then oil minister Mani Shankar Aiyar, who favoured diesel supply to the neighbour.

India had exported some petrochemicals such as purified terephthalic acid (PTA) and lube oil base stock (LOBS) to Pakistan through the sea route. Later, former oil minister Murli Deora also proposed to export PTA from Indian Oil Corp's Panipat refinery to Pakistan through land route via Wagah border. But proposals remained on paper due to political tensions, especially after the Mumbai attack.