In order to incorporate transportation costs for fuels, we first find the distance through which imported coal needs to be transported once it is landed in a port. Table 2 presents the estimation of transportation costs a power plant would need to pay, on average, if it uses imported coal in Afghanistan, Bangladesh, India and Pakistan. According to Coal India Limited, the current transportation costs of coal using railway is Indian Rs. 5/per ton-per km. Using this figure in Table 2, we find that the price of imported coal varies from IRs. 22.5/tonne in Bangladesh to Irs. 100/tonne in Northern Grid of India to 117/tonne in Afghanistan. It would cost Irs. 71/tonne in Nepal and Irs. 96/tonne in Pakistan. As power plants using domestic coal tend to be sited near mines, we assume an average distance between mine to power plant 20 km; therefore we add Rs.100/tonne for transportation cost.

**Table 2: Price of imported coal after transportation cost adjustments US$/Tonne)**

|Average Distance bet<br>|ween port to load centers<br>|||||
|---|---|---|---|---|---|
|grid|Port|Load Center|Distance (km)|Transport cost (Rs.|/tonne)|
|Northern grid|Hazira, Gujarat|Delhi|1200|6000|100|
|Western Grid|Hazira, Gujarat|Ahmedabad|300|1500|25|
|Southern Grid|Mangalore|Bangalore|360|1800|30|
|Eastern Grid|Haldia, Kolkota|Ranchi|380|1900|31.66667|
|North Eastern Grid|Chittagong, Bangladesh|Guhati, Assam|600|3000|50|
|Bangladesh|Chittagong, Bangladesh|Dhaka|270|1350|22.5|
|Nepal|Haldia, Kolkota|Birganj, Nepal|850|4250|70.83333|
|Pakistan|Karachi|Faisalabad|1150|5750|95.83333|
|Afghanistan|Karachi|Kabul|1400|7000|116.6667|

For natural gas, we assumed that the regulated prices of domestic gas would increase gradually in order to fully converge with the price of LNG imports by 2040. For example, the average price of natural gas in Bangladesh is set at $4.20/mmbtu in 2015, we assume that it would increase gradually and reach $12.40/mmbtu in 2040 to be equal to the price of LNG imported by the country in that year. The projection of international LNG prices also comes from IEA (2013). The price of natural gas for electricity generation is a weighted average price of domestic gas and imported LNG. The share of imported LNG in Bangladesh would be very small, 2% of the total supply in 2020, but it would reach 70% by 2040 (Petrobangla, 2012). In Pakistan, prices of domestic gas and imported LNG are expected to be, respectively US$10/mmbtu and US$13.2/mmbtu in 2015. They will converge to US$12.40/mmbtu by 2040. The share of LNG in total gas supply is 42% in 2015, but it is projected to be 80% by 2040 (EAC, 2010). In India, the price evolution of domestic and gas and imported LNG are similar to those in Pakistan; the share of imported LNG is already 60% in India, which is expected to remain stable until 2040.

We have also incorporated the costs of LNG port facilities and transportation costs while delivering imported natural gas to the site of power plants. Based on the Gas Authority India Limited (GAIL) asking price of Rs. 73.5/MMBTU for 1400 km transmission line, gas transportation cost is estimated to be Rs. 0.0525 per Km per MMBTU. For petroleum products we have made use of projections from World Energy Outlook 2013 (IEA, 2013).

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