(Updates with Ahmadinejad declarations, India govt's statements)
By Bappa Majumdar and Nidhi Verma
NEW DELHI, April 29 Iranian President Mahmoud Ahmadinejad pushed to seal a $7.6 billion pipeline deal linking the world's second-largest gas reserves to growing South Asian economies, despite opposition from the United States.
Ahmadinejad met Prime Minister Manmohan Singh on Tuesday in a brief stop-over trip that has already sparked diplomatic tension between New Delhi and Washington, which fears the pipeline will fund Iran's nuclear ambitions.
"The two sides are very close to each other. We will finalise the gas pipeline soon," Ahmadinejad told reporters, saying a firm proposal on the pipeline would be formulated in the next 45 days.
The Iranian leader visited Pakistan on Monday before moving on to Sri Lanka and then India. Islamabad and Tehran said they had settled a host of issues over the pipeline project, which could be completed by 2012.
It would initially transport 60 million cubic metres of gas (2.2 billion cubic feet) daily to Pakistan and India, half for each country, but capacity would be raised later to 150 million cubic metres.
Ahmadinejad said that there was a proposal from China to join the pipeline. India Foreign Secretary Shivshankar Menon said on Tuesday that this proposal was "only an idea".
New Delhi also wants to revive a 2005 agreement to import 5 million tonnes of liquefied natural gas from Iran. Washington urged India this month to use Ahmadinejad's visit to encourage Iran to stop nuclear enrichment.
India, which has been growing closer to the United States in recent years, responded sharply -- saying that it did not need any "guidance" on its bilateral relations.
"We do not think our relationship with Iran should worry any other country," Menon, repeating the government's line, said on Tuesday.
"CRADLE OF HUMAN CIVILISATION"
India also hopes to improve diplomatic relations with Tehran which have been strained. It voted against Iran at the International Atomic Energy Agency in 2006, and launched an Israeli spy satellite earlier this year.
"We are two friends and India and Iran are the cradle of human civilisation ... India supports the peaceful nuclear activity of Islamic Republic of Iran," Ahmadinejad said.
India has been boycotting trilateral meetings on the Iran pipeline since mid-2007, saying it first wanted to resolve the issues of transit fees and transportation tariffs with Pakistan.
"On the pipeline, there will be further discussions. The discussions will relate to security of supply and how to start the project," Menon said.
"This pipeline is not just a commercial deal. It is a part of confidence-building measures.
Earlier on Tuesday, Ahmadinejad launched a project to boost the capacity of Sri Lanka's main oil refinery, part of a $1.5 billion loan to the government as Iran extends its energy ties in South Asia.
Ahmadinejad's visit came as Sri Lankan President Mahinda Rajapaksa, increasingly isolated over criticism from Western countries about his government's human rights record in a 25-year-old civil war with Tamil Tiger separatists, seeks closer ties with Asian countries.
"We can ensure security and fair play for all ... but in the world some powerful nations do not allow such a situation and they have created divisions among people and nationalities," Ahmadinejad said at the launch in remarks through an interpreter.
"The peoples of Sri Lanka and Iran are against the policies of the nations who are the enemies of humanity."
Iran had pledged a $1.5 billion loan to fund a raft of infrastructure projects in Sri Lanka, including a deal to boost oil refinery capacity and a 100-megawatt hydropower project.
The project aims to boost production of Sri Lanka's existing Sapugaskanda oil refinery in Colombo from 50,000 barrels per day to 100,000 bpd. (Additional reporting by C.K. Nayak; writing by Alistair Scrutton; Editing by Himangshu Watts and Myra MacDonald)