Indian Economy News

India to use road link to access CIS market

  • Livemint" target="_blank">Livemint
  • December 26, 2014

New Delhi: India has decided to use the existing road link between Iran and Azerbaijan to get easier access to the lucrative markets of Russia and other nations of the Commonwealth of Independent States (CIS) after a report based on a dry run commissioned by the commerce ministry showed costs of shipment could fall by 40% if the road route is used instead of the Suez Canal route which is currently being used.

A commerce ministry official said India had two options to choose from—either to use a combination of the rail and road route or to only use the dedicated road route.

“Since the road route is a barricaded transport corridor, the movement of goods is smooth and unhindered,” he said, requesting anonymity.

“The cost difference is also significant,” he added.

India and Azerbaijan started the dry run in March on the International North-South Transport Corridor (INSTC) to ship goods through Nhava Sheva (Mumbai), Bandar Abbas (Iran), Tehran, Bandar Anzali (Iran) and Astrakhan (Russia).

The dry run was conducted by the Freight Forwarders’ Association of India (FFAI).

India is also trying to persuade Iran to build the 165 km missing rail link between Rasht in Iran, and Astara in Azerbaijan, a connection that will help Asia’s third-biggest economy access the CIS as well as the northern and central European markets. India has also offered to provide consulting services through Rail India Technical and Economic Services to complete the project. But since the project is taking time, India has decided to use the existing road link to access the market.

The official said the dry run report will be discussed at the INSTC coordination council and the use of the transport corridor will start after the council gives the go-ahead.

As the US and European Union (EU) shut their doors on Russia by imposing sanctions for backing Ukrainian separatists, India is eyeing a window of opportunity, Mint reported on 6 August.

The commerce ministry has chalked out a strategy to boost India’s exports of around 24 items to Russia that the country usually buys from the European Union and the US.

The commerce ministry official said a group of experts have visited the Indian facility and India may soon start exporting cheese and vegetables to Russia. “Though India does not have the capacity to meet the total demand for cheese which Russia was earlier importing from Holland, we can make a beginning,” he added.

During the visit of Russian president Vladimir Putin earlier this month, both nations declared that the INSTC can vastly improve the efficiency of bilateral trade by significantly reducing transit time and freight costs.

“India and Russia will work together to conclude the necessary multilateral arrangements and outreach to step up the use of this corridor at the earliest,” the joint declaration after the meeting between Putin and Prime Minister Narendra Modi said.

Both leaders agreed that the initiative launched by India and the Eurasian Economic Commission for a joint study group (JSG) to explore the feasibility of a comprehensive economic cooperation agreement covering trade in goods, services, investment cooperation, movement of individuals and mutual recognition of standards, is of great importance for bilateral economic cooperation.

“The Russian side will support the productive work of the JSG so that this group completes its study within an optimal timeframe,” it added.

Russia and India also showed their keenness to encourage payments in national currencies for bilateral trade. “The working group established for this purpose will make recommendations on eliminating the existing barriers and stimulating transactions in national currencies,” the joint declaration said.

India’s exports to Russia contracted 6.46% in 2013-14 to $2.15 billion, while its imports from the country shrank 7.85% to $3.9 billion during the same year.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.