India exploring Azerbaijan-Iran road route for trade with CIS

December 23, 2013

Commerce ministry asks Freight Forwarders’ Association to conduct dry run to study feasibility of plan

Asit Ranjan Mishra
India exploring Azerbaijan-Iran road route for trade with CIS
India is trying to persuade Iran to build a 165km rail link between Rasht and Astara (in Azerbaijan), a connection that will help Asia’s third biggest economy access the markets of the Commonwealth of Independent States (CIS) and Russia. Photo: Mint
New Delhi:  India is exploring using the existing road link between Rasht in Iran and Astara, Azerbaijan, to get easier access to the lucrative markets of Russia and other Commonwealth of Independent States (CIS) nations, as a proposal to build a rail link between the two places is taking more time than expected.

The commerce ministry has asked Freight Forwarders’ Association of India (FFAI) to conduct a dry run to study the feasibility of using the road route between the two places.

“We are trying to completely explore the route through a cost benefit analysis. The idea is to use the infrastructure as it is present today. The plan to build the rail is going on separately,” a commerce ministry official said, speaking on condition of anonymity. “We are trying to find out why businesses do not use the existing road link. What are the problems and concerns of businesses.

The Freight Forwarders’ Association of India will submit the report by end February or March.”-

An FFAI official confirmed it is undertaking a dry run in the route. He, too, declined to be named.

India is trying to persuade Iran to build a 165km rail link between Rasht and Astara, a connection that will help Asia’s third biggest economy access the markets of the CIS and Russia. India currently uses the Suez Canal to reach the landlocked CIS countries. If the rail link is built, goods from India can be ferried through Iran into the CIS countries using the Bandar Abbas port, which will reduce the distance drastically.

Exploring the road link to boost trade with the region is a good move since the main problem is the lack of infrastructure and information gap, according to Ram Upendra Das, a senior fellow at Research and Information System for Developing Countries.

“It is very important to keep India economically engaged in the region because there is a lot of untapped potential. Irrespective of our economic relationship with other countries, this would be a new region to expand our trade,” Das said. “The study could be useful for business communities of both sides.”

In a recent study on enhancing India’s trade with Russia, the Export-Import Bank of India (Exim Bank) said that while India’s ranking in Russia’s export market improved from the 24th position in 2001 to the 21st position in 2012, its ranking as an import partner for Russia declined from 19 in 2001 to 22 in 2012.

Russia maintains a trade surplus with India, which rose from $575 million in 2001 to $2.2 billion in 2012 as a result of a sharp fivefold rise in Russia’s exports to India from $1.1 billion to $5.1 billion in that period.

Fertilizers are the largest items in Russia’s exports basket to India, accounting for around 21% of the total exports from India in 2012, up from 9% in 2001. Pharmaceutical products dominate Russia’s imports from India, accounting for as much as one-fourth of its imports from India in 2012. India is the third largest source of pharmaceuticals for Russia, after Germany and France, with a share of 6% of Russia’s total imports in 2012.

For India, Russia ranks as the second largest market for pharmaceuticals after the US, accounting for around 7.8% of India’s total exports in 2012.

Other major items in Russia’s import basket from India include electrical and electronic equipment, iron and steel, coffee and tea, machinery, apparel and accessories, and miscellaneous edible preparations.

Although India’s exports to Russia has been increasing, India needs to export more to bridge the widening trade deficit, said David Sinate, chief general manager of Exim Bank of India.

“In Russia’s import basket, India’s share of pharmaceuticals is coming down, which means other countries are exporting larger amount of pharmaceuticals to Russia,” Sinate said. “Similarly, in textiles also, while our exports to Russia are rising, our share in the Russian textile import basket is coming down.”

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