In a bid to boost trade with former Soviet Union countries, Iran and Russia, the commerce ministry has pitched for popularisation of International North-South Transport Corridor (INSTC) as an alternative route through Tehran that significantly reduces costs and travel time.
The move comes at a time when the government has adopted a market diversification strategy to help Indian exporters reduce their dependence on traditional markets in the West where there is currently not much demand and instead gain more access in growing markets in Asia, Africa and Latin America not tapped as much previously.
At a stakeholder meeting held last week in Mumbai, the commerce ministry officials pointed out that even 15 years after the formalisation of the INSTC concept by India, Iran and Russia (in 2000), this alternative trade route has not taken off in a big way due to outstanding issues concerning logistics, banking connections, insurance cover as well as harmonisation of documentation and procedures for cargo.
The INSTC is a multi-modal route (ship, road and rail) from Mumbai to the Iranian port of Bander Abbas then via Tehran to Baku (Azerbaijan) and further to Astrakhan, Moscow and St Petersburg in Russia. Alternatively, there is also a road route from Iran to former Soviet Union countries such as Azerbaijan.
Poor rail connectivity and the shortage of wagons in Iran as well as the lack of incentives including discounts for using the INSTC were also flagged by the commerce ministry during the meeting. In addition, the need for improving scanning facilities—to do away with unloading/reloading of cargo and detention of vehicles/train—was highlighted.
The ministry also wanted banks (to help in trade finance) and insurance companies (to provide trade credit insurance, cargo insurance and risk management) to play an active role in boosting traffic through INSTC. Meanwhile, Export Import Bank of India has expressed interest in financing projects in the infrastructure sector and joint ventures involving Indian companies to better the prospects of INSTC.
Besides Iran, India and Russia, countries that are members of INSTC include Armenia, Azerbaijan, Belarus, Kyrgyztan, Kazakhstan, Ukraine, Turkey, Tajikistan, Oman, Syria and Bulgaria (observer status).