India is likely to open a $1 billion line of credit (LOC) for Iran, said the Indian ambassador to Tehran earlier this week.
Meeting with members of investment and finance committee of Tehran Chamber of Commerce, Industries, Mines and Agriculture, D.P. Srivastava exchanged views on how to enhance two-way trade.
Following the recent negotiations between President Hassan Rouhani and Indian minister of external affairs, the two agreed that Iran would continue exporting oil to India, while India would pay part of oil money in its own currency, the rupee, the ambassador noted.
Now the governor of the Central Bank of Iran is reportedly set to travel to India to do the preliminaries of opening the LOC. Confirming the news about the governor’s trip, Srivastava said, “India has not imposed any terms on the LOC,” which is going to be discussed during the CBI governor’s trip to India.
As agreed so far, the LOC is expected to provide up to 85 percent of the finances needed for Iranian projects, said the ambassador.
He called on Iranian traders to further use letter of credits, saying that “at the moment, 90 percent of Iranian exports use cash-in-advance payment method.”
“Although India does not have any objections to this,” the ambassador said, “further usage of LCs can help decrease the amount of Iranian blocked assets in India.”
Mohammad Mehdi Raeeszadeh, chairman of the TCCIM investment and financing committee, said the reports released by Custom Administration of Iran show that total trade of Iran in the first five months of the current Iranian year (started March 21, 2014) amounted to $41,620 billion, of which $19,639 billion was related to exports.
Raeeszadeh added that the total value of exports to India was $883.8 million, while $1.76 billion worth of goods was imported from India.
Statistics from India’s ministry of commerce and industry show that trade between Iran and India grew by 25 percent in five years, from $12.8 billion in 2007-08 to $15.9 billion in 2011-12. During the same period, Iran’s import from India also grew by over 25 percent, from about $19.4billion to $24.1 billion, while Iran’s export to India showed even a higher percentage of growth, i.e. 30%, from $10.9 billion in 2007-08 to $13.5 billion.
In the 5-month period this year, India was the third greatest exporter to Iran after China and the United Arab Emirates, while China, Iraq, United Arab Emirates, Afghanistan, and India were main export markets of Iran.
Srivastava said that an Indian institute was going to finalize a contract to also export steel to Iran.
According to the Indian official, an Indian state-owned company which produces chemical fertilizers is also going to establish a methanol factory in Iran.
India has recently signed a memorandum of understanding with the Iranian Ports and Maritime Organization to establish a direct shipping line from India to the southeastern port of Chabahar among other things.
The ambassador said the company that was in charge of establishing the shipping line has already transferred 500 tankers to Iran to be used in the transit line to Chabahar.
