Iran’s trade with India grew by 48% in 2022 compared with the year before to stand at $2.5 billion, latest data released by Indian Ministry of Commerce and Industry show.
Iran’s exports stood at $653 million, registering a 59.57% rise compared with the previous year.
The exported goods mainly included petroleum products worth $175 million, dye intermediates worth $152 million, fresh fruit worth $148 million and residual chemicals and allied products worth $40 million.
Iran’s imports from India during the period stood at $1.84 billion, registering a year-on-year rise of 43.86%.
The imports mainly included rice worth $1.09 billion, tea worth $86 million, sugar worth $79 million, other types of rice worth $64 million and organic chemicals worth $62 million.
Bilateral trade hit $1.69 billion in 2021, with Iran’s export standing at $409 million and imports at $1.28 billion.
Iran, Saudi Arabia, UAE Account for Half of India’s Rice Exports
India’s basmati rice exports surged by 17% in volume during the first three quarters of the current fiscal year (ended Dec. 21, 2022), while exporters are earning at least 20% more on average in overseas markets as Iran, Saudi Arabia and the UAE together bought half of India’s total shipments of the aromatic rice, The Hindu Business Line reported.
According to the latest data from India’s Agricultural and Processed Food Products Export Development Authority, the shipments of basmati rice increased to 3.2 million tons in April–December of the current fiscal from 2.74 million tons in the year-ago period. However, in terms of value, the surge was 40% to $3.34 billion from $2.38 billion.
Due to the depreciating rupee, the growth is even higher – 50.5% - in Indian currency, at ₹26,591 crore against ₹17,664 crore. In fact, export realization in basmati rice increased to $1,044 per ton this fiscal from $868 per ton a year ago.
Prices did not increase from the average received ($1,057) in April-September, contrary to what was expected. Though traders and exporters paid record-high prices for basmati paddy this year anticipating a huge jump, it is a win-win for all stakeholders — farmers, exporters and consumers.
Recalling the 2013-14 price spiral in basmati, an industry player said exports may not rise that high over the next two months as contracts are happening at an average of $1,100-1,200/ton, though some are getting premiums and selling at $1,350 for limited quantities.
In 2013–14, India exported 3.76 million tons of basmati worth $4.87 billion, a record high in value terms, realizing an average of $1,295 per ton.
“That was an exceptional year as Iran had bought nearly 1.5 million tons of basmati from India whereas the traditional top buyer Saudi Arabia imported around 0.8 million tons,” said an industry veteran who has been tracking basmati prices for the last two decades.
Converging Interests in Trade, Connectivity
New Delhi and Tehran have converging interests in trade and connectivity, according to the Diplomat.
Iran’s full membership in the Shanghai Cooperation Organization, where India is also a member, could accentuate mutual efforts to focus on connectivity projects like Chabahar Port, which links India with the International North-South Transportation Corridor.
Since India began operations at Shahid Beheshti Terminal of Chabahar in late 2018, it has handled bulk cargo transshipments from Australia, Bangladesh, Brazil, Germany, Russia and the UAE.
Experts say the throughput can be significantly enhanced, if the port is linked to the rail network.
India took up the development of Shahid Beheshti Terminal under a tripartite agreement on Chabahar signed with Iran and Afghanistan in May 2016. Afghanistan is effectively no longer part of the arrangements since the takeover of the country by the Taliban last year, though the port has benefited from a US waiver on sanctions imposed on Iran.
India pledged to invest $85 million in the terminal and has so far supplied cranes and other equipment worth $24 million. The people pointed out there is a need to expedite the supply of more equipment such as heavy gantry cranes for transferring cargo from ships to land.
India and Iran are close to striking a long-term agreement for operations at the strategic Chabahar Port, with the matter held up only by differences on a clause related to arbitration, Hindustan Times reported recently, citing people familiar with the matter.
The long-term agreement, valid for a period of 10 years and to be extended automatically, is meant to replace an initial pact that covered India’s operations at Shahid Beheshti Terminal and has been renewed on an annual basis.
The move comes at a time when China has been showing growing interest in investments in ports and other coastal infrastructure in Iran, and the Iranian side has been pressing New Delhi to step up development of Shahid Beheshti Terminal, which is operated by the state-run India Ports Global Limited.
The long-term agreement figured in discussions during the Indian Shipping and Waterways Minister Sarbananda Sonowal’s visit to Iran in September, especially his meeting with Iran’s former roads and urban development minister, Rostam Qasemi.
The issue holding up the long-term agreement is not major and relates only to jurisdiction for the arbitration of differences on any matters, the people said.
Under Iran’s Constitution, such arbitration cannot be referred to foreign courts, and a proposal under the agreement would require a constitutional amendment, which would be difficult, they pointed out.
Both sides, however, are hopeful of the speedy resolution of this matter, as legal and technical experts are working on it, the people said.
At the same time, the Iranian side has been pushing India to speed up the development of its operations at Chabahar Port, including the completion of the 700-km Chabahar-Zahedan railroad.
Less than 200 km of this crucial rail link remain incomplete and in the face of hesitation to deal with a construction company with links to the US-sanctioned Islamic Revolutionary Guards Corps, Tehran has suggested a contract can be finalized by the Indian side with another entity, the people said.
During Sonowal’s visit, the two countries decided to form a joint technical committee for the smooth functioning of the port.
India remains “fully committed to develop Chabahar Port to realize the vision” outlined during Indian Prime Minister Narendra Modi’s visit to Iran in 2016, Sonowal said at the time.
India has allocated ₹100 crore ($12.16 million) for Iran’s Chabahar Port in the 2023-24 budget, signaling the importance of the facility in regional connectivity efforts, Hindustan Times reported.
The outlay for Chabahar Port, where a terminal is being operated by state-run India Ports Global Limited, has been maintained at ₹100 crores, the same level as the current and previous fiscal years, the report said, adding that this reflects the focus on connectivity projects, including the International North-South Transport Corridor.
IRISL Opens Offices in India
The Islamic Republic of Iran Shipping Lines has recently opened offices in different parts of India to boost its activities in the International North-South Transportation Corridor. The group will ship exports from eastern India, which are transported by rail, to the ports in the west.
IRISL is strengthening its activities in India, the INSTC corridor and Russia. Following negotiations with the Indian Railways, Indian manufacturers and traders are planning to deliver their exports from Kolkata in eastern India through the corridor to Russia and the Commonwealth of Independent States using the IRISL fleet, Otaghiranonline.ir reported.
Given that the Indian government and businesspeople are eager to expand their ties with Russia, the CIS countries and Iran through the north-south corridor, IRISL has been offering regular transportation services for months. It has launched container shipping from the western ports of India to the southern ports of Iran.
In the meantime, executive and marketing moves have been made to strengthen and develop cooperation with Indians for the transportation of the country’s exports and imports to Russia and CIS.
INSTC is the best route for the transportation of goods between India and Russia; the transit time is between 20 and 25 days, compared with transportation through the Suez Canal to Russia and Central Asian countries, which takes between 40 and 50 days. In fact, no other route can compete with the north-south corridor in terms of transit time and transportation costs to access the Russian and CIS markets. In addition, IRISL plans to reduce the transit time between India and Russia to 15 days.
On the other hand, IRISL has taken effective steps in recent months to strengthen its activities in the north-south corridor by investing in the Russian port of Solyanka on the coast of Caspian Sea.
