Economy, Domestic Economy

Rail Cargo Transport Breaks Record

Rail Cargo Transport Breaks RecordRail Cargo Transport Breaks Record
Taking advantage of its strategic geopolitical position in the region, Iran seeks to become a hub of transportation, thereby boosting transport revenues and reducing reliance on oil

Iranian railroads transported 40.3 million tons of cargo in the last Iranian year (ended March 20, 2017), which has been described by the CEO of the Islamic Republic of Iran Railways as "an all-time record".

"The volume shows a 35% rise compared to the preceding year," Saeed Mohammadzadeh was also quoted as saying by the Ministry of Roads and Urban Development’s news service.

"As of 2013 when President Hassan Rouhani took office, rail freight transport started to rebound from a downtrend starting 10 years ago."

According to Mohammadzadeh, the share of railroad in cargo transportation stood at 10% during March 2013-14, which currently stands at 12%.

Despite tight budget and little investment, the Rouhani administration is now setting the stage for the realization of ambitious targets set in the sixth five-year development plan (2017-22), including a 30% share for railroads in total cargo transport.

Iran's development plans outline government strategies in its budget planning for the five years to come.

The sixth plan also tasks the government with increasing the share of rail in passenger transportation to at least 20% by 2021.

Taking advantage of its strategic geopolitical position in the region, Iran seeks to become a hub of transportation, thereby boosting transport revenues and reducing reliance on oil that currently accounts for the lion’s share of the national income.

The government also intends to transfer as many passengers and as much freight as possible from roads to rail to facilitate transportation, save hydrocarbon fuels and reduce air pollution. Plans are underway to build 9,134 kilometers of railroads across the country.

As per the sixth plan, it has been decided that 1% of annual oil revenues be allotted to development of railroads over the next five years. The government has also earmarked $500 million for the rail sector in the budget for the current Iranian year (March 2017-18).

Development projects include double-tracking, electrification and construction of high-speed railroads and track-laying on 1,500 km of new lines.

Major railroad projects in need of financing include Qazvin-Rasht (388 km), Tehran-Isfahan high-speed line (410 km), Mianeh-Tabriz (200 km), Tehran-Hamedan-Sanandaj (430 km), Shiraz-Bushehr (250 km), Gorgan-Bojnourd-Mashhad (570 km), Mianeh-Ardabil (175 km), the Gharb Rail project as well as electrification of Garmsar-Incheh Borun and Tehran-Mashhad lines.

The Qazvin-Rasht line is part of the International North-South Transport Corridor, a major transit corridor from India to Russia and Europe, passing through Iran and Azerbaijan.

According to the Indian government officials, INSTC can reduce the time and cost of deliveries by 30-40%. It is much shorter than the current route that runs through the Suez Canal and the Mediterranean Sea.

Goods transported through the Suez Canal take 45-60 days to reach Europe, compared to INSTC’s 25-30 days.

The potential of this corridor will be manifold for India, if it is linked further with Southeast Asian countries. This can also boost trade between Europe and Southeast Asia.

Rail projects, including links to Afghanistan and Central Asia to give them accessibility to free waters via Iran, are awaiting foreign investment amid little capital injected by the cash-strapped government of Iran.

According to IRIR, Iran has reserved $10 billion worth of rail projects for foreign investment following the implementation of the nuclear deal. "Iran has been in talks with Italy, Russia, China, India, France, Turkey and Germany to attract foreign capital," IRIR official Abbas Nazari said.

Italy has reportedly agreed to invest an aggregate of $4 billion, Russia will provide €1.2 billion for the Garmsar-Incheh Borun route and India is supplying rails worth $175 million for a route from the southern port and special economic zone of Chabahar to the city of Zahedan, both in Sistan-Baluchestan Province.

Germany has signed several agreements to invest in the manufacture of equipment in Iran. Early October, Siemens signed a contract to supply components for 50 diesel-electric locomotives to Iran.

Based on the contract signed with Iranian power and infrastructure group MAPNA during an official visit of German Economy Minister Sigmar Gabriel to Iran, Siemens agreed to deliver the components, which will be assembled in Karaj, Iran's fourth-largest city.

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