India is the largest buyer of Iranian crude oil after China, ships rice and consumer goods to the country and has significant interests in infrastructure projects there
New Delhi: India is sending its top trade official to Iran on Sunday to boost bilateral commercial ties, quick on the heels of a framework agreement the Islamic republic signed with world powers to end a 12-year stand-off on its nuclear programme.
The visit of commerce secretary Rajeev Kher to Tehran is important because India is the largest buyer of Iranian crude oil after China, and had to halt imports for the first time in a decade in March, bending to US pressures to economically isolate the West Asian nation.
India also ships rice and consumer goods to Iran and has significant interests in implementing infrastructure projects in that country.
“It has been some time since we visited Iran," Kher said. “We have also significant interest in project exports to that country."
Western nations on Thursday reached a temporary framework agreement on curbing Iran’s nuclear programme, which is a step towards a comprehensive accord that could end 12 years of confrontation and could potentially lift economic sanctions on the Islamic republic, opening business opportunities for many countries.
India has welcomed the understanding on the nuclear issue, saying a significant step seems to have been taken with agreement on the parameters of a comprehensive settlement to be negotiated by 30 June.
“India has always maintained that the Iranian nuclear issue should be resolved peacefully by respecting Iran’s right to peaceful uses of nuclear energy as also the international community’s strong interest in the exclusively peaceful nature of Iran’s nuclear programme," the foreign ministry said in a statement on Friday.
India owes $8.8 billion (around ₹ 55,000 crore today) to Iran, as economic sanctions imposed over Tehran’s nuclear programme have cut its access to the global banking system.
India has issued guidelines to allow exports of humanitarian goods such as food, medicines and medical equipment to Iran as a part of oil payments due to that country, commerce minister Nirmala Sitharaman informed Parliament on 20 March.
“Ministry of finance has decided that payments to the extent of $100 million per month for such third country exports to Iran would be allowed from the 45% rupee vostro account held with the UCO Bank," she said. “Payment over and above $100 million per month would be met from 55% euro component."
A vostro account is one in which a domestic bank acts as a custodian or manages the account of a foreign entity.
India’s exports to Iran grew 48.35% to $5 billion in 2013-14, while imports contracted 11.1% to $10.3 billion, leading to a trade deficit of $5.3 billion. The value of rice exports alone to Iran in 2013-14 stood at $2 billion.
Ram Upendra Das, a professor at the New Delhi-based Research and Information System for Developing Countries, expects efforts to balance two-way trade to get more attention.
“With exports of tourism, IT, educational and health services to Iran, our external balance with Iran could further address the asymmetry in economic relations," he said.
The country is also planning to develop the Iranian port of Chabahar to help promote its economic interests throughout the region, including Afghanistan, Iran and Central Asia.
India’s exports to Iran have increased twofold in the last couple of years, facilitated by the rupee-rial payment mechanism and supported by complementarities between the two economies, the commerce ministry said in its foreign trade policy statement released on Wednesday.
“The potential for bilateral trade, however, has not even been scratched on the surface," the policy paper said. “Keeping in view the long-term potential of project exports to Iran, especially in the railways sector, an umbrella financing agreement for rupee credit has been signed between EXIM Bank of India and Iranian banks. The financing will be on commercial terms and in rupees. For the designated project export contracts, rupee financing would be offered through the Export Development Fund being operated through EXIM Bank."
The trade policy also said the rupee-rial mechanism has stabilized and is now showing results.
“We will continue to strengthen this mechanism for long-term results. Bilateral trade in areas such as meat, agricultural products, gems & jewellery, engineering, pharmaceuticals, automobiles and auto components will be encouraged. Trade promotion activities will be further intensified. An institutional mechanism for regular interaction will be set up to review, evaluate and monitor bilateral trade. Other institutional opportunities will be explored," it added.
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