India keen to help build missing rail link to Russia

Connection will help India access markets of Commonwealth of Independent States, Russia

New Delhi: India is trying to persuade Iran to build the 165km missing rail link between Rasht, Iran, and Astara, Azerbaijan, a connection that will help Asia’s third biggest economy access the markets of the Commonwealth of Independent States (CIS) and Russia.

The development comes at a time when India is also considering starting negotiations for a comprehensive trade pact with the Russia-led Eurasian Customs Union. CIS refers to the East European satellites of the erstwhile Soviet Union.

At a meeting held recently in Azerbaijan of eight countries interested in the project, India was represented by a delegation led by commerce ministry officials. It also included officials from the rail ministry and Rail India Technical and Economic Services (RITES). India has offered to provide consulting services through RITES to complete the railway project at the earliest.

“If this rail corridor is completed, we will have access to Russia and the CIS countries through the land route, which could give us substantial market access," said a commerce ministry official, who declined to be named. India currently uses the Suez canal to reach the landlocked CIS countries. If the rail link is built, goods from India can be ferried through Iran into the CIS countries using the Bandar Abbas port, which will reduce the distance drastically.

A senior official at RITES, who also did not want to be named, said the state-owned company has submitted a proposal for a project feasibility study. “Iran is yet to give its clearance for the project. It is expected by 31 July," he said.

The cost of the project could vary depending on the kind of track that is laid, he said. “It could be a single track or double track, and the material used will determine the price."

CIS countries account for just 1% of India’s total trade, down sharply from the 30% share in the 1990s, said the commerce ministry official cited earlier.

“We ran to the West in the 1990s after the Soviet Union’s collapse. Now the economies in that region are stable and offer great market potential," he said.

The CIS countries are virgin territory, said Biswajit Dhar, director general, Research and Information System for Developing Countries.

“Once we get access to these countries through the land route, this can also give us easier access to Europe. We should be focusing more on matters of this kind since the name of the game is transaction cost," he said.

With a widening trade deficit and economic trouble in the euro zone, India is looking for new markets to boost exports. The trade deficit in 2012-13 was $191.7 billion while the current account deficit widened to a record 4.8% of the gross domestic product. India’s exports to Russia increased 29% to $2.3 billion in 2012-13.

At the sidelines of the St Petersburg International Economic Forum, India’s trade minister Anand Sharma and Viktor Khristenko, chairman, Eurasian Economic Commission, discussed the possibility of a comprehensive economic cooperation agreement with the Customs Union, which includes Belarus, Kazakhstan, and Russia. Kyrgyzstan is keen to join the grouping and is expected to be granted observer status.

The commerce ministry official said the government is planning to conduct a study on the viability of such an agreement. “Sharma has already given his nod for the study. We will soon be approaching the Prime Minister’s trade and economic relations committee for approval," he said.

Abhijit Das, a professor at the Indian Institute of Foreign Trade and head of the Centre for WTO Studies, said Russia is a big market while the other countries in the region, though small, are rich in energy resources. “While negotiating with such countries, India should focus on ensuring part of its energy security from this region, apart from trying to meet their import requirements," he said.