Indian exporters are hoping to increase shipments to Iran this fiscal by more than half to $5 billion as both countries have stepped up efforts to expedite deals to offset part of the oil payment owed to the sanction-hit country.
In addition to exploring ways to increase banking channels, look at joint investment opportunities and firm up credit lines, the Indian Embassy in Tehran and the Commerce Department are jointly sponsoring an India Show in Tehran in October.
The India Show will focus on products such as engineering goods, pharmaceuticals, project goods, auto components and chemicals, which hold scope for India as Iran has stopped importing these from the Western countries following the sanctions imposed by the US and the EU because of the country’s alleged nuclear activities.
India’s exports to Iran in 2012-13 jumped 39.4 per cent to $3.36 billion from $2.41 billion in 2011-12 after the two countries put in place a Rupee payment mechanism — payment for part of the oil purchased from Iran is deposited in a Rupee account in India’s UCO Bank.
This money is then used to make payments to Indian exporters to Iran thereby avoiding payments in dollars and through foreign banks.
Exporters say that banks on both sides are doing their best to encourage trade by moving papers fast. “The opening of letters of credit (L/Cs) by banks has been expedited with L/Cs worth $400 million opened in April itself. This gives us hope that we will touch $5 billion of exports this year,” said Ajay Sahai Director-General Federation of Indian Export Organisations.
Although India’s purchase of oil from Iran has gone down to 13.3 million tonne in 2012-13 from 18.1 million tonne the previous year because of the Western sanctions, Iran still has a trade surplus of about $8 billion with India.
“Now that all payments for oil from Iran are made in Indian Rupees because new sanctions have blocked Dollar and Euro routes completely, Iran has interest in sourcing a greater number of items from India to use its Rupee balance productively,” a Commerce Department official said.
“Iran is realising that India is not just a trusted supplier of textiles and agriculture products, but also of sophisticated products such as drugs, project goods and machinery. The India Show is an effort by the Government and exporters to display our prowess in various areas,” he said.
An Indian delegation led by the Commerce Secretary recently visited Iran and discussed operationalising new banking channels, exploring joint investment opportunities and establishing credit lines to further deepen trade between the two countries.
External Affairs Minister Salman Khurshid, who was in Tehran last week, said that India is determined to continue its crude oil purchases from Iran.
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