The Hindu reported that after the rupee payment mechanism for trading with Iran kicked in last year, Indias exports to the Persian Gulf country rose steeply, as Iran needs to buy goods from India to make use of the rupees that it gets for its oil exports.According to UCO Bank, which handles trade with Iran, Indias exports to Iran currently stand at about USD 500 million. This is compared with USD 40 million a year back a sharp rise of over 12 times.
Interestingly, most of these exports are food items. UCO Bank has so far processed 3,112 letters of credit, involving goods worth INR 17,463 crore, of which 960 LCs worth INR 12,191 crore or 70% were for food and agricultural products. And the commodity that witnessed the most dramatic rise in exports was basmati rice. While India exported INR 2,034 crore worth of the aromatic rice in 2010 to 11, the figure jumped to INR 6,166 crore in the first 6 months of the current year.
Now, the US government has eased restrictions on India for buying more oil from Iran. Also, though not formally agreed upon, Iran wants India to pay 55% of its oil dues in euros. Therefore, experts see Iran accumulating more rupees and the only way it can use the money is by buying goods and services from India.
Against this backdrop, India has begun encouraging domestic companies to bid for projects in Iran, such as for laying roads, building railway lines or factories. Last week, the Commerce Ministry met officials of public sector companies, notably BHEL, SAIL and IRCON in this regard.
Such project exports are typically high-value in nature and take time to secure. However, the Government ushered in another measure a few months back which could help boost exports in quick time a manufacturer can import raw materials and export to Iran with only 15% value addition, other conditions, such as the goods should leave an Indian port and should reach an Iranian port, remain unchanged.
However, export under this value addition facility is yet to happen. Mr T S Mallikarjuna, Deputy General Manager with UCO Bank, in charge of trade with Iran in the bank, presumes that exporters may not be aware of this facility.
UCO Bank has been holding meetings with exporters one was held in Chennai on December 21st to sensitize them about the opportunities that Iran now offers.
At the Chennai meeting, the officials said the bank had tie ups with 6 Iranian banks for processing payments and would soon enter into pacts with 4 more.
Mr Arun Kaul CMD of UCO Bank said that This would make it easier and cheaper for Iranian importers to buy goods from India.
The public sector bank last year accepted the responsibility of handling payments in India-Iran trade. Under the arrangement, oil refiners, such as IOC and BPCL, buy oil from Iran but make payments into an Iran account with UCO Banks Mumbai branch. When Iranians buy goods from India, UCO Bank pays the Indian exporters out of the Iran account.
This arrangement sidesteps the US sponsored sanctions against Iran, which seek to deny Iran access to US dollars or Euros, with which it could possibly buy material and equipment for making nuclear weapons.
By Steel Guru
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