Long wait for a shorter trade route to Russia ends

Iran-Azerbaijan-Russia corridor promises to cut down 44% of logistics cost, halve travel time

India will on April 13 showcase a shorter trade route to the Commonwealth of Independent States (CIS) to mark the 70th anniversary of diplomatic and trade ties between India and Russia, but the corridor has found few takers as of now due to lack of awareness, threat of US sanctions against Iran and difficulties over procedural issues. 

The marketing of the route next month may evoke interest from traders; albeit it may still take four-six months to get traffic. 

The International North-South Transport Corridor is being dubbed as India’s biggest bet in Central Asia and Russia. It aims to halve the time taken by cargo to reach the CIS. 

India will next month send container cargo to Russia through this corridor using rail, road, sea connectivity and sources said while meat and leather exporters had shown interest in joining the anniversary shipment, finding more players was proving difficult because of the recent threat of sanctions against Iran by the Trump administration.

The other issue that comes in the way of popularising the route is that surprisingly traders are not aware of the corridor. 

“The average time taken is expected to be brought down from 35-40 days to 20-22 days. Logistics costs will go down by 44 per cent. But the lack of awareness is a challenge,” said J B Shah, chairman of the Federation of Freight Forwarders’ Associations in India (FFFAI).

However, now the government as well as freight forwarders believe the traders may evince interest in the new route in four-six months after awareness is created April 13 onwards. 

Traders are expected to make the switch to the new route within the next four-six months, FFFAI Vice-Chairman Shankar Shinde said. Meanwhile, a 165-km rail link between Rasht in Iran and Astara in Azerbaijan was nearing completion. However, shipments can use alternative roads as of now to use the route, Shinde added.

A shipment by the Kirloskar Group carrying heavy machinery was among the few that had made it through the new route, he said.

Exporters are also facing difficulties over the lack of loan facilities from banks on this route, inadequate insurance coverage for bill of lading, non-vessel operating common carrier as well as irregular shipping services to Iran. 

Earlier, exporters had faced difficulties with paperwork on the Iranian side, but the problem had eased now, said Ajay Sahai, director-general of the Federation of Indian Export Organisations. 

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Rail, road and ship linkages are in place connecting Iran’s southern port Bandar Abbas to the Russian port Astrakhan, 3,200 km away. Shipments from Nhava Sheva Port in Mumbai proceed to Bandar Abbas and from there fork out on one of two routes. The first traverses through Tehran and crosses the Caspian Sea to Astrakhan, and the other leads to Baku in Azerbaijan from where it goes north to Russia by land or sea.
 

A commerce ministry official said almost all of India’s container trade with Russia was still passing through the Suez Canal, moving around the European continent and through St Petersburg. 

India’s trade with the CIS nations was $7.06 billion in April-November 2016-17, compared to $9.46 billion in 2015-16. 

Major exports to the region are pharmaceuticals, machinery, coffee, tea and spices. Countries in the region are considered underserved markets and are potential suppliers of energy and minerals to India.

Talks on the new route started in 2000 and the initial agreement was signed in 2003.  A successful dry run was conducted through Iran, Azerbaijan and Russia in 2014.