India and Iran Increasing Ties in Heavy Industry and Transport

13 Apr 2016

 As trade negotiations overseas continues apace since the easing of sanctions, India is still viewed as a substantial trade partner for Iran and vice versa.  India has discussed investing up to $20 billion in a range of industries, together with investing in the port of Chabahar to expand their exports to Afghanistan and rail routes to facilitate trade with Russia.

India is interested in the manufacture of petrochemicals, fertiliser and liquefied natural gas (LNG).  Iran still lacks adequate facilities for production in Iran to meet India’s needs; in return for investment in these sectors, India is looking for preferential terms in acquiring land and cheaper natural gas from Iran. 

India’s Oil Minister, Dharmendra Pradhan, visited Iran this week with a group of industry executives to discuss energy sector developments. In keeping with Tehran’s South Asian trade partner seeking to enhance trade routes in and around Iran, India also seeks to ensure convenience and cost viability for Indian companies investing in these industries by keeping industry plants close to key transport hubs.

Pradhan talked about setting up petrochemical and fertilizer plants,  as well as pushing progress on the Chabahar Port’s Special Economic Zone.  These bilateral trade partnerships could include joint ventures between Indian and Iranian companies - public or private sector.   

Iran could potentially allocate appropriate land in Chabahar SEZ to facilitate any deals between the two countries. India’s Oil Minister also asked Iranian ministers for favourable gas prices for India, with rich gas supplies competitively priced over the long-term life of joint ventures established. 

Pradhan expressed a wish to set up both an LNG plant and a gas cracker at Chabahar, together with wanting to import liquefied petroleum gas (LPG) from Iran. India is keen to develop this key port in Iran, to connect with Kandla, cutting down on sea freight costs and transport time. 

Under discussion was also the award of rights to develop Farzad-B gas fields in which Indian companies are seeking opportunities.  Also, payment is pending for Iranian oil from Indian refiners.  Whilst no agreement was fully reached, both sides remain optimistic of resolution being found.

Both Iran and India have compatible energy strategies, with Iran seeking to double its oil output and hoping for India to import crude quickly in order to speedily return to pre-sanction export levels and maximise revenues from their biggest export with such a key trade partner.   .

Visits of delegations to Iran from India have been consistent over recent years, gaining momentum in the lead up to the lifting of sanctions against Iran from America and Europe.  Narendra Modi, India’s Prime Minister wants to see import and export business opportunities increased across a number of sectors, beyond energy, including road transport, railway and highway construction.

Apart from the creation of more jobs in these vital sectors of the Iranian economy, there is likely to be a positive impact around the various hubs being established, which could have a knock-on effect for other small businesses in those areas of industry and freight transportation links.