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India’s exports to sanction-hit Iran have bounced back on the growth track this fiscal, following implementation of the rupee payment mechanism.
Exports to the West Asian country had slipped into the negative zone last year. Both Governments are now working on a joint strategy to identify Indian products with export potential and expedite contracts to set off a larger portion of the country’s oil import bill.
India and Iran have decided to set up a working group of experts on specific products to fast-track contracts. The Indian Government is also looking at giving product-specific incentives for exports to Iran, a Commerce Department official told Business Line .
“It is encouraging that our exports to Iran are back on the growth track,” the official said.
India’s exports to Iran went into the negative zone last year slipping 3.7 per cent to $2.4 billion following a crackdown by the US and Europe against banks that had dealings with the country on account of its alleged nuclear programme.
This led the two countries to put in place a rupee payment mechanism wherein payments for part of the oil purchased from Iran is deposited in a rupee account in India’s UCO Bank. The money is then used to make payments to Indian exporters to Iran thereby avoiding payments in dollars and through foreign banks.
The rupee payment system seems to have paid off, with exports to Iran in the April-November 2012 period increasing 6.7 per cent to $1.78 billion despite a seven per cent decline in overall exports in the same period.
However, exports to Iran have to more than treble to make a significant contribution in setting off India’s oil import bill from Iran which was close to $12 billion before the sanctions, but has gone down subsequently.
New Delhi has already identified a number of products, including gems & jewellery, engineering goods and pharmaceuticals, as export thrust areas. The working groups will bring businesses from both countries to the table and speed up pricing and quality discussions for fast closure of contracts.
“India should make all efforts to help exporters clinch their deals in Iran by settling pricing and quality issues. There is a lot of demand for Indian products in that country and we have to move fast,” said Ajay Sahai, Director-General, Federation of Indian Export Organisations.
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