Iran open for business but India must move fast

India will need to act fast if it wants to take advantage of the opportunities thrown up by the historic deal between world powers and Iran, the domestic oil industry and the exporters feel.

If it plays its cards right, the Modi government can turn Iran into a gateway to Central Asia, which New Delhi has been wooing.

With Prime Minister Narendra Modi focussing on energy during his just-concluded trip to Central Asia and talks about a possible tour to West Asia later this year, many see this as an opportunity for Indian firms to revive ties with Iran.

Tuesday’s deal means domestic refiners such as Mangalore Refinery and Petrochemicals Ltd can buy more Iranian crude at competitive price, while exploration majors such as ONGC can expect better participation in the Gulf nation’s oil and gas hunt.

However, whether Iran will continue with its preferential treatment to Indian business remains to be seen.

Indian companies will now have to compete with the rest of the world for their share of the Iranian market.

Exporters feel that with the sanctions ended, they may no longer get the preferential treatment they had enjoyed the last couple of years.

“Iran will now have many more trading partners to chose from as economic sanctions have been lifted. Moreover, there will be no pressure on the country to buy more from India to utilise the balance in its rupee account as it can now sell oil to New Delhi in international currencies,” a Commerce Ministry official said.

But if Indian exporters are fast and competitive enough, they can grab a big piece of the additional business that will be generated as Iran starts to rebuild its economy.

“Once Iran begins rebuilding itself, it will import larger quantities of critical engineering products like industrial machinery, automobiles, auto-components, electrical and iron and steel, throwing open a big opportunity for Indian exporters,” said Anupam Shah, Chairman, Engineering Export Promotion Council.

Much depends on how soon India cashes in on this opportunity as competitors like China are already moving in.

Reacting to Tuesday’s developments, Dharmendra Pradhan, Minister for State (Independent Charge) Petroleum & Natural Gas, said, “…those who are in the exploration and production business will face fresh challenges with a new price regime, as Iran’s entry to the market will lead to a further slide in the oil price, creating more stagnancy and difficulties for the sector.”

But with surplus fuel available in the market, prices will come down further, he said adding, “If prices go down, naturally consumption of diesel and petrol will increase. Compared to oil, gas is still cheaper so our plans to have a gas-based economy will not be impacted.”

When sanctions were imposed on Iran by the West, India was compelled to cut its crude sourcing from Tehran and more or less ended its oil product exports.

From being the second largest crude oil supplier to India, Tehran had slipped to the seventh position.

The domestic oil industry sees more opportunity in sourcing gas from Iran now. ONGC, whose subsidiary MRPL is one of the main importers of Iranian crude, can now expect to take forward the commercial interaction on its interest in discovered Farsi offshore block, now named Binaloud.

Discussions on the possibility of building a gas pipeline from Iran to India through various alternative routes are also expected to gather momentum.

For MRPL it also means early clearance of the pending amount for purchasing Iranian crude.

A senior ONGC official said, “This will mean we can make remittance of pending amount without any hassle.”

A senior government official said, “It will take six-seven months before the real implication of this pact will be seen.”