Senior officials of India and Iran are likely to hold the fifth round of negotiations for a bilateral preferential trade agreement (PTA) here this month, an official said.

Till now, four rounds of the negotiations have been completed and the last one was held in March in Tehran where both countries discussed draft text of the pact. “Both sides have tentatively agreed to hold the fifth round of talks here this month,” the official added.

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Unlike in a free trade agreement, where two trading partners significantly reduce or eliminate duties on maximum number of goods traded between them, PTA involves the removal of duties on certain identified products.

Strategic diversification needed

According to trade experts, the proposed agreement will give India a greater market access in the Persian Gulf nation. “The PTA may not help India in bypassing trade sanctions being imposed by the US on Iran, but in the long run, Iran is an important market for Indian exporters,” Biswajit Dhar, a professor of economics at Jawaharlal Nehru University, said.

Trade Promotion Council of India (TPCI) Chairman Mohit Singla said that the PTA is important as India will be able to diversify its export basket which is now limited to agri-products. “With a carefully designed PTA, strategic products such as leather, textiles and ready-made garments — which attract very high duties in Iran — can become naturally competitive, and India will be able to leverage its export strengths,” he said.

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The Federation of Indian Export Organisations (FIEO) said that Iran holds huge export opportunities in sectors such as agriculture, chemicals, machinery, pharmaceuticals, paper and paper products, man-made fibre and filament yarn, and essential oils. “The PTA will help India in its long run to increase exports,” FIEO DG Ajay Sahai said.

Iran’s major exports to India are oil, fertilisers and chemicals, while imports include cereals, tea, coffee, spices and organic chemicals.

India’s trade imbalance

India’s exports to the Persian Gulf nation in 2017-18 were worth USD 2.65 billion, while imports were valued at USD 11.11 billion. The trade imbalance is mainly because of India’s import of oil from Iran.

India, the world’s third-biggest oil consumer, meets more than 80 per cent of its oil needs through imports. Iran in 2017-18 was its third-largest supplier after Iraq and Saudi Arabia, and meets about 10 per cent of the total needs.

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