India is all set to throw open the flood gates to the historic Europe-India link, an integral part of the famous silk route of millennia past. According to Central Board of Excise and Customs, the International North-South Transport Corridor will be operationalised after nearly 17 years stuck in the pipelines.
The first consignment to Russia will be flagged off from Mumbai in mid-January, 2018, land in Bandar Abbas, Iran, and move overland and via barge to Russia’s Astrakhan region, bypassing Pakistan.
While initially conceptualised at the turn of the century as a cheaper and shorter route to Europe, the current geopolitics gives the corridor new significance due to the opportunities it opens for India in Central Asia. China’s inroads into Central Asian trade have far eclipsed India’s, and the belt and road initiative is only set to strengthen the northern neighbour’s hands.
The opening up of the corridor is a consequence of India shaping up to formally accede to the TIR customs facilitation system in mid-December -- the most broadly used international customs transit system with 71 contracting parties including India. Becoming part of the convention will enable seamless transport of goods between member countries -- including doing away with declaration of goods at international borders during transit and bank guarantees. FICCI has been appointed the National Guaranteeing Association for TIR operations.
“A lot of Central Asian nations are parties to the convention. This will open up huge potential for us in the region and significantly reduce transport costs and time to ship goods to Europe,” Sandeep Kumar, Commissioner (Customs & EP), CBEC said. Dry runs conducted by the Federation of Freight Forwarders' Associations in India (FFFAI) have shown that transport cost and transit time to Europe stand nearly halved through the route. Challenges observed, however, included customs red tape and procedures. “Becoming part of the TIR system will remove many of these hurdles,” Kumar said.
The expected reduction in red tape makes it easier for India to scale up trade in the region, though it is by no means a fix-all solution. Speaking to Express, former India foreign secretary and Ambassador to Russia, Kanwal Sibal, said that there were several reasons for the slow take-off of the corridor. Some past and current challenges include congestion at Bandar Abbas port, need for investment in terminals and the fact the investments will increase only if the route is commercially utilised at a certain scale.
According to Kumar, India’s trade with Central Asian currently stands in the “millions”, minuscule in the context of international trade.
However, while Sibal points out that the corridor is not a competitor to the BRI, it has the potential to expand India’s trade presence in the region. In contrast to China, which expanded exports to Central Asia from $18 billion in 2015 to around $500 million in 2001, India has only managed to enhance the figure to $950 million from around $100 million.
“This is an important, facilitating measure. But, ultimately, it depends on the volume of trade and the possibility of jacking it up. We have substantial trade with Iran, apart from the oil trade… But with Russia, it is less than $80 billion. These are not exactly vibrant markets. But, once our business people increase focus and our range of exports expand, then it will begin (paying dividends),” Sibal pointed out.