State trading agencies may come to rescue of Indian firms exporting to Iran

Indian automobile and pharmaceutical companies hesitating to export directly to sanction-hit Iran to protect their business with Western countries may get a helping hand from state trading agencies.

The Government is looking at the possibility of using public sector trading companies such as MMTC and STC as a go-between so that Indian sellers do not come into direct contact with Iranian buyers.

“There is a big demand for Indian pharmaceuticals and automobiles in Iran now that their supplies from developed countries are drying up because of economic sanctions. But Indian companies are afraid to sell to Iranian companies fearing retaliation by buyers in the EU and the US,” a Commerce Department official told Business Line .

The Government has, therefore, hit upon the idea to use its trading agencies to carry out the business. “The Indian sellers and the Iranian buyers can strike the deal and then the trading agencies could step in to carry it out. The agencies would buy the products from the Indian sellers and then sell it to Iranian companies,” the official said.

This elaborate mechanism would ensure that Indian companies do not have Iranian companies on their buyers list.

“We are still in the discussion stage. Nothing has been firmed up yet,” the official said.

Iran, which has been hit by tough sanctions from the UN and tougher ones from the US and the EU for its alleged nuclear activities, has been boycotted by most companies in the West. It has become difficult even for willing countries like India to do business with Iran as no foreign bank is ready to handle payments fearing a crackdown by the US.

India, therefore, put in place a rupee payment mechanism last year wherein payments for the oil purchased from Iran by India 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.

India’s imports from Iran, comprising mostly oil, is much more than what it exports to the country so the two countries are trying their best to increase Indian exports so that transactions from both sides could be balanced. Although India’s purchase of oil from Iran has gone down to 13.3 million tonnes in 2012-13 from 18.1 million tonnes the previous year because of the Western sanctions, Iran still has a trade surplus of about $8 billion with India.

India’s exports to Iran in 2012-13 jumped 39.4 per cent to $3.36 billion from $2.41 billion in 2011-12, thanks to the efforts put in by both countries to bring buyers and sellers together.

The Commerce Department, in collaboration with the Federation of Indian Exporters Organisation, is planning an India Show in Iran in October showcasing products such as engineering goods, pharmaceuticals, project goods, automobile components and chemicals.

amiti.sen@thehindu.co.in

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