In News:

• An India-bound Russian cargo, sent by train for the first time using the ambitious the International North-South Transport Corridor (INSTC), has reached Iran after travelling around 3,800 km through Kazakhstan and Turkmenistan.

What’s in today’s article:

• About INSTC (History, Components, Benefits, etc.)
• News Summary

International North-South Transport Corridor (INSTC)

• The INSTC is a 7,200-km-long multi-mode transport project for moving freight among India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia and Europe.
  • It is a multi-mode transport project in the sense that it encompasses sea, road, and rail routes.
• Objective: To facilitate transportation between the member countries.
• Historical Background:
  • The foundation of the North-South transport corridor was laid in September, 2000 in accordance with an intergovernmental agreement signed between Russia, Iran, and India in Saint Petersburg, Russia.
  • This agreement has been ratified by 13 countries in total. These countries are:
    • Azerbaijan, Belarus, Bulgaria, Armenia, India, Iran, Kazakhstan, Kyrgyzstan, Oman, Russia, Tajikistan, Turkey, Ukraine.
• Components:
  • The project has a number of components –
    • Northern and Western Europe;
    • Russian Federation, Caucasus;
    • Persian Gulf (Western route);
    • Central Asia – Persian Gulf (Eastern route);
    • Caspian Sea – Iran Persian Gulf (Central route);
• Funding for the Project:
  • While India has backed the development of the port, free trade zone and railway line at Chabahar, Azerbaijan has come to Iran’s aid to expedite the completion of the Iranian section of the corridor.
  • Moreover, multilateral organisations are stepping in to support the INSTC in different ways.

Potential Benefits of INSTC:

• The INSTC is seen as a response to China’s Belt and Road Initiative.
• The goods sent from Russia to India will take less than 25 days to reach.
  • Earlier it used to talk 40 days for the arrival of goods between India and Russia.
• It not only saves time in trade between Russia and India, but also it is easiest option among the current geo-political challenges.
• Along with time, the route will reduce the cost of trade between India and Russia by about 30%.

Challenges:

• Lack of Private sector participation:
  • From the time of its very conceptualisation, the INSTC has failed to secure full-fledged involvement of the private sector.
  • The sanctions did play a role in preventing some Western multilateral companies from entering the Iranian market.
• Lack of application of digital technologies:
  • The lacklustre attitude of the private sector when it comes to participating in developing the corridor, and the accompanying lack in the application of digital technologies, is obstructing the INSTC from emerging as a trade route that will fully cater to the needs of various actors within its business ecosystem.
• Limitations in structural design:
  • The present design of the INSTC is limited in terms of territorial reach and scope of scaling up businesses.
  • Furthermore, there is no joint work-plan/strategic roadmap for developing the corridor and its surrounding business ecosystem. 

News Summary:

• An India-bound Russian cargo sent by train for the first time using the ambitious International North-South Transport Corridor (INSTC) has reached Iran after travelling around 3,800 km through Kazakhstan and Turkmenistan.
• From Iran, the cargo will be shipped to India by sea.