International North South Transport Corridor (INSTC), is a multi modal transportation initiated in September 2000 in St. Petersburg, for the purpose of promoting transportation cooperation among the Member States.
It is a land-and sea-based 7,200 km long network comprising rail, road and water routes to boost trade between Russia, Iran, Central Asia, India and Europe.
It is a not a new concept. This ancient route was used by European, Indian and many other foreign traders to reach out to the Central Asian markets. During the time of the Safavid dynasty, it is estimated that around 10,000 Indian traders were spread across the empire. (Safavids were one of the most significant ruling dynasties of Persia (modern Iran) from 1501 to 1736.)
The founding members of the initiative are Iran, Russia and India.
This corridor connects Indian Ocean and Persian Gulf to the Caspian Sea via Islamic republic of Iran, then is connected to St. Petersburg and North Europe via Russian Federation. It is the shortest route through this line.
The objective of the corridor is to increase trade connectivity between major cities such as Mumbai, Moscow, Tehran, Baku, Bandar Abbas, Astrakhan, Bandar Anzali and etc.
The International North South Transport Corridor (INSTC) was expanded to include eleven new members, namely: Republic of Azerbaijan, Republic of Armenia, Republic of Kazakhstan, Kyrgyz Republic, Republic of Tajikistan, Republic of Turkey, Republic of Ukraine, Republic of Belarus, Oman, Syria and Bulgaria (Observer).
The International North South Transport Corridor (INSTC) Route
Mumbai is at the southern hub of the route.
Route extends to Bandar Abbas in Iran via sea. Bandar Abbas is a sprawling port city on the southern coast of Iran, on the Persian Gulf. It occupies a strategic position on the narrow Strait of Hormuz.
From Bandar Abbas to Bandar-e-Anzali by road on Iranian mainland. Bandar-e-Anzali is another Iranian port but on the Caspian Sea side.
From Bandar-e-Anzali to Astrakhan by ship across the Caspian Sea. Astrakhan is a Caspian port in the Russian federation. The city lies on the two banks of the Volga River.
From Astrakhan to other regions of the Russian federation, and further into Europe by Russian Railways.
Additional Routes
Azerbaijan route: The NSTC route through Azerbaijan allows India-Iran-Azerbaijan-Russia-Kazakhstan transport connectivity. Iran started construction work to complete the missing link of the Qazvin-Rasht-Astara railway
Chabahar NSTC Integration: India and Iran have a long-standing agreement, signed in 2002, to develop Chabahar into full deep sea port. Bandar Abbas port handles 85% of Iran’s seaborne trade and is highly congested. Whereas, Chabahar has high capacity with plans to expand it from its current capacity of 2.5 million to 12.5 million tons annually. Unlike Bandar Abbas, Chabahar has the ability to handle cargo ships bigger than 100,000 tons. Industry Analysts have highlighted there are long term plans to integrate Chabahar with the NSTC.
The Kazakhstan – Turkmenistan – Iran railway link: also known as North–South Transnational Corridor, is a 677 km long railway line connecting Kazakhstan and Turkmenistan with Iran and the Persian Gulf.
Southern Armenia-Iran Railway Corridor: As the key missing link in the International North–South Transport Corridor, the Southern Armenia Railway would create the shortest transportation route from the ports of the Black Sea to the ports of the Persian Gulf.
Trans-Iranian canal: The idea of linking the Persian Gulf and the Caspian Sea by a canal was developed already in the late 19th century. In 2016 Russia Today reported that the Russian and Iranian governments were discussing the project.
Benefits for India
International North South Transport Corridor (INSTC) will substantially reduce the time taken and cost for transport of goods between India and Eurasia once fully functional.
The successful activation of the corridor will help connect India to Russia within 16-21 daysat competitive freight rates leading to development of trade on the INSTC. At present we have to either use Rotterdam port or land route via China to reach Russia and Central Asia. These are long, expensive and time-consuming.
A study conducted by the Federation of Freight Forwarders’ Associations in India found the route is, “30% cheaper and 40% shorter than the current traditional route”.
It will increase economic activities between India and the resource-rich Russia as well as markets of Europe.
Through this transportation route, Indian exports could potentially get a competitive advantage due to lower cost and less delivery time.
The INSTC has particular economic and strategic relevance to India given the increasing regional ambitions of China through its One Belt, One Road Initiative.
The construction of this route will help in diversification of Indian investment in the infrastructure as well as other economic development for the region.
This corridor would help India bypass Pakistan and reach out to Central Asia and Russia.
Potential of this route is manifold, if India can bring on board its South East Asian neighbours too. The Suez Canal route takes 45-60 days, whereas the INSTC would take 25-30 days. Turkey has offered to provide necessary information for linking Black Sea Economic Cooperation (BSEC) with INSTC.
Challenges
The International North South Transport Corridor (INSTC) still does not have a strong mechanism to address the operational issues on ground.
Problems related to customs procedures and documentation.
Issues related to the funding of various infrastructure projects need to be addressed.
The low level of container trade on the INSTC route.
Lack of common border crossing rules among the member countries.
Problems related to the insurance and data exchange between the member states.
Higher tariffs by rail vis-a-vis road transport for movement from Bandar Abbas to Amirabad.
Wagon shortage and load restrictions for transit traffic in Iran.
The security fears emanating from Afghanistan.
Way Forward
Member countries need to formulate long-term strategies, both at the bilateral and regional level.
Creation of high level working groups on transport cooperation among the regional partners.
Organising annual meetings of the technical working groups to follow the developments in a sustained manner.
Conclusion:
International North South Transport Corridor (INSTC) is an ideal start to project India as a big global player. Even though the investment is well worth with its economic, political and geo-strategic benefits, it is testing India’s financial backbone.
India can do well to rope in other interested parties for partnering in the project, like Japan who also see Central Asia as a lucrative market for its products.
