International North-South Transport Corridor: Enhancing India’s Regional Connectivity

By Nivedita Das Kundu

Introduction

The International North-South Transport Corridor (INSTC) is the term which is used to describe the ship, rail, and road route for moving freight from South Asia to Europe through Central Asia, the Caucasus and Russia. The route primarily involves moving goods from India via ship to Iran. From Iran, the freight moves by ship across the Caspian Sea or by truck or rail to Southern Russia. From there, the goods are transported by truck or rail along the Volga River through Moscow to Northern Europe. In 2001, Russia, Iran and India signed an agreement to develop the route. India has taken a major step in arranging the meeting of the countries, including Iran, Russia and the countries of Central Asia, as well as Bulgaria, to push the idea of the project and its implementation. In addition to the aforementioned countries, this project includes Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Belarus and Oman. The commencement of the first commercial consignment through INSTC in July 2022 marked a historic milestone.

Previous Route (Transit Time 40 to 60 days)

INSTC Route (Transit time 25 – 30 days; 40% shorter, 30% cheaper)

Source: Federation of Freight Forwarders Association in India, Ministry of Commerce

Route to Moscow from Mumbai/JNPT

Distance – 8,700 nautical miles

Tentative cost – Freight $1,300 to 1,800 per 20ft dry container. $3,500 for refer containers up to St. Petersburg. Approx . $800 /1000 USD transport from St. Petersburg to Moscow. Total cost – $2,100 to 2,800 for a dry container.

Transit time – 25 to 30 days and 7 days to Moscow from St. Petersburg. Total 32 to 37 days to Moscow.

Main operators – Maersk, Hamburg Süd, MSC, CMA

Source: Federation of Freight Forwarders Association in India, Ministry of Commerce

INSTC Route to Moscow, from Mumbai/JNPT

Distance – 2,200 nautical miles + 3,000 kms

Tentative cost – Freight $150 to BNB 20ft dry container. $500 (volume discounted rate) from BNB to Amirabad, $250 from Amirabad to Astrakhan and $600 to Moscow (Russia and Iran maintain same tariff for same distance).

TOTAL – $1,260 (adding 2 ports transhipment cost of $260 approx.)

Transit time – 7 days to BNB, 3 days to Amirabad, 7 days to Astrakhan , 2 days for transhipments – Total 19 days.

Main Operators – Simatech, IRSIL

Source: Federation of Freight Forwarders Association in India, Ministry of Commerce

INSTC India’s Gateway to Eurasia

The INSTC, considered India’s gateway to expanding trade and investment links with Eurasia, is a multi-modal transportation route that links the Indian Ocean and Persian Gulf to the Caspian Sea via Iran and onwards to northern Europe. It envisages the movement of goods from Mumbai, India to Bandar Abbas, Iran by sea, and from Bandar Abbas to Bandar-e Anzali, an Iranian port on the Caspian Sea, by road. From Bandar-e-Anzali, the route proceeds to the Russian port city of Astrakhan by ship across the Caspian Sea, and thereafter from Astrakhan to the other regions of the Russian Federation and further into Europe via Russian Railways.

The INSTC project was initiated by Russia, Iran and India in September 2000, in order to establish a transportation network among the member states and enhance connectivity with land-locked Central Asian republics. Later, it was joined by eleven countries, namely, Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Belarus, Oman, Syria and Bulgaria. The INSTC route via Bandar Abbas in Iran to Russia and CIS (Commonwealth of Independent States) destinations in transit is considered the best route, with optimal transit costs for the Indian exporters-importers. The INSTC provides the legal framework for moving freight on the ship-rail-road route linking India, Iran, Russia, the Central Asian countries and Europe. The INSTC helps in boosting India’s trade with Eurasian countries and also helps in improving connectivity. The INSTC connectivity project facilitates India’s outreach to its extended neighbourhood, helping to increase trade and commerce with this region.

India’s active interest in pursuing the project is due to a variety of considerations. Indian goods reach Russia and Central Asia by making the lengthy journey via the Suez Canal. While the Suez Canal route takes about 45-60 days, the trans-Iranian route takes about 25-30 days. This route helps in opening-up the vast markets in India, Russia and the Central Asian countries, as well as other parts of Asia and Europe. The energy rich region of Eurasia, with its vast geography and resources, is expected to play a crucial role in the emerging new great game in the Eurasian space. The politico-economic dimension of this route will be significant in the international political scenario, given the indications of a shift in the global power base.

The North-South Corridor helps to develop a web of bilateral infrastructure for trade routes in the region and for the flow of goods and people, which are otherwise impeded at the borders due to a lack of bilateral and multi-lateral agreements. It reduces the transportation costs which otherwise hinder commerce; these arise from varying technical and legal requirements pertaining to considerations such as vehicle weight, dimensions and operating permits, inconsistent documentation and inspections, etc. The rail corridor connecting Northern Europe (with Helsinki as the reference point of origin) with ports in the Persian Gulf (with Bandar Abbas as the reference destination port) could serve as the backbone for a distinctive distance advantage over the existing shipping route. The distance from Helsinki to Bandar Abbas by sea is around 7,217 nautical miles, i.e. 13,366 km. In other words, the corridor reduces the distance by half. The Caspian Sea route is the shortest of all routes within the corridors.

All the Eurasian States have shown a keen interest in opening up the network of routes in the region and emphasised the need to increase cooperation and connectivity between the countries of the region, as a close network and links can bind them into mutually beneficial framework. In today’s geo-political environment, achieving better connectivity and better trade and economic relationships is extremely important. The north-south corridor certainly facilitates this; it brings the regional powers together and increases mutual understanding and cooperation.

Conclusion

The revival of Silk route connectivity, development of transport corridors, and improvement of links increases regional cooperation and can be considered a major tool for transport and trade developments. There is a major developed market that surrounds this region, which can be connected to easily through the INSTC.

Regional cooperation agreement helps in removing many potential obstacles. Transport corridors can indeed contribute significantly in developing trade and transit among the countries of the region. The significance of the transport corridor is that it provides a platform for improving cooperation as well as communications, and reduces barriers to permit the economies of each country to grow independently and achieve objectives for the benefit of the country and the region as a whole.

Nivedita Das Kundu - Ph.D. Foreign Policy Analyst. Senior Researcher at York University, Academic Director at Liaison College.

Source: Valdai Discussion Club