INSTC to be operationalised mid-Jan 2018; game changer for India's Eurasia policy

The International North South Transportation Corridor (INSTC) connecting Mumbai with St Petersburg and beyond – which has been 17 years in the making – is set to be operationalised from the middle of next month with the first consignment from India to Russia.

Although the formal operationalisation of INSTC is planned for mid-January, the corridor will start functioning fully in a few months thereafter, according to people aware of the matter. Hectic preparations are underway to firm up all elements of the corridor in all key stakeholder states, informed officials. A Russian railway operator is expected to play key role in INSTC.

India, Iran and Russia had in September 2000 signed the INSTC agreement to build a corridor to provide the shortest multi-model transportation route linking the Indian Ocean and the Persian Gulf to the Caspian Sea via Iran and St Petersburg. From St Petersburg, North Europe is within easy reach via the Russian Federation. The estimated capacity of the corridor is 20-30 million tonnes of goods per year.

Conceived well before China’s Belt and Road Initiative (BRI), INSTC will not only help cut down on costs and time taken for transfer of goods from India to Russia and Europe via Iran but also provide an alternative connectivity initiative to countries in the Eurasian region. It will be India’s second corridor after the Chabahar Port to access resource rich Central Asia and its market.

External affairs minister Sushma Swaraj, in an indirect criticism of the BRI project while addressing a meeting of the heads of Shanghai Cooperation Organisation (SCO) member states on Friday last week, emphasised on the need to make connectivity corridors inclusive.

The operationalisation of Chabahar Port (whose Phase 1 was inaugurated on Sunday) coupled with INSTC will be a game changer for India’s strategic and economic goals in the Eurasian region, where China has benefited from its geographical contiguity, experts told ET. These connectivity routes promise to open up a sea of opportunity for India, they said, and the country may even consider working jointly with Russia on economic projects in the Eurasian region.

INSTC could get linked to the Chabahar Port besides Iran’s Bandar Abbas port, said an official, who did not wish to be identified. India also hopes that INSTC will be connected with various other connectivity projects that the five Central Asian and other Eurasian countries have undertaken among themselves, the official said.

“INSTC is now becoming a reality. Chabahar project launched in 2016 will complement INSTC. India is also exploring how Chabahar connectivity corridor can be extended to connect with Central Asia through INSTC, or the Iran-Turkmenistan-Kazakhstan rail line, Iran-Uzbekistan-Kazakhstan alignment and Trans-Afghan rail line (which possibly could be developed by Iran, India, Afghanistan and Uzbekistan),” said P Stobdan, India’s former envoy to Kyrgyzstan and noted expert on Central Asia.

India’s ratification of international customs convention TIR in June will help boost trade through INSTC and other corridors.

The absence of viable surface transport connectivity is a serious impediment to trade with the Eurasian region. Currently, transport of goods between India and Russia mostly takes place through the sea route via Rotterdam to St Petersburg. In the case of the Central Asian region, goods are routed through China, Europe or Iran. The routes through China and Europe are long, expensive and time-consuming. Therefore, a need was felt to have a logistics route that would be shorter, cheaper and faster, officials said. A few dry runs on INSTC have been carried out in the past few years.

The corridor could held Indian exports get a competitive advantage due to lower cost and less delivery time. Studies show that this route can reduce time and cost of container delivery by 30-40%. According to Iranian officials, tariffs for transportation of freight through INSTC may drop further after the completion of a railroad segment connecting two Iranian and Azerbaijani border cities. Finland, Estonia and Latvia may also join INSTC in the near future, according to Iranian officials.

INSTC has been expanded to include 11 new members – Azerbaijan, Armenia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkey, Ukraine, Belarus, Oman, Syria and Bulgaria (as observer).

economictimes