Even in the 1950s through 1970s India had a reputation for constructing a large number of railway and power transmission projects in a number of countries in Africa, South East Asia… IE has referred to BHEL winning orders for high pressure boilers from Malaysia in the 1960s even before its first boiler was lighted at Ennore in 1971! This thrust seems to have vanished post- liberalisation.
Historically India had strong and long relations with Iran. For years these have been beneficial to both the countries. India has been importing crude oil and other minerals from Iran. In turn, Iran has been making use of India’s skilled manpower as also in importing a range of products from India. Industrial houses like the Hindujas had established strong trading channels. In the 1970s India concluded major trade deals with the Shah of Iran like regular purchase of crude oil for the Madras Refineries (now CPCL). India also provided Iran equity participation in the public sector companies, Madras Refineries and the Madras Fertilizers (MFL).
Rise and fall of Kudremukh…
The two countries concluded a long term agreement for collaborating in the steel sector. The Kudremukh iron ore project was set up at a cost of around Rs 600 crore specifically for meeting the requirements of Iranian steel plants. Though India has abundant high grade hematite ore in central and eastern India, on consideration of logistics, India agreed to mine the low grade magnetite iron ore available in plenty around Kudremukh in Karnataka beneficiate these to iron ore concentrates specifically for exports to Iran. Sophisticated facilities were created at Kudremukh for upgrading the iron ore and transferring the concentrates through pipelines to Mangalore Port for shipment to the Bandar Abbas Port, Iran.
Iran agreed to fund the Kudremukh iron ore project contracting a 20 year purchase of 150 million tonnes of iron ore concentrates at the rate of 7.5 MT per year. Iran made the first contribution of around Rs 100 crore.
The overthrow of the Shah of Iran also threw the project of Kudremukh Iron Ore Company Ltd (KIOCL) in to the Arabian sea. The Ayatollah Khomeini regime resiled on the contract and on the project. Designed specifically for Iran, KIOCL, on which over Rs 600 crore was spent by then, went down the drain. For several years the project was dormant; more investments were later made for making pellets for export to Japan, this however, did not make the project viable.
Even in regard to MRL and MFL projects, Iran would not agree to disinvest; even after MRL was taken over by IndianOil with no need for a financial partner for these companies.
Chabahar Port – lifelone to Afganisthan, Central Asia
For strategic reasons, access to Iran was of importance to reach Indian products to Iran, Afghanistan, Turkmenistan and other central Asian countries by sea and land. This assumed a lot of importance in the context of India’s hostile relations with Pakistan that denied easier and a more economical land route. India thus agreed to fund the construction of the Chabahar port at a capital cost of $85.21 million and annual revenue expenditure of $22.95 million towards equipping two berths. The agreement to this was concluded in 2016.
Indian Railways Construction Ltd (IRCON) was invited to construct a $1.6-billion railway line from Chabahar to Zahedan, near the Iran-Afghan border. Besides, Indian private and state-run petrochemical and fertilizer companies were planning investments of billions of dollars in the Chabahar Free Trade Zone.
The sanctions on Iran imposed by the US on the nuclear issue have severely impacted India on its trade relations with Iran. But this development came later. The failure to proceed ahead with the railway construction project on which the contract was signed in 2016 had been a non-starter even earlier (we do see the parallel in the high speed bullet train project between Ahmedabad and Mumbai funded by Japan, making little progress. With quick clearances the project should have been substantially progressed by now).
Precisely during this period China has been building strength to expandig its influence across Africa, Asia, Latin America and even Europe.
China offers large credit to Iran
The Iranian government has cancelled the contract for IRCON. Simultaneously we hear of China promising a $ 400 billion credit spread over 25 years to Iran that can take care of such large infrastructure projects.
Prime Minister Narendra Modi has been striving hard to build much closer relations with a large number of countries. This should facilitate a much larger volume of trade with these countries. The imperative is to decide quickly on bilateral projects and, more importantly, the capacity to execute these in quick time. For this the country needs to learn from developed countries, including China, for speedy execution. India did have the reputation for constructing a large number of railway and power transmission projects even in the 1950s and 1960s. There is need to regain this reputation. -SV