Russia Sends First Coal Trains to India via INSTC: A New Era in Trade Connectivity

In a historic move, Russia has dispatched two trains loaded with coal to India through the International North-South Transport Corridor (INSTC), according to Russia’s national railway company. The INSTC, a 7,200 km (4,500 miles) multimodal route, connects St. Petersburg to Mumbai, traversing Iran and utilizing a network of railways, roadways, and seaports. This development marks a significant shift in Russia’s trade strategy amid Western sanctions, redirecting its trade flows from Europe to Asia and the Middle East.

Significance of INSTC for India’s Trade

The INSTC’s development, especially through Iran’s Chabahar Port, is poised to revolutionize India’s trade landscape. As Russia faces sea trade restrictions due to the Ukraine conflict, this corridor gains strategic and economic importance, presenting an alternative to China’s Belt and Road Initiative.

India recently took over the management of Chabahar Port for an initial 10-year period, enhancing the INSTC’s potential. This port is set to transform regional connectivity, enabling efficient trade with Central Asia, Afghanistan, and Russia, and offering an alternative route to Europe.

Trade experts highlight the INSTC’s potential to make Indian trade more cost-effective and accessible to Central Asia, Russia, Azerbaijan, and the Baltic and Nordic countries. The corridor is also seen as a viable alternative to the Suez Canal route, which handles a significant portion of global trade but remains vulnerable to disruptions, as evidenced by the 2021 blockage and recent conflicts affecting the canal.

Benefits to Indian Trade

Ajay Srivastava, Co-founder of the Global Trade Research Initiative (GTRI), emphasizes the strategic advantage of the INSTC for Indian ports like Kandla, JNPT, Mumbai, Mormugao, Cochin, and Mangalore. These ports can leverage Chabahar to access Central Asia and Northern Europe via Iran and Russia, reducing transit times from 45 to 25 days and cutting freight costs by 30%.

Nisha Taneja of the Indian Council for Research on International Economic Relations (ICRIER) notes that sectors such as energy, pharmaceuticals, IT, health, agriculture, textiles, and gems and jewelry stand to benefit significantly from this route.

The Energy Perspective

India’s coal imports from Russia, especially for steel production and power generation, have surged due to lower prices amid the Ukraine conflict. Metallurgical coal imports from Russia have tripled to 15.1 million tonnes in 2023-24. Russia’s share in India’s metallurgical coal imports has risen to 21%, driven by cost advantages.

However, analysts caution that these imports may decline if Russia imposes an export tax on metallurgical coal and logistics costs increase. Additionally, the INSTC could facilitate energy imports from Central Asia, enhancing India’s energy security through cheaper and more reliable sources.

Rajan Sudesh Ratna of the United Nations Economic and Social Commission for Asia and the Pacific (UNSCAP) highlights the economic sense of the INSTC in terms of energy connectivity. Central Asia offers a viable alternative for energy imports due to lower prices and improved connectivity, potentially saving India significant foreign exchange and reducing production costs.

The INSTC, thus, emerges as a crucial geostrategic tool for India, promising to enhance its trade reach and economic resilience in the face of global uncertainties.

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