Trade between India and Iran is being hampered because of the length of time it takes to obtain letters of credit (L/Cs) in Iran, according to an Indian business leader.

Business leaders from both countries nevertheless anticipate a significant increase in commercial activity between the two countries.

Trade boom

Bilateral trade between Iran and India is expected to rise steeply from the current level of US$3.2 billion to US$5 billion within the next three years, according to Iran's ambassador to India, Siyavash Zargar Yaghoubi.

Addressing PHD Chamber of Commerce and Industry (PHDCCI) members in northern India, the ambassador suggested cheap energy and access to Central Asian markets make Iran a good investment location.

Investments

One major Indian company is already developing a port in Iran, which should provide access to these markets, while projects in the petrochemical sector worth US$1.5 billion are being finalised with Indian companies.

Total investment in projects being discussed is in the range of US$5-11 billion, and that figure does not include the Iran-India gas pipeline project through Pakistan worth US$10 billion dollars.

Disagreement

The ambassador also suggested that it was easy for Indian companies to do business in the country he represents. He told the mainly Punjabi business executives at the meeting, "for India there is no red tape in Iran".

The Co-Chairman of the PHDCCI's Punjab Chapter apparently disagrees. At present it takes almost four months to establish a L/C due to stringent banking rules in the Islamic state, according to R S Sachdeva.

Solution

Responding to difficulties in trading with Iran on account of the lack of smooth banking channels highlighted by Sachdeva, the ambassador suggested that joint venture banking operations could be established and branches could be opened in Iran's free trade zones.

PHDCCI serves ten states in northern India. The acronym PHD stands for progress, harmony and development.

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