International North-South Transport Corridor (INSTC)

In News

• The International North-South Transport Corridor(INSTC) recently began.
  • It started off with the two containers that journeyed from Russia to India via Iran.

International North-South Transport Corridor (INSTC)

• Origin: 
  • The legal framework for the INSTC is provided by a trilateral agreement signed by India, Iran and Russia at the Euro-Asian Conference on Transport in 2000. 
• Aim: 
  • To reduce the carriage cost between India and Russia by about 30% and reduce the transit time from 40 days by more than half.
  • The corridor is expected to consolidate the emerging Eurasian Free Trade Area.
• Components:
  • Northern and Western Europe –– the Russian Federation; 
  • Caucasus –– Persian Gulf (Western route); 
  • Central Asia –– Persian Gulf (Eastern Route); 
  • Caspian Sea – -Iran Persian Gulf (Central Route).
• Connectivity & Length:
  • It is a 7,200-km multi-modal transport corridor that combines road, rail and maritime routes connecting Russia and India via Central Asia and Iran. 
  • It links the Indian Ocean to the Caspian Sea via the Persian Gulf onwards into Russia and Northern Europe.
  • It offers the shortest connectivity route between India and Russia.
• Ratification:
  • 13 countries ratified this agreement (Azerbaijan, Belarus, Bulgaria, Armenia, India, Iran, Kazakhstan, Kyrgyzstan, Oman, Russia, Tajikistan, Turkey and Ukraine). 

Significance

• India-Iran:
  • India’s investment in the INSTC is exemplified by its involvement in Iran’s Chabahar port and the construction of a 500-km Chabahar-Zahedan railway line.
    • India recently proposed the Chabahar Port to be included in the INSTC.
    • Once completed, this infrastructure will allow India access to Afghanistan and Central Asia, a prospect strengthened by the Taliban government’s support for the project.  
    • A special economic zone around Chabahar will offer Indian companies the opportunity to set up a range of industries
• “Connect Central Asia” Policy: 
  • When looked at in sync with the Ashgabat Agreement, the INSTC could be the key to India’s “Connect Central Asia’’ policy.
    • India joined Ashgabat Agreement in 2018.
• Defying western sanctions:
  • The move also signalled India’s involvement in the INSTC alongside Russia and Iran, both of which are subject to sanctions by Western governments.
• Bypassing Pakistan:
  • India can now bypass Pakistan to access Afghanistan, Central Asia and beyond. 
• Alternative to Suez Canal:
  • It ia a better alternative to Suez Canal, which will save time, freight charges & easy exports.
• Counterbalancing China:
  • The INSTC can shape a north-south transport corridor that can complement the east-west axis of the China-led Belt and Road Initiative (BRI).
  • INSTC has the potential to act as a major counterbalance to Chinese influence in Central Asia and beyond 
• Economic Engagements:
  • Infrastructural investments:
    • The INSTC provides an opportunity for the internationalisation of India’s infrastructural state, with state-run businesses taking the lead and paving the way for private companies.
    • Increased Market Access: 
      • The cheaper transport cost will lead to increased competitiveness of Indian exports, opening access to unfulfilled markets.
    • Supply of energy as a commodity: 
      • With India being the fifth largest energy consumer in the world, improved connectivity and trade prospects with the energy-rich member nations cannot be overlooked. 
      • Also, another prospect of an oil pipeline development along INSTC cannot be ruled out.

Challenges

• Security:
  • Central Asia has a major security threat in the form of the Islamic State (IS), a terrorist organisation. 
• Differential tariffs and customs:
  • The issue of differential tariffs and customs in the region is a major challenge that India needs to overcome.
• Absence of a financial force behind INSTC:
  • Unlike the Belt and Road Initiative (BRI), which has been pushed forward by China and supported by dedicated financial institutions, INSTC is proceeding in an ad-hoc manner, without any long-term strategy.
  • It is mainly financed by regional development banks or INSTC member states.

Way Ahead & Conclusion

• The INSTC offers a platform for India to closely collaborate with Russia, Iran and Central Asian republics. 
• Even if Russia and Iran are subject to Western sanctions, it hasn’t prevented India from collaborating with the U.S., Japan and Australia as part of the Quad to create and safeguard a free and open Indo-Pacific.
• India’s founding role in both the INSTC and the Quad exemplifies its departure from non-alignment to multi-alignment.