Cabinet nod for increased corpus for funding exports to Iran

With a view to promoting India's exports to Iran, the union cabinet on Wednesday approved an increase in the corpus for funding the purchase of goods and services from India to Rs.3,000 crore.

The hike comes in the wake of a framework agreement between the Exim Bank of India and a consortium of Iranian banks led by the Central Bank of Iran.

"The increase to Rs.3,000 crore (from Rs.900 crore) will enable the Exim Bank to provide buyer's credit facility to Iran, secured via sovereign guarantee from Iran, for the export of goods and services. It will help Indian companies penetrate and enhance their footprint in Iran," a cabinet communique said.

"This will be done by utilising the Export Development Fund (EDF). The proposal provides for domiciling two contracts of export of steel rails by the State Trading Corporation and for the Chabahar port development project, previously approved by the cabinet under the EDF," it added.

India's Exim Bank and seven Iranian banks led by the Central Bank of Iran had negotiated a framework agreement in November 2014 for financing the purchase of goods and services from India by Iranian entities to the tune of Rs.900 crore under the EDF. The limit has now been raised.

The cabinet had, in February, approved to provide 150 million dollars in credit from the Exim Bank for the development of the Chabahar port in Iran.

The Chabahar port outside the Persian Gulf will help expand maritime commerce in the region. India is negotiating this project to facilitate the growing trade and investment with Iran and other countries in the region, notably Afghanistan.

According to a memorandum of understanding signed in May 2015 between India and Iran, India will equip and operate two berths in the Chabahar port Phase-I with a capital investment of 85.2 million dollars and with an annual expenditure of 22.9 million dollars on a 10-year lease.