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India's exports to Iran skyrocketed

Staff writer |
After the "rupee payment mechanism" for trading with Iran kicked in last year, India's exports to the Persian Gulf country rose steeply, as Iran needs to buy goods from India to make use of the rupees that it gets for its oil exports.

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According to UCO Bank, which handles trade with Iran, India's exports to Iran currently stand at about $500 million. This is compared with $40 million a year back, a sharp rise of more than 12 times.

Interestingly, most of these exports are food items. UCO Bank has so far processed 3,112 letters of credit (LCs), involving goods worth Rs 17,463 crore, of which 960 LCs worth Rs 12,191 crore, or 70 percent, were for food and agricultural products.

The commodity that witnessed the most dramatic rise in exports was basmati rice. While India exported Rs 2,034 crore worth of the aromatic rice in 2010-11, the figure jumped to Rs 6,166 crore in the first six months of the current year.

The U.S. government has eased restrictions on India as well as China and South Korea for buying more oil from Iran. Also, though not formally agreed upon, Iran wants India to pay 55 percent of its oil dues in euros. Therefore, experts see Iran accumulating more rupees and the only way it can use the money is by buying goods and services from India.

Against this backdrop, India has begun encouraging domestic companies to bid for projects in Iran, such as for laying roads, building railway lines or factories. Last week, the Commerce Ministry met officials of public sector companies, notably BHEL, SAIL and IRCON, in this regard.

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