Air transport is the only one direct option, but is useful only for expensive or perishable goods. The bulk of goods are delivered via Suez and Black Sea ports (Novorossiysk or others). As a result, the cargo travels triple the distance and several overloads along the route. High transport and logistics costs hinder the competitiveness of goods and the volume of mutual trade.
Until now, the volume of mutual trade between India, Russia and Central Asia has been not so large (for example, $3.2 billion between India and five Central Asian countries in 2022). The obstacle is over huge delivery distances through the ports of the Black Sea or the Far East (7-10 thousand km).
The INSTC is more shorter – 4700 km from Mumbai Nova Sheva to Tashkent. It could lead to the revival of trade and investment in Central Asia from India. There are already political agreements (for example, the Joint Turkmen-Indian statement during the state visit of the President of the Republic of India to Turkmenistan, by April 2, 2022).
The operationalisation of the multimodal International North–South Transport Corridor (INSTC) is an important element of strategy aimed to expansion of trade and economic cooperation between India, Russia and Central Asian states.
Of course, the INSTC will not be able to completely replace the entire cargo flow through the Suez Canal, but the establishment creation of an alternative will also be very important for the smooth trade and transport operations.It is important to create reliable and high-quality infrastructure (Chabahar Port and construction of railway to the port in Iran is very important in this regard), as well as competitive services along INSTC routes, according to Eurasian Development Bank. The experience of single container and logistics operators, through rates, which was implemented along main transport corridors of Eurasia (Northern Eurasian/Trans-Siberian Corridor, Central Eurasian Corridor China – EAEU – EU, etc.) should be extend to North South Corridor.
The development of INSTC transport infrastructure will not yield the expected results without soft infrastructure measures, including harmonisation of procedures and regulations and coordination of transport stakeholders by governments and the private sector. For this reason, improving such infrastructure is critical to the INSTC development agenda.
Soft infrastructure improvement along INSTC should include Establishment of regular (scheduled) container services from Jawaharlal Nehru Port (Mumbai Nova Sheva) to Russia and Central Asia via Iran; Creation of favourable tariff environment; An agreement on mutual trade and transport facilitation; actions taken towards establishment of free trade areas; Bilateral road transport agreements (especially between Central Asian states and Iran) need to include vehicle weight and dimension requirements, recognition of third-party semitrailers, etc.
The Bank also recommends an agreement to simplify visa issue procedures for transport personnel of all modes of transport; Expansion of cooperation among the customs authorities of the INSTC countries (e.g., a permanent task force); AEO mutual recognition agreements conclusion (for Central Asian states); Implementation of best practices in line with the standards and recommendations of the World Customs Organisation (WCO); Digitalisation of customs formalities: electronic predeclaration and transit declarations, digital customs transit tools, etc and Implementation of digital tools and documents in Central Asia and Iran – e-CMR, e-TIR, e-permits and electronic data exchange for railways.