Now with sanctions becoming a thing of the past, as part of last year’s nuclear accord with the world powers, the key sector is expected to move faster on the growth trajectory, and for obvious reasons.
Addressing a press conference last week, Mohsen Pourseyyed Aqaie, head of the Islamic Republic of Iran Railways, reviewed the sector’s track record in the past three years.
According to Aqaei, the incumbent government invested as much in the development of railroads during the two fiscal years from March 2013 to March 2015 as was spent throughout the preceding ten years despite the fact that “we were facing a severe credit crunch during those two years.”
Plummeting oil export earnings in the past two years has been a major hurdle to development spending. Crude prices have plunged by two-thirds since mid-2014. By the same token, oil revenues have fallen steeply from over $100 billion three years ago to below $20 billion in 2016.
By increasing investment in the rail sector, the government is planning to increase the share of rail transit in transportation which is currently dominated by roadways. The share of railroads in domestic transport reached 12.3% last year, up from the 4% in 2013.
According to Aqaie, rail cargo transit stood at 500,000 tons in fiscal 2013/14, which was the lowest in the past few years. “We were able to increase this figure to 1.5 million tons in the last year that ended in March.”
Iran’s sixth economic development plan (2016-21) stresses, among other things, the need to develop rail transport. The existing railroads are planned to be electrified and double-tracked, along with plans to add 1,500 km of new lines.
Aqaie says the administration started construction of 2,000 kilometers of double-track railroads in 2013, of which 800 kilometers will become operational before the year is out in March 2017. Iran currently has 1,500 kilometers of double-track railroads.
Following the nuclear deal, Tehran has signed agreements with international companies to start new railroad projects and expand and upgrade the existing routes.
Construction of a high-speed train between Tehran and Isfahan, electrification of a route between Tehran and the shrine city of Mashhad, as well as the rail project to connect Rasht and Astara in the north as part of the International North-South Corridor, are among the new railroad deals.
The INSTC, which is expected to turn Iran into a multimodal transit hub, will connect northern Europe with southeastern Asia. It will serve to connect the railroads of Azerbaijan, Iran and Russia. At the initial stage, it is planned to transport 5 million tons of cargo via the corridor per year and 10 million tons in the future.
Fleet Renewal
The government is also planning to replace ageing cars and reduce the average age of the rail fleet to 15 years, according to Aqaie.
To refurbish the dilapidated fleet, Tehran signed an agreement to import wagons from Ukraine.
Public joint-stock company Azovobschemash (Mariupol, Donetsk region), the flagship company of the leader of Ukrainian heavy engineering Azovmash Group, earlier said it will sell 3,000 wagons worth more than €100 million to Iran.
Iran is also trying to acquire wagon-manufacturing capabilities in order to reduce reliance on overseas companies. Iran currently has 2,200 passenger cars and wants to increase it to 4,000, according to Minister of Industries, Mining and Trade Mohammadreza Nematzadeh.
“Domestic companies supply 45% of passenger cars in Iran,” he said recently, adding that the country has the capacity to increase it to 70%.
There are 22,000 freight cars in Iran’s rail fleet, which Nematzadeh says should increase to 50,000.
Rail officials have unveiled plans to increase the share of domestic companies in Iran’s freight car market. According to Babak Ahmadi, deputy head of IRIR, the company has put forward a proposal to produce 5,000 freight cars inside the country, according to Financial Tribune.
“All those wagons will be manufactured with international financing by domestic companies such as Pars Wagon, Wagon Kowsar and Arak Steel,” he says.
Ahmadi noted that some components will be supplied by a Russian company. He said one of the goals of this project is for Iranian companies to be able to carry out all the stages of freight car manufacturing domestically.
As the country strives to draw on indigenous capability for manufacturing of rails, an agreement has been reached with Indian steel and energy company Jindal Steel and Power Limited for imports of rail. JSPL dispatched the first lot of rail to Iran last month.
The steel major has bagged a contract to supply 150,000 tons of rail to Iran for developing much-needed rail infrastructure. Of the order, 130,000 tons will be normal rail and 20,000 tons will be specialized head hardened rail.
New Delhi-based engineering and construction company IRCON International Limited is also building a rail line in Chabahar, in Iran’s southernmost province, to move goods to and from Afghanistan.