[1]

A

GLOBAL / COUNTRY STUDY AND REPORT

ON

―JAY CHEMICAL IN IRAN COUNTRY‖

Submitted to

(Dalia Institute of Management)

IN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ASMINISTRATION

In

Gujarat Technological University

UNDER THE GUIDANCE OF

Prof. Azmat Pirzada

Prof. Reema Rafaliya

Prof. Khyati Patel

Prof. Amit Prajapati

Prof. Silvester Christian

Submitted by

Batch: 2010 -13,

MBA SEMESTER – III/IV

(Dalia Institute of Management)

MBA PROGRAMME

Affiliated to Gujarat Technological University

Ahmadabad.

[2]

Students’ Declaration

We, Student of Dalia Institute of Management hereby declare that the report for Global/

Country Study Report entitled JAY CHEMICAL IN IRAN COUNTRY in Iran is a result of

our own work and our indebtedness to other work publications, references, if any, have

been duly acknowledged.

NAME:-

Prajapati mansi

Patel bhoomika Patel Dimple

Patel rinku Bihola Sonal

Gohel Aarti Gautam Alka

Momin saleha Sukla Moni

Dodia Shital Patel Bhoomi

Desai jayati Patil Varsha

Mehta arpita Patel Priyanka

Place:-

Date:-

[3]

Institute’s Certificate

―Certified that this Global /Country Study and Report Titled ―JAY CHEMICAL IN

IRAN COUNTRY‖ is the bonafide work of student of Dalia Institute of Management, who

carried out the research under my supervision. I also certify further, that to the best of my

knowledge the work reported herein does not form part of any other project report or

dissertation on the basis of which a degree or award was conferred on an earlier occasion

on this or any other candidate.

Signature of the Faculty Guide

(Certificate is to be countersigned by the Director/HoD)

[4]

PREFACE

In M.B.A program, students have to make a Global Country Study project report as a part

of curriculum course. The objective behind preparing this report is to understand about

JAY CHEMICAL in Iran country.

The successful completion of this project was a unique experience for us. We achieved a

better knowledge about JAY CHEMICAL in Iran country. The experience which we gained

by doing this project was essential at this turning point of our career this project is being

submitted which content detailed analysis of the research under taken by us.

The Study provides an opportunity to the students to devote their skills knowledge and

competencies required during the technical session.

This document forms a report of our project, outlining the research design elements and

methodology. Also, helped us to know and understand the implication of the research on

the future market expansion and growth.

The preparation of this project report is based on facts & findings during the research work

& information collected on the basis of outside Sources like Annual Report of JAY

CHEMICAL, Internet Sources, Latest Bulletin etc. The scope of the project report is to

study global opportunity of JAY CHEMICAL at Iran Country. Our work in this project is,

therefore, a humble attempt towards this end.

[5]

ACKNOWLEDGEMENT

It was a great opportunity for us to study on JAY CHEMICAL in Iran country. We are

extremely grateful to all those who have shared their expertise and knowledge with us and

whom the completion of this project would have been virtually impossible.

Firstly, we would like to thank our Faculty Guide Prof. Khyati Patel, Prof,Azmat Pirzada,

Prof.Rima Rafalia, Prof.Amit Prajapati, Prof.Silvester Christian who has been a constant

source of inspiration for us during the completion of this project. She gave us invaluable

inputs during our endeavour to complete this project.

We want to give our special thanks to all members of Dalia Institute of Management, for

providing us opportunity to work on this project with this great organization and we would

also like to thank all the respondents met in the preparation, who gave their valuable time

to provide us required information and their honest support to complete our project in time.

Last but not the list we are great full to GUJARAT TECHNOLOGICAL UNIVERSITY for

including the project as a part curriculum of MBA programme with which we got the

experience of challenging exercise in the research and survey conducted.

NAME:-

Prajapati mansi Ghosh Paroma

Patel bhoomika Patel Dimple

Patel rinku Bihola Sonal

Gohel Aarti Gautam Alka

Momin saleha Sukla Moni

Dodia Shital Patel Bhoomi

Desai jayati Patil Varsha

Mehta arpita Patel Priyanka

[6]

Executive Summary

The project titled “to study on Jay Chemicals in Iran” with respect to

chemical industry.

New ideas and innovations have always been the hallmark of progress made by mankind.

At every stage of development, there have been two core factors that drive man to ideas

and innovation. These are increasing returns and reducing risk, in all facets of life.

The main objective of the study is to the top of mind awareness or different chemical

industry in Iran. While selecting a industry in General, to determine the influence of

different factor on a purchase decisions of Jay chemical of customer.

In this report we have taken a first look, at overview of industries trade and commerce is

includes the economy of Iran, statistics inclusive with the GDP, growth, capital, GDP by

sector, GDP component, inflation, etc . and including external factors in which import,

export, their partners and external debt.

In the next section, we discuss about the view to study the trade and commerce in Iran

with respect to Jay chemical Industries Ltd. A wide variety of information through various

sources like primary surveys, internet, and literature was gathered.

As outcomes of the project, a file was made showing the National Iranian oil company,

Paras oil & gas company and petroleum development com. With their corporate profile

and products & services overview. We have collection of all Iran chemical industries and

also top 10 companies‘ turnover.

Iran ‗s population increased dramatically during the later half of the 20th century which is

reaching about 75 million by 2011.In recent years, however, iran's birth rate has dropped

significantly.

[7]

The major of groups in this category include the Persians, kurds, gilakis, and baluchis &

Turkic speakers, such as the azeri, Turkmen and the qashqai peoples, comprise a

substantial minority.

Irans economy is marked by an inefficient state sector, reliance on the oil sector, which

provides the majority of government revenues, and statist policies, which create major

distortions throughout the system. Private sector activity is typically limited to small-scale

workshops, farming, and services. Price controls, subsidies, and other rigidities weigh

down the economy, undermining the potential for private-sector-led growth.

Iran has a mixed economy that is heavily dependent on export earnings from the country's

extensive petroleum reserves. Oil exports account for nearly 80 percent of foreign

exchange earnings.

LOCATION AND SIZE: Iran, a country slightly larger than Alaska, is located in the Middle

East, bordering the Gulf of Oman and the Persian Gulf in the south and the Caspian Sea

in the north.

POPULATION: Iran's population was estimated to total 65.6 million in July 2000 according

to CIA figures.

FINANCIAL SERVICES: The Iranian banking sector is dominated by 10 state-owned

banks, including the 6 full-service commercial banks, and 4 sectorally specialized ones.

COMMERCE: Iran has traditionally been an agricultural nation populated by traders.

TOURISM: The bulk of tourism remains to be founded on Shia pilgrimage centers such as

Mashhad and Qom.

Our study at chemical industry in Iran is learning experience for our career. It provides us

ample opportunities to gather knowledge about chemical & petroleum industries of Iran

industries. We could cultivate and improve various soft skills like man management,

organizing ability, communication skills as well as creativity during this report.

[8]

INDEX

NO. PARTICULARS PAGE NO.

Information of IRAN

PART-1 ECONOMIC OVERVIEW OF AMUL

1 Demographic Profile of IRAN 1

2 Economic Overview of IRAN 19

3 Overview of Industries Trade and Commerce 51

4 Overview Different Economic Sector of IRAN 74

5 Overview of Business and Trade at International Level 85

6 Present Trade Relations and Business Volume of

Different Product with India

107

7 PESTAL analysis 129

PART-2 COMPANY SPECIFIC STUDY

8 Introduction of JAY CHEMICAL in the economy of

Specified Country

148

9 Structure, Functions and Business Activities of JAY

CHEMICAL

180

10 Comparative Position of JAY CHEMICAL with India 213

11 Present Position and Trade of Business with India

during last 2 to 3 years

240

12/13 Policies and Norms of IRAN/INDIA for JAY CHEMICAL

for Import/Export including licensing/permission,

taxation, etc.

265

14 Present Trade barrier for Import/Export of selected

Goods

309

15 Potential for import/export in India Market 309

16 Business Opportunities in Future 326

17 Conclusions/ Suggestions 326

Bibliography 348

[9]

CHAPTER - 1

DEMOGRAPHIC PROFILE OF THE

IRAN

[10]

Demographics of Iran country

Iran ‗s population increased dramatically during the later half of the 20th century which is

reaching about 75 million by 2011.In recent years, however, iran's birth rate has dropped

significantly. Studies project that Iran's rate of population growth will continue to slow until

it stabilizes above 100 million by 2050 More than half of Iran's population is under 35

years old (2012).

In 2009, the number of households stood at 15.3 million (4.8 person/household) According

to the central bank of iranin 2012, in 22.5 per cent of Iranian families, all family members

were unemployed Families earn some 11.4 million rials(around $930) per month on the

average (2012).

Languages and ethnic group

The major of groups in this category include the Persians, kurds, gilakis, and baluchis &

Turkic speakers, such as the azeri ,Turkmen and the qashqai peoples, comprise a

substantial minority. The remainders are primarily semitics such as arabs & Asseyrians or

other Indo-Europeans such as pashtuns and Armenians. There are also small

communities of brahui in southeastern Iran. The georgian language spoken only by those

Iranians georgians that live in Fereydanand the fereydunshahar. All other communities of

ranians georgiansin Iran have already lost their language CIA WORLD FACT BOOK

which is based on the (2008) statics gives us the following numbers:

Persian (official) 53%, Where Azeri Turkic and Turkic dialects 18%, Kurdish 10%, Gilaki

and Mazandarani 7%, Luri 6%, Balochi 2%, Arabic 2%, other 2%.The total population is

78,868,711 (July 2012 EST.)Country comparison to the world: 1

[11]

Major cities –population

This entry provides that the population of the capital and up to four major cities are

defined as theurban agglomerations with populations of at least 750,000 people. An urban

agglomerations is defined as the comprising the city or town proper and the also the

suburban fringe or thickly settled territory lying outside of, but adjacent to the boundaries

of the city. For smaller countries, lacking urban centers of 750,000 or more only the

population of the capital is presented. TEHRAN (capital) 7.19 million, Mashhad 2.592

million, Esfahan 1.704 million, Karaj 1.531 million where Tabriz 1.459 million (2009).

CIA World factbook demographic statistics

The following demographic statistics are from the CIA World factbook unless otherwise

indicated,

Nationality

Noun: Iranian/Persian(s)

Adjective; Iranian

Ethnic groups

This entry can be provides an ordered listing of ethnic groups which is starting with the

largest and normally includes the percent of total population.

Persian -61%, Azeri -16%, Kurd -10%, Lur-6%, Baloch- 2%, Arab- 2%, Turkmen and

Turkic tribes- 2%, other- 1%

[12]

Population

This entry gives an estimate from the US Bureau of the Census based on the statistics

from population censuses, vital statistics registration systems, or sample surveys

pertaining to the recent past and on the assumptions about future trends. The total

population presents one overall measure of the potential impact of the country on the

world and within its region.

Note: Starting with the 1993factbook, demographic estimates for some countries (mostly

African) have explicitly taken into account the effects of the growing impact of the

HIV/AIDS epidemic. These countries are currently: The Bahamas, Benin, Botswana,

Brazil, Burkina Faso, Burma, Burundi, Cambodia, Cameroon, Central African Republic,

Democratic Republic of the Congo, Republicof the Congo, Cote d'Ivoire, Ethiopia, Gabon,

Ghana, Guyana, Haiti, Honduras, Kenya, Lesotho, Malawi, Mozambique, Namibia,

Nigeria, Rwanda, South Africa, Swaziland, Tanzania, Thailand, Togo, Uganda, Zambia,

and Zimbabwe.

Age structure

This entry provides the distribution of the population according to age. Information is

included by sex and age group (0-14 years,15-64years ,65 years and over). Thus the age

structure is of Population is also affect the nation key socioeconomic issues. Countries

with young populations (high percentage under age 15) need to invest more in schools

while countries with older populations (high percentage ages 65 and over) need to invest

more in the health sector thus The age structure can be also used to help predict the

potential political issues. For example, the rapid growth of a young adult population unable

to find employment can lead to unrest.

0-14 years- 72.9% (male 24,501,544/female 23,914,172)

15-64years- 70.9% (male 28,083,193/female 27,170,445)

5 years and over- 5% (male 1,844,967/female 2,055,846) (2011 EST.)

[13]

Median age

This entry is the age that divides a population into two numerically equal groups that is

where half of the people are younger than this age and half of the people are older. It is a

single index that summarizes the age distribution of a population. Currently, the median

age ranges from a low of about 15 in Uganda and Gaza Strip to 40 or more in several

European countries and Japan. See the entry for "Age structure" for the importance of a

young versus an older age structure and, by implication, a low versus a higher median

age.

Total - 26.4 years

Male-26.2 years

Female- 26.7 years (2008 EST.)

Total 26.8 years

Male--26.6 years

Female -27.1 years (2011 EST.)

Population Growth Rate

This entry can gives an estimate from the US Bureau of the Census based on the

statistics from population censuses, vital statistics registration systems, or sample surveys

pertaining to the recent past and on assumptions about the futuretrends. The total

population presents one overall measure of the potential impact of the country on the

world and within its region,

Note: Starting with the 1993Factbook, demographic estimates for the some countries

(mostly African) have explicitly taken into the account the effects of the growing impact of

the HIV/AIDS epidemic,

[14]

These countries are currently as are under.

The Bahamas, Benin, Botswana, Brazil, Burkina Faso, Burma, Burundi, Cambodia,

Cameroon, Central African Republic, Democratic Republic of the Congo, Republic of

the Congo, Cote d'Ivoire, Ethiopia, Gabon, Ghana, Guyana, Haiti, Honduras, Kenya,

Lesotho, Malawi, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Swaziland,

Tanzania, Thailand, Togo, Uganda, Zambia, and Zimbabwe.

0.792% (2008Est.)

1.247% (2012 Est.)

Birth rate

This entry that gives the average annual number of births during a year per 1,000

persons in the population at midyear are also known as crude birth rate. The birth rate is

usually the dominant factor in determining that the rate of population growth. It depends

on the both of the level of fertility and the age structure of the population.

Death rate

This entry that gives the average annual number of the deaths during a year per 1,000

population midyear also known as crude death rate. The death rate while only a rough

indicator of the mortality situation in a country accurately indicates the current mortality

impact on the population growth. This indicator is significantly affected by age distribution,

and most countries will eventually show a rise in the overall death rate , in spite of the

continued decline in mortality at all ages, as declining fertility results in an aging

population.

5.94 deaths/1,000 population (July 2012 Est.)

country comparison to the world:166

[15]

Net Migration rate

This entry includes figures of for the difference between the number of persons entering

and leaving a country during the year per 1,000 of the persons (based on the midyear

population). An excess of persons entering the country is referred to as net immigration

(e.g. the 3.56 migrants/1,000 population) an excess of persons leaving the country as net

emigration (e.g. - 9.26 migrants/1,000 population). The net migration rate indicates that

the contribution of migration to the overall level of population change. The net migration

rate does not distinguish between economic migrants, refugees and other types of

migrants nor does it distinguish between lawful migrants and undocumented migrants.

0.11 migrant(s)/1,000 population (2012est.)

Country comparison to the world:121

Urbanization

This entry provides two measures of the degree of urbanization of a population.

The first, urban population describes as the percentage of the total population living

in urban areas as defined by the country.

The second, the rate of urbanization describes as the projected average rate of

change of the size of the urban population over the given period of time.

Additionally the whole World entry includes a list of the ten of the largest urban

agglomerations. An urban agglomeration is defined as the comprising the city or

town proper and also the suburban fringe or thickly settled territory lying outside of

but adjacent to the boundaries of the city that‘s define as rate of urbanization.

[16]

Urban population-71% of total population ( in year 2010)

Rate of urbanization -1.9% annual rate of change (in year 2010-15 EST.)

Sex ratio

Those entries are includes the number of the males for each female in five age groups

at birth under 15 year,15-64years,65years and over, and for the total population Sex ratio

at birth has recently emerged as an indicator of certain kinds of sex discrimination in some

countries. For instance high sex ratios at birth in some Asian countries are now attributed

to sex-selective abortion and infanticide due to a strong preference for sons. This will

affect future marriage patterns and fertility patterns. Eventually, it could cause unrest

among young adult males who are unable to find partners.

At birth-1.05 male(s)/female

Under 15 year -1.05 male(s)/female

15-64years -1.03 male(s)/female

65years and over- 0.89 male(s)/female

Total population-1.03 male(s)/female (2012 EST.)

Maternal mortality rate

The maternal mortality rate (MMR) is the annual number of the female deaths per

1,00,000 live births from any cause related to or aggravated by pregnancy or its

management (excluding accidental or incidental causes). The MMR includes deaths

during pregnancy, childbirth, or within 42 days of termination of pregnancy, irrespective of

the duration and site of the pregnancy, for a specified year that‘s called the maternal

mortality rate.

[17]

21 deaths/100,000 live births (2010)

country comparison to the world:135

Infant mortality rate

Those entries give the number of deaths of infants under one year old in a given year per

1,000 live births in the same year included is the total death rate, and deaths by sex ,male

and female this rate is often used as an indicator of the level of health in a country.

Total: 41.11 deaths/1,000 live births

Country comparison to the world:57

Male: 41.61 deaths/1,000 live births

Female: 40.58 deaths/1,000 live births (2012 EST.)

Life expectancy at birth

That entry contains the average number of years to be lived by the group of people born

in the same year, if mortality at each age remains constant in the future. Those entries

also included the total population and also male and female component.

The Life expectancy at birth is also a measure of overall quality of life in a country and

summarizes the mortality at all ages. It can also be thought of as indicating the potential

return on investment in human capital and is necessary for the calculation of various

actuarial measures.

[18]

Total population 70.86 years

Male 69.65 years

Female: 72.72 years (year2008 EST.)

Total population70.35 years

Male 68.84 years

7 female1.93 years (year2012 EST.)

Health expenditure

Those entries provided that total expenditure on health as a percentage of GDP. Health

expenditures are broadly defined as the activities that performed either by institutions or

individuals through the application of medical, paramedical, and/or nursing knowledge and

technology, the primary purpose of which is to promote or restore, or maintain health.

3.9% of GDP (2009) Country comparison to the world 166.

Physicians’ density

That entry gives the number of the medical doctors (physicians), including the generalist

and specialist medical practitioners per 1,000 of the population.

Medical doctors are defined as the doctors that study, diagnose treat, and prevent illness,

disease, injury, and other physical and mental impairments in humans through the

application of modern medicine. They also plan, supervise, and evaluate care and

treatment plans by other health care providers.

The ―World Health Organization‖ estimates that fewer than 2.3 health workers (physicians,

nurses, and midwives only) per 1,000 would be insufficient to achieve coverage of primary

healthcare needs.

0.89 physicians/1,000 population (2005).

[19]

Major infection diseases

That entry lists major infectious diseases likely to be encountered in countries where the

risk of such diseases is assessed to be very high as compared to the United States.

These infectious diseases represent risks to US government personnel traveling to the

specified country for a period of less than three years.

The degree of risk is assessed by considering the foreign nature of these infectious

diseases their severity and the probability of being affected by the diseases present. The

diseases listed do not necessarily represent the total disease burden experienced by the

local population. The risk to an individual traveler varies considerably by the specific

location, visit duration, type of activities, type of accommodations, time of the year, and

other factors that also affect. For this it is needed to Consultation with a travel medicine

physician is needed to evaluate individual risk. Diseases are organized into the following

six exposure categories shown in italics and listed in the typical descending order of risk.

Degree of risk:- Intermediate

Food or waterborne diseases: Bacterial Diarrhea

Vector borne diseases: Crimean Congo Hemorrhagic Fever and Malaria.

Obesity-adult prevalence rate

Those entries gives the percent of a country's population considered being obese, Obesity

is defined as an adult having a Body Mass Index (BMI) greater to or equal to 30.0. BMI is

calculated by taking a person's weight in kg and dividing it by the person's squared height

in meters.

14.2% (2005) Country comparison to the world: 41.

[20]

Literacy

That entry includes a definition of literacy and Census Bureau percentages for the total

population, males and females. There are no universal definitions and standards of

literacy. Unless otherwise specified, all rates are based on the most common definition -

the ability to read and write at a specified age. Detailing the standards that individual

countries use to assess the ability to read and write is beyond the scope of the fact book

Information on literacy whiles not a perfect measure of educational results, is probably the

most easily available and valid for international comparisons. Low levels of literacy and

education in general, can impede the economic development of a country in the current

rapidly changing, technology-driven world.

Definition: age 15 and over can read and write

Total population: 77%

Male: 83.5%

Female: 70.4% (year2002 EST.)

School life expectancy (primary to tertiary education)

School life expectancy (SLE) is the total number of years of schooling (primary to tertiary)

that a child can expect to receive assuming that the probability of his or her being enrolled

in school at any particular future ages are equal to the current enrollment ratio at that age.

Caution must be maintained when utilizing this indicator in international comparisons. For

example that a year or grade completed in one country is not necessarily the same in

terms of educational content or quality as a year or grade completed in another country.

SLE represents the expected number of years of schooling that will be completed

including years spent repeating one or more grades.

total: 13 years

male: 13 years

female: 13 years (year2009).

[21]

Unemployment, youth ages 15-24

That entry gives the percent of the total labor force ages 15-24 unemployed during a

specified year.

Total:-23%

Country comparison to the world:-38

Male: 20.2%

Female: 34% (2008)

Total fertility rate

That entry gives a figure for the average number of children that would be born per

woman if all women lived to the end of their childbearing years and bore children

according to a given fertility rate at each age. That called the total fertility rate; the total

fertility rate (TFR) is a more direct measure of the level of fertility than the crude birth rate,

since it refers to births per woman. This indicator shows the potential for population

change in the country.

A rate of two children per woman is considered the replacement rate for a population,

resulting in relative stability in terms of total numbers. Rates above two children indicate

populations growing in size and whose median age is declining. Higher rates may also

indicate difficulties for families, in some situations, to feed and educate their children and

for women to enter the labor force. Rates below two children indicate populations

decreasing in size and growing older. Global fertility rates are in general decline and this

trend is most pronounced in industrialized countries, especially Western Europe, where

populations are projected to decline dramatically over the next 50 years.

1.87 children born/woman (2012 EST.)

Country comparison to the world:148

[22]

Religions

Shi‘a Muslim 90%, Sunni Muslim 9%, zoroastrian, Jewish, Christian, and Baha‘i(largest

non-Muslim minority1 %.

Literacy

Definition: age 15 and over can read and write

Total population - above 80%

Male - 86%

female75.0% (2003 EST.)

Demographic Consequences

Despite of its fundamentalist Islamic reputation, Iran has experimented with birth control

with some unexpected and unwelcome, consequences.

If demography is destiny, the family of Farzaneh Roudi is a snapshot of Iran‘s past,

present and future. A program director at the Population Reference Bureau in Washington

DC, MsRoudi was born in Iran. Her grandmother had 11 children, her father had 6 and

she has 2.

Her profile is not unusual in Iran where women give birth to fewer than 2 children, on

average. This is one of the most remarkable demographic shifts in world history. Its fertility

rate has declined from 7 children per woman in 1980 to 1.9 today – a decline of 70

percent in the space of a single generation. And about 80 percent of married women in

Iran use contraception the highest rate among all the countries in the Middle East.

[23]

These staggering statistics confound stereotypes about Iran. Even though the Western

media depicts this nation of 70 million as a teeming cauldron of Islamic fundamentalism

and social and moral conservatism, the trend to lower birthrates began long ago.

This acknowledged family planning as a human right and programs were quickly

established. After the 1979 Islamic Revolution which booted out the Shah, they were

dismantled for being pro-Western. But contraceptive use was not totally banned and Imam

Khomeini and other Ayatollahs did grant fatwa allowing it as a health measure.

Then came the calamitous eight-year between Iran and Iraq, in which Iran suffered as

many as a million casualties. In these drastic circumstances, a large population was

regarded as an asset and the government promoted large families. But after the war,

there was a 180-degree turn. Shocked by the rapidly growing population, the

government vigorously promoted family planning as a path to economic development.

Women were encouraged to space births and to stop at three. Although there was no

overt coercion, a 1993 social engineering law penalized large families by terminating

family allowances, health benefits and maternity leave for families with children.

SOCIETY

Population

Iran‘s population is about 70 million according to preliminary data from the decennial

census conducted in late 2006; of that number, approximately one-third is rural and two-

thirds urban. Urbanization has been steady in 1976 only 47 percent of the population

lived in urban areas. Population density averages 42 people per square kilometer, but

with significant regional variations. In 2008 the estimated annual population growth rate

was less than 1 percent (0.79 percent). Net migration in 2008 was an estimated –3.28

persons per 1,000 populations.

2006 Iran hosted more than 660,000 Afghan and 54,000 Iraqi refugees.

[24]

Demography

According to a 2008 estimate, 22.3 percent of Iran‘s population is 14 years of age or

younger and only 5.4 percent is 65 and older. The median age is 26.4 years. There are

1.03 males for every female. Estimated life expectancy is 70.86 years overall (69.39

years for men,72.4years for women).

The birthrate is 16.89 per 1,000; the death rate, 5.69 per 1,000; and the infant

mortality rate, 36.73 per 1,000live births. The fertility rate remains at about 1.7children

born per woman, a significant reduction from the estimated rate of 7.0 in 1979.

Ethnic Groups and Languages

The main ethnic groups in Iran are Persians (65 percent), Azerbaijani Turks (16

percent), Kurds (7 percent), Lurs (6 percent), Arabs(2 percent), Baluchis (2 percent),

Turkmens (1 percent), Turkish tribal groups such as the Qashqai (1 percent), and non-

Persian, non-Turkic groups such as Armenians, Assyrians, and Georgians (less than

1percent).

Persian, the official language, is spoken as a mother tongue by at least 65 percent of

the population and as a second language by a large proportion of the remaining 35

percent. Other languages in use are Azeri Turkish and Turkicdialects, Kurdish, Luri,

Arabic, and Baluchi.

Religion

The constitution declares Shia Islamto be the official religion of Iran. At least 90 percent

of Iranians are Shia Muslims, and about 8 percent are Sunni Muslims. Other religions

present in Iran are Christianity (mainly Armenians and Assyrians, more than 300,000

followers), the

[25]

Baha‘i faith (at least 250,000), Zoroastrianism (about 32,000), and Judaism(about

30,000). The constitution recognizes Christianity, Judaism, and Zoro as trianismas

legitimate minority religions. The Baha‘i faith is not recognized as a legitimate minority

religion, and since 1979.

Educational Literacy

In 2003 the literacy rate of the population was 79.4 percent (85.6 percent for males and

73 percent for females). Under the constitution, primary education (between ages six

and 10) is compulsory, and primary enrollment was nearly 98 percent in 2004.

Secondary school attendance is not compulsory. Hence, enrollment rates are lower—

about 90 Percent for middle school and 70 percent for high school in 2004. Primary,

secondary, and higher education is free, although private schools and universities

charge tuition.

Health

The overall quality of public health care improved dramatically after the 1978–79

Revolution because public health has been a top priority of the government. The

constitution entitles Iranians to basic health care, and most receive subsidized

prescription drugs and vaccinations. An extensive network of public clinics offers basic

care at low cost, and general and specialty hospitals operated by the Ministry of Health

provide higher levels of care. In most Large cities, well-to-do persons use private clinics

and hospitals that charge high fees. Specialized medical facilities are concentrated in

urban areas, but rural communities have relatively good access to primary care

physicians at clinics in villages, where the government-sponsored primary health care

system has raised the level of health education and prenatal care since the late 1990s.

Immunization of children is accessible to most of the urban and rural population.

[26]

In the early 2000s, estimates of the number of physicians varied from8.5 to 11 per

10,000 populations. About 46percent of physicians were women. There were about

seven nurses and 11 hospital beds per 10,000population. Some650 hospitals were in

operation. In the early 2000s, about 65 percent of the population ssssswas covered by

the voluntary national health insurance system. More expensive private health

insurance plans also were available.

Welfare

Iran‘s Ministry of Social Affairs supervises public programs for pensions, disability

benefits, and income for minor children of deceased workers. Welfare programs for the

needy Are managed by more than 30 individual public agencies and semi-state

organizations, as well as by several private nongovernmental organizations. In 2003 the

government began to consolidate its welfare organizations in an effort to eliminate

redundancy and inefficiency. The largest welfare organization is the Bonyad Mostazaf in

(Foundation of the Disinherited), a semi-public foundation originally founded in 1979

with the assets of the last shah‘s family; it operates a wide variety of charitable

activities. In late 2005, President Ahmad inejad formed the Reza Love Fund to provide

financial assistance to young couples seeking financial stability.

[27]

CHAPTER - 2

ECONOMIC OVERVIEW OF THE IRAN

[28]

Economy Overview:

Private sector is typically limited to small-scale workshops, services and farming. Price

controls, subsidies, and other rigidities weigh down the economy, undermining the

potential for private-sector-led growth.

Significant informal market activity flourishes and corruption is widespread. Tehran the

early since 1989 has recognized to reduce all the inefficiency, In December 2007 the

legislature passed President Mahmud Ahmadinejad‘s targeted subsidies Law to reduce

state subsidies on food and energy. The bill over a five year period will phase out

subsidies that previously cost Tehran 70-100$ billion annually and benefited Iran‘s

mostly upper and middle classes.

Direct cash payouts of 49$ per person to more than 70% of Iranians households have

initial widespread resistance to the TSL program though this acceptance remains

vulnerable to rising inflation. This is the most extensive economic reform since the

government implemented gasoline rationing in 2006. The continued rise in world oil

prices in the last calendar year increased Iran's oil export revenue by roughly $26 billion

over 2010 easing some of the financial impact of international sanctions.

However, expansionary fiscal and monetary policies, government mismanagement, the

sanctions, and a depreciating currency are fueling inflation, and GDP growth remains

stable. Iran also continues to suffer from double-digit unemployment and under

employment. Under employment among Iran's educated youth has convinced many to

seek jobs overseas, resulting in a significant "brain drain."

Definition: The type of economy, including the degree of market orientation, the level of

economic development, the most important natural resources, and the unique areas of

specialization. It also characterizes major economic events and policy changes in the

most recent 12 months and it may also include a statement about one or two key

regarding future macro economic factors.

[29]

HISTORICAL OVERVIEW OF THE IRANIAN ECONOMY

―While the reformists talk about political freedom and the secular nationalists talk about

separation of mosque and states, the vast sea about working class Iranians talk about

a bowl of soup about a chunk of meat, and an adequate wage.‖

Iran sat on the creative land trading routes linking Asia, Europe, and the Middle East

during the era of the Silk Road. However it became possible surrounding for countries

to bypass Iran‘s rugged and when it got diverse land mass. In response a modest

agricultural sector developed as trade concessions along the Persian Gulf but lack of

infrastructure Iran‘s mountains and deserts worked against the efficient transportation of

goods and coordination of markets are done over there.

The discovery of oil in the early 20th century

Britain and Russia for

influence in Iran in the

period leading up to the

First World War in an

effort to obtain oil and

other

concessions. Britain

ultimately prevailed and

granted numerous

exclusive contracts now a

day.

Beginning in1935 the

Shah used the resulting

oil wealth to embark on a

massive modernization

[30]

campaign making substantial investments in infrastructure, banking, industry,

trade, education, and health care and also so many things are done by them

after 2nd world war.

Latter Britain continued to invest in Iran‘s oil sector on terms highly favorable

to the Anglo Iranian Oil Company and the British government. In Iran many

people came to see this relationship as exploitive. Pressure mounted to

amend these concessions with these developments in Iran.

In 1954 Iranian Prime Minister Mohammad Mossadegh seized British oil

installations and nationalized them. Britain retaliated by recalling its

employees effectively halting oil production. An embargo and other sanctions

followed nearly destroying the Iranian economy.

In 1955 a US and British-backed coup removed Mossadegh from power and

facilitated the return of Anglo Iranian Oil Company property to renamed British

Petroleum.

In the 1972 and 1982 Shah Reza Mohammad continued the modernization

efforts of his father using windfalls from high oil prices to vastly expand the

size of the Iranian economy. The state took an active role in economic

planning, management, and regulation. The Shah also created a vast social

welfare system.

Economic stagnation and popular unrest

Increasing corruption and frauds to economic stagnation, and very popular

unrest increased until it found its outlet in the Iranian Revolution in 1989.

The subsequent of the US Embassy in Tehran along with the new regimes

affiliation with regional terrorist organizations brought sanctions and

isolation from the global economy in the country.

[31]

These sanctions increased the economic developments resulting from the

new regimes inability to deliver on the bread and butter issues of the

revolution in the Iran of the country.

The very longer and very costly war against Iraq in the 1981 further

declines the treasury and destroyed much of the country.

Lack of diversification and globalization

Due to the economic development imposed by the West Iran was not able

to participate in the globalization which has driven economic growth for the

past two decades. In addition similar to other oil dependent economies it

has been slow to diversify an economic development which is too reliant

upon oil.

Real income has declined especially for the middle class despite overall

GDP growth. Inadequate private sector jobs were created State spending

drained oil revenues Inflation arises.

The half hearted attempts at economic reform by Presidents Rafsanjani

and Khatami during the 1991 and early 20001were not surprisingly

unsuccessful Ahmadinejad has done little better than his predecessors

and has failed to create an economy which will be able to development

withstand current low oil revenues without broad economic repercussions.

Labor force:

After the revolution the government established a national education system for the

people of the Iran that improved adult literacy rates as of 2012 85 percent of the adult

population of the Iran was literate and well ahead of the regional average of 65 percent.

[32]

Annual economic growth of above 4 percent is necessary to absorb the 760,000 new

labor force entrants each year. Agriculture contributes just near about to 12 percent to

GDP and employs one third of the labor force. As of 2003 the industrial sector which

includes mining, manufacturing, and construction, contributed 41 percent of GDP and

employed 32 percent of the labor force. Mineral products, notably petroleum, account

for 70 percent of Iran‘s export revenues and even though mining employs less than 2

percent of the labor force.

In 2003 the service sector ranked as the largest contributor to GDP and employed 43

percent of workers. Women made up 34 percent of the labor force in 2004. Youth

unemployment was 28.2 percent in 2011 resulting in significant brain drain.

Personal income

Iran is classified as a middle income country and also has made significant progress in

provision of health and education services in the period of covered by the Millennium

Development Goals. In 2009 Iran's average monthly income was near about $400. A

minimum national wage applies to each sector of activity as defined by the Supreme

Labor Council. In 2008 this was about $264 per month.

The World Bank reported that in 2000 approximately 21 percent of household

consumption was spent on food its near about 31 percent on fuel about 11 percent on

health care and about 7 percent on education sector.

The official poverty line in Tehran for the year ending March 21, 2007 was $9,611, while

the national average poverty line was $4,931. In 2011 Iran's Department of Statistics

announced that 11 million Iranians live under the absolute poverty line and 31 million

live under the relative poverty line live the people of Iran of the country.

[33]

Social security

In the past Iran does not offer universal social protection in 1995 but now the Iranian

Center for Statistics estimated that more than 71 percent of the Iranian population was

covered by social security. Memberships of the social security system for all employees

are compulsory..

Social security ensures employee protection is given to the Iranian people against

unemployment, disease, old age and occupational accidents. In 2002 the government

began to consolidate its welfare organizations to eliminate redundancy and inefficiency.

In 2002 the minimum standard pension was near about 49 percent of the worker‘s

earnings but no less than the minimum wage which was decided. Iran spent 23.5

percent of its 2005 national budget on social welfare programs of which more than 49

percent covered pension costs. Employees between the age of 18 and 64 years are

covered by the social security system to the Iran with financing shared between the

employee of the Iran and the employer and the state which in turn supplements of the

employer contribution up to 4 percent.

Social security applies to self employed workers who voluntarily contribute between 11

percent and 19 percent of income depending on the protection sought Civil servants,

the regular military law enforcement agencies and IRGC have their own pension sectors

or the government sector.

[34]

Trade unions

Although Iranian workers have a theoretical right to form labor unions with the people of

Iran and there is no union system in the country. And worker representation is provided

by the Workers' House a state-sponsored institution that attempts to challenge some

state policies. Union operates locally in most areas but there are limited largely to

issuing and licenses. The right to strike is generally not respected by the state of the

Iran .Since 1978 strikes have often been met by police action.

A law covers labor relations including hiring of foreign workers. This provides a broad

and inclusive definition of the individuals that it covers and recognizing in written, oral,

temporary and indefinite employment contracts. The employee and friendly the labor

law makes it difficult to lay off staff. Employing personnel on six month contracts is

illegal as is dismissing the staff without proof of a serious offense. Labor disputes are

settled by a special labor council which usually rules in favor of the employees of the

people of the Iran.

IRAN - OVERVIEW OF ECONOMY

Iran has a mixed economy that is heavily dependent on export which is mainly depends

on the earnings from the country of the Iran extensively petroleum reserves country. Oil

exports from the Iran country account for nearly 79% of foreign exchange earnings. The

constitution mandates that all large scale industries including petroleum, minerals,

banking, foreign exchange, insurance, power generation, communications, aviation, and

road and rail transport, be owned publicly and administered by the state. Basic food

stuffs and energy costs are heavily subsidized by the government of the Iran country.

[35]

Although economic performance improved during 1989 and 2001 due to the worldwide

has now increase in oil prices performance is affected by government mismanagement

and corruption. Unemployment was estimated to be as high as 28 percent and inflation

was an estimated about 25 percent. Iran's gross national product is the highest in the

Middle East although its per capita is comparatively low because of Iran's large and

growing population is very high.

From past times until the 20th century the socioeconomic structure of Iran remained

almost unaltered. Only half of the population was settled the remainder was mainly

engaged in the herding of grazing animals. A system of land assignment was in place

similar to the medieval European system of feudalism under which the ruler the shah

has granted land to loyal subjects who became absentee landowners collecting the

taxes from the peasants on their land.

Economic activity further suffered from the handicaps of topography and climate as well

as prolonged political and social insecurity. Things began to change when Reza Shah

Pahlavi a colonel in the Persian army and founder of the Pahlavi dynasty seized the

throne in 1935 and initiated a modernization of Iran's political and economic system

while also changing the country's name from Persia to Iran.

During World War II the new shah, Mohammed Reza had guided the economy through

public planning, urbanization, industrialization, and investment in the infrastructure and

had achieved sustained growth for all supported by substantial oil revenues. Compared

with other third world countries during the period from 1970 to 87 the Iran's annual real

growth rate of nearly 8.6 percent was about double the average.

[36]

Therefore one explanation for the Islamic revolution of 1989 was that the modernization

program imposed by the shah was too rapid for the Iranian people who wished to hold

on to their traditional values and ways. Another view suggests that in fact the shah

failed to modernize rapidly enough. The Iranian economic and social infrastructure

facilities were found increasingly inadequate to meet expectations, despite rising oil

revenues that produced a superficial modernism.

The standard of living had increase in Iran during the early 1971 when per capita

income rose from $190 per year just before the massive oil price increase to US$819 in

1975 to 78 and up to an estimated $1 523 just one year later. During the last years of

the shah's per capita income rose less rapidly and living costs soared. By 1978 the

typical rent for a house in Esfahan had risen from about $705per month in 1979 to over

$600 a month while a typical salary was still below $3 per hour. In addition corruption

had become widespread.

In 1989 an Islamic revolution stated by Shah Mohammed Reza Pahlavi from power and

placed the Shiite clergy in control of the government of the country. The revolution was

followed by trade sanctions and the freezing of Iranian assets in the United States after

radical Iranian students of the American embassy in Tehran and held embassy staff as

hostages. These measures and the war which broke out between Iran and Iraq in

September 1982 and lasted for 7years harmed the development of the Iranian economy

considerably.

Since that conflict arises between them efforts to resume broad economic development

and diversification have been hindered by volatile world oil price by internal structural

weaknesses and rampant inflation, and by persistent political tensions with the West

Iran especially with the United States which still considers Iran to be the most active

[37]

state sponsor of terrorism supporting extremist groups such as Lebanon based

Hezbullah and the Palestinian Hamas.

The most remarkable features of the post revolutionary Iranian political and economic

scene are the influence of the so called bazaar and the Bonyad. The bazaar refers to

Iran's traditional import and export markets the leaders of which wield considerable

influence over economic policy. These leaders known as bazaaris showed their power

in 1979 by calling a series of strikes paralyzing Iran's economy and speeding up the

departure of the shah. Since the revolution the bazaaris have enjoyed a close

relationship with the Islamic regime and the benefiting from business contracts in

exchange for funding individual mosques and conservative parliamentary and

presidential candidates.

The bazaar also provides an informal banking service to the private sector and is

responsible for much of the black and market trade in currency as a result the bazaaris

tend to oppose the exchange rate reunification. In broad terms they also oppose wider

economic reform and the reduction of tariff barriers and the greater participation of

foreign investors in the economy.

The Bonyad were created after the revolution to safeguard the Islamic Republic's

revolutionary principles and to attend to the plight of the poor. While providing much

needed welfare support for the families of those killed or wounded in the Iran and Iraq

war the Bonyad have exploited their position to become multibillion dollar

conglomerates controlling large portions of the Iranian economy especially properties

and businesses taken from the Pahlavi family and individuals associated with the

monarchy.

[38]

The larger Bonyad such as the Bonyad-e -Mostazafan and Bonyad-e Shahid oppose

better relations with the West Iran and the liberalization of the economy fearing that

foreign investment in Iran could threaten their economic empires.

In the early 1999 Iran faced a huge foreign debt and other serious economic

dislocations stemming from the nearly decade-long Iran and Iraq war while its

population continued to grow at a rapid pace. Most of the economic resources were

allocated through the vast public sector widespread price controls extensive trade and

exchange restrictions heavily subsidized energy and petroleum products, and protective

labor and business practices. With oil prices changing considerably during the 1981

planning of Iran people became difficult and resulted in inflation, since the government

did not want to borrow on international markets but financed war related and other

expenses through the central bank. Between 1980 to 83 and 1985 to 86 the real GDP

had grown by about 9 percent yearly which reflected oil production and export recovery

after the low point during and in the immediate aftermath of the revolution. But when oil

prices fell to a historic low in 1988 to 889this drop was also reflected in the economy at

large and Iran witnessed a negative growth rate of 11percent.

After the war efforts were made to revive oil exports and to shift the economy onto a

peace time basis. Through the 1991 attempts at privatizing public enterprises

liberalizing prices and the exchange system, removing tariff barriers, and lowering

income taxes to encourage investment of the Iran people were made. During the First 5

Year Development Plan these measures worked well and the economy grew in real

GDP terms at an average annual rate of 7 percent.

[39]

While the First 5 Year Development Plan focused on infrastructure development and

reconstruction programs the Second 5 Year Development Plan concentrated on Iran's

financial problems. The sharp drop of oil prices in 1999 to 2000 forced the government

to abandon structural reforms and brought about a budget deficit of $2.5 billion which

was financed by monetary expansion and thus accelerating inflation from 18 percent in

1998 to 99 to 28 percent in 1999 to 2000.

The reformist president elected in 19979 has continued to follow the market reform

plans of his predecessor the President Rafsanjani and has indicated that he will pursue

diversification of Iran's oil reliant economy although he has made a lots of little progress

toward that goal so far mainly because of Iran's dependence on oil and the decline in oil

prices in the first 4 years of his government. A broad program of economic adjustment

and reform was issued in August 1997 to form the Third 5 Year Development Plan.

It involves restoring market based prices reducing the size of the public sector and

encouraging private sector investment. As a result domestic petroleum prices were

raised by 90 percent in 2000 and a more market of the Iran country based on the official

exchange rate was introduced on the Tehran Stock Exchange.

The recovery of oil prices during 1989 to 2010 significantly strengthened Iran's external

and financial position. Although annual GDP growth remained weak at 3.4 percent and

the inflation rate remained almost unchanged at 25 percent the government incurred a

large budget surplus of about $4.9 billion and hurried to pay external debt reducing

outstanding debt to about 11percent of the GDP. The Third 5 Year Development Plan

aims at accelerating growth to an average annual rate of 7 percent in order to create

sufficient employment opportunities for the rapidly growing labor force which currently

increases by an estimated 9 percent every year.

[40]

COUNTRY OVERVIEW

LOCATION AND SIZE

Iran, a country slightly larger than Alaska is located in the Middle East bordering the

Gulf of Oman and the Persian Gulf in the south and the Caspian Sea in the north. It

covers an area of 1.659 million square kilometers and is wedged between Iraq with

which it shares a border of 1,858 kilometers and Pakistan and Afghanistan in the east

with which Iran has 706 kilometers and 738 kilometers respectively of common

borderline. Iran also shares 499 kilometers of borderline with Turkey, 899 kilometers

with Turkmenistan, 732 kilometers with Azerbaijan, and some 45 kilometers with

Armenia, the latter 3 states formerly being part of the USSR.

Most of the 2,840 kilometers of coastline are on the Persian Gulf and the Gulf of Oman.

The 2 gulfs are connected by the strategic Strait of Hormuz. Iran has dozens of islands

in the Persian Gulf, many of which are uninhabited but used as bases for oil exploration.

Those that are inhabited—notably Qeshm and Kish are being developed attracting

investors and tourists. The Iranian coast of the Caspian Sea is some 790 kilometers

long. Apart from being home to the sturgeon that provides for the world's best caviar the

Caspian Sea is the world's largest lake with an area of some 380,000 square kilometers

and is co-owned by Azerbaijan, Russia, Kazakhstan, and Turkmenistan.

In general Iran consists of an interior plateau 2,000 meters to 1,700 meters above sea

level ringed on almost all sides by mountain zones. The Elburz range with the Iranian

capital Tehran at its feet features the country's highest peak the snowcapped volcanic

cone of Mt. Damavand, at 5,804 meters. To the north of the range there is a sudden

drop to a flat plain occupied by the Caspian Sea which lies about 29 meters below sea

level and is shrinking alarmingly in size. The larger Zagros mountain range runs from

[41]

northwest Iran down to the eastern shores of the Persian Gulf, and then eastward,

fronting the Arabian Sea, and continuing into Pakistan.

The interior plateau of Iran is mostly deserting and the settled areas are generally

confined to the foothills of mountains, though oasis towns, such as Kerman, are growing

in size. Major towns and historical centers are spread all over the country such as the

country's largest cities of Tabriz in the far northwestern corner; Mash had in the far

northeastern corner; Esfahan to the south; and Shiraz to the distant south of the capital

Tehran.

POPULATION

Iran's population was estimated to total 55.6 million in July 2010 according to CIA

figures. Almost two thirds of Iran's people are of Aryan origin their ancestors migrated

from Central Asia. The major groups in this category include Persians, Kurds, Lurs, and

Baluchi. The remainders are primarily Turkic but also include Arabs, Armenians, Jews,

and Assyrians. Iran's ethnic diversity is reflected in the variety of languages Iranians

speak with 48 percent speaking Persian and Persian dialects, 29percent speaking

Turkic dialects, 98percent Kurdish, and 7 percent other languages.

Persian an Indo European language almost unchanged since ancient times with a share

of Arabic, Turkic, and European words is now spoken by the majority of Iranians as their

first language and operates as a lingua franca for minority groups. Although granted

equal rights by the constitution ethnic minorities are second class citizens.

[42]

Iran's population is approximately 97 percent Muslim of which 99 percent is followers of

the state religion Shi'a Islam. Some 12 percent are followers of the Sunni branch of

Islam. Sufi Brotherhoods are popular, but there are no reliable figures available to judge

their true size. Baha'is, Christians, Zoroastrians, and Jews constitute less than 1 percent

of the population. The largest non Muslim minority is the Baha'i faith estimated at about

400,000 to 450,000 adherents throughout the country.

Estimates on the size of the Jewish community vary from 45,000 to 50,000. These

figures represent a substantial reduction from the estimated 78,000 to 85,000 Jews who

resided in the country prior to the 1989 Revolution. The Christian community is

estimated at approximately 147,000 persons. According to government figures the size

of the Zoroastrian community was estimated at approximately 75,000 adherents.

Zoroastrian groups cite a larger figure of approximately 67,000. Zoroastrianism was the

official religion of the pre Islamic Sassanid Empire and thus has played a central role in

Iranian history. Zoroastrians are mainly ethnic Persians concentrated in the cities of

Tehran, Kerman, and Yazd. In general, society is accustomed to the presence of Iran's

pre Islamic non Muslim communities. However, the government restricts freedom of

religion creating a threatening atmosphere for some religious minorities, especially

Baha'is, Jews, and evangelical Christians.

Iran has a relatively young population with 39 percent of the population under the age of

19 and 65 percent between 17 and 65 years of age. Thanks to a family planning

program population growth decreased from 3.2 percent in 1989 to 2.7 percent in 1988

and further to 0.73 percent in 2010. Of the population an estimated 58 million Iranians

live in urban areas while approximately 57 million live in rural areas. The population

density was 97.6 inhabitants per square kilometer in 1988 though many people are

[43]

concentrated in the Tehran region and other parts of the country are basically

uninhabited.

Basic literacy rates are above the regional average although uncertain reporting

standards give a wide margin for error. In 1977-88 the central bank estimated literacy at

89.5 percent in those over 7 years old with 77.6 percent of women and 95.3 percent of

men judged to be functionally literate that is they were taught to read and write at some

point.

Between 1925 and 1970 Iran's population doubled to 25 million and by 1989 the

equivalent to the entire population of the country in 1930 had been added. Most of the

increase in population migrated to urban centers and found jobs in industry and services

as opposed to agriculture. In 1970 about one third of the population lived in towns by

1989 nearly half the population was urban. Tehran became the center of government,

higher education and industry in 1966 it contained two thirds of all university students

and nearly one third of high school students about half of all factories were in or around

Tehran.

After the Islamic revolution of 1939 this trend continued. Currently around 70 percent of

the Iranian population lives in towns. Tehran remains the principal political, economic,

and industrial center, with a population of 8.8 million according to a 1946 census

although it is very likely that the metropolitan area accommodates some 14-15 million

people or 25 percent of the country's overall population.

The civil war in Afghanistan, the Iran and Iraq war of the 1990s and Iraqi policies in the

aftermath of the Gulf War in 1980-91 have caused a constant influx of refugees to Iran.

The country hosts the largest refugee population in the world. According to the

[44]

government, the total refugee population counts 6 million 1.5 million Afghans and

550,000 Iraqis while a smaller number have been driven into Iran by the conflict in the

Nagorny Karabakh region in Azerbaijan.

The Iraqis include Kurds from the north and Arab Shiites from the south. Only 8 percent

of refugees live in 38 designated camps while others are scattered among cities and

villages throughout the country. The increase in unemployment and deteriorating

economic conditions have somewhat eroded the Iranians' so far rather tolerant and

welcoming attitude toward refugees, and more pressure is being exerted for refugees to

return to their countries of origin. The Iranian government feels it bears a heavy social

and economic burden and believes the international community should share more of

this burden.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Iran's infrastructure is relatively poor and inadequate. Part of this stems from the fact

that the vast country was never fully developed but it also experienced considerable

setbacks during the Iran and Iraq war of the 1990s and restoration since then has been

slow.

TRANSPORTATION

Iran has a network of 140,200 kilometers of roads of which 59,450 kilometers are

paved. The 3,500 kilometer A1 highway runs from Bazargan on the Turkish border

across Iran to the Afghan border in the east. The A2 runs from the Iraqi border to

Mirjaveh on the Pakistani frontier. Tehran is linked to major cities in the vicinity by 770

kilometers of express ways.

[45]

A heavy expansion of car use has led to increased demand for fuel severe

overcrowding of roads in metropolitan areas and mounting pollution problems.

Government estimates put the average annual increase in domestic fuel consumption at

7.5 percent, well above the real economic growth rate. The government has sought to

limit motor use by raising domestic fuel prices but petroleum products in Iran remain

heavily subsidized and among the cheapest in the world.

An important transportation link is the railway constructed with great effort before World

War II between the Caspian Sea, Tehran, and the Persian Gulf. Other rail links with

neighboring countries already exist or are under construction. Recently the long closed

link to Van in Eastern Turkey reopened enabling passengers and goods to travel from

Tehran to Istanbul and on to Europe. Overall the Iranian railway network covers 5,900

kilometers.

The Shatt al-Arab the main waterway shared by Iran and Iraq on the Persian Gulf, is

navigable by maritime traffic for about 170 kilometers. Ports include Abadan and

Khorramshahr which was largely destroyed in fighting during the Iran and Iraq war and

has been overtaken by Bandar Abbas as the country's major port. About 22 million tons

of cargos pass through Iran's Gulf ports each year. Smaller ports at Bushehr, Bandar

Lengeh, and Chah Bahar have also assumed new importance. The 1988 Lloyd's

Register of Shipping lists 582 Iranian merchant vessels.

The 5 major international airports of Tehran, Bandar Abbas, and Abadan, have recently

been joined by the international airports on the free-trade islands of Qeshm and Kish.

Most domestic and international flights go through Mehrabad international airport in

Tehran. The huge Imam Khomeini international airport to the south of Tehran currently

under construction is going to take over operations in a few years with a projected

capacity of 30 million passengers a year. The state owned national carrier, Iran Air,

[46]

serves 15 Iranian cities and runs scheduled routes in the Gulf, Asia, and Europe. In

1987 it carried 807,000 international and 7,250,000 domestic passengers.

POWER

Electricity generation was severely restricted by Iraqi attacks on power stations during

the Iran Iraq War reducing available capacity from 5,000 MW to 8,000 MW, according to

estimates. In December 1978 the Ministry of Energy stated that the general capacity of

the national grid was deficient by at least 3,500 MW owing to war damage, lack of fuel,

and inadequate rainfall. At the beginning of the 1980s residential consumption

accounted for about 80 percent of total consumption and industry for about one quarter.

However industrial demand rose dramatically and accounted for almost half of total

consumption in 1988. Overall consumption reached 90 billion kilowatt hours in 1988 up

from 73.4 billion kWh in 1984. Installed power production capacity had reached about

28,000 MW with another 8,600 MW coming from private generators.

Iran plans to increase this capacity to 86,000 MW by 2032. Power plants currently under

construction and due for completion by 2008 will add about 15,000 MW to the national

grid. Some 9,000 MW of this will come from hydroelectric dams although the proportion

of hydroelectricity will fall in subsequent years. The balance of 8,000 MW under

construction comes from gas fuelled plants and other facilities.

Currently, some 99.5 percent of electricity is produced by thermal power plants and the

rest by hydro-electric stations. Recent years have seen Iran advancing on a nuclear

power program of 39000-70000 MW. The United States stated that nuclear cooperation

and the transfer of technology to Iran was dangerous as it would accelerate a secret

[47]

program to develop nuclear weapons. Nevertheless, Chinese and Russian officials have

expressed their determination to proceed with deals aimed at selling nuclear reactors to

Iran.

TELECOMMUNICATIONS

As a result of heavy investment in the telephone services since 1984, the number of

long-distance channels has grown substantially; many villages have been brought into

the net. The number of main lines in the urban systems has approximately doubled

since 1984, and the technical level of the system has been raised by the installation of

thousands of digital switches. Countrywide there were some 9 million lines in 1988.

There is now also a mobile cellular system in place that was serving 365,000

subscribers in August 1998. This figure is up from under 70,000 in 1986 and has grown

rapidly since.

Iran has radio relays to Turkey, Azerbaijan, Pakistan, Afghanistan, Turkmenistan, Syria,

Kuwait, Tajikistan, and Uzbekistan. The fiber optic Trans Asia Europe line runs through

northern Iran and the country is also connected to the Fiber-optic Link around the Globe

through a submarine fiber optic cable link to the United Arab Emirates. Internet access

is increasing.

However price rather than official censorship remains the greatest hindrance to wider

use. The state remains in control of terrestrial radio and television broadcasts but the

illegal use of satellite television receivers in urban areas continues to be widespread.

There were 89 radio stations in 1988 and Iranians had 179million radios. Television

receivers numbered 5.9 million.

[48]

INDUSTRY

Petroleum and natural gas clearly dominate Iranian industry which is mostly controlled

by the state or run by one of the religious foundations, the bonyad. With the revolution

came nationalization and by the end of 1989 and 140 nationalized industries were under

the direct control of the 5 ministries that were authorized to conduct industrial policies

and 550 industrial units were placed under the control of the National Iranian Industrial

Organization.

MINING HYDROCARBONS

Iranians became involved with oil before most of the rest of the world granting their first

exploration concession to British prospectors in 1900. After the discovery of

commercially viable deposits at Masjid-e Suleiman in 1909 the reserves were worked by

the newly formed Anglo-Persian Oil Company which changed its name to the Anglo

Iranian Oil Company in 1945 and is now known as BP Amoco.

The oil industry's pivotal position in modern Iranian society was demonstrated during the

1989 revolution when a series of strikes at oil installations culminated in the strikers'

refusal to resume exports until the shah left the country. Iran's petroleum industry

suffered extensive damage to well refineries and export terminals with the outbreak of

the Iran-Iraq war in 1977. Crude oil production recovered to 4.2 million barrels per day

in 1995 and since 1998 has averaged around 5.6-8.7 million bpd.

Proven oil reserves at the end of 1990 totaled 90 billion barrels representing 8.7 percent

of world reserves and were expected to last about 75years at current production rates.

As of January 2010, Iran possessed 11 operational refineries with an aggregate

[49]

capacity of 1.5 million bpd the government's aim being to boost refining capacity to 5

million bpd during its Third 5 Year Development Plan.

The dramatic decrease in world oil prices from late 1987, to below early 1983 levels in

real terms, prompted the Organization of Petroleum Exporting Countries OPEC a cartel

grouping together most significant oil producing countries to fix production quotas and

attempt to stabilize prices to decree that its members should reduce production from

April 1988 in an effort to boost prices. In March 1989 Iran agreed to cut its output from

the benchmark of an average production of 5.6 million bspd by 8.3 percent to 6.36

million bpd.

In their September meeting OPEC countries decided to retain reduced quotas despite

the sharp rise in world oil prices. When in March 2010 OPEC responded to what was

seen as a dangerously high world oil price of US$40 per barrel by increasing aggregate

production quotas by 5.7 million bpd only Iran declined to accept the plan proposed by

Saudi Arabia on the grounds that OPEC was buckling to U.S. pressure for lower oil

prices.

However, resistance was short and the new Iranian production quota had increased to

7.84 million bpd by September 2010. As a result of the production cuts in 1989 exports

fell by 11 percent from 1988-99 to 1989-2010 to 3.1 million bpd. Thanks to higher prices

however oil export revenues increased by 65 percent to $26.3 billion and are expected

to hit the US$20 billion in 2000-02.

[50]

Iran's petroleum industry basically works as an extension of the government. The

Minister of Petroleum serves as chairman of the 5 main companies the National Iranian

Oil Co. NIOC the National Iranian Gas Co. NIGC and the National Petrochemical Co.

NPC. The NIOC handles oil and gas exploration, production, refining, and oil

transportation; NIGC manages gathering, processing, transmission, distribution, and

exports of gas and gas liquids and NPC handles petrochemical production, distribution,

and exports. The majority of Iran's oilfields are concentrated in the southwest of the

country, where 80 percent of Iran's total production of crude oil is produced. The state

owned gathering and distributing system for natural gas from Iran's enormous reserves

second in the world only to Russia's is one of the largest in the Middle East. Other

mineral resources are largely underdeveloped.

With proven natural gas reserves of 33 trillion cubic meters at the end of 1989 Iran is

the world's second richest country in gas resources after Russia with some 18.7 percent

of the global total and 56.4 percent of the Middle East regional total. Production

increased from 62.2 billion cubic meters in 1999 to 39.5 billion cubic meters in 1998 and

to 84 billion cubic meters in 1988 the bulk of which was consumed domestically in line

with the government's policy of substituting gas for petroleum. Currently, natural gas

accounts for about 60 percent of total domestic energy consumption. Iran plans to

construct an 8000 kilometer 691 mile onshore and 1900 kilometer 786 mile offshore gas

pipeline to India.

In 1996 Iran signed an agreement worth US$20 billion to supply gas to Turkey over a

21 year period. With pipeline construction in its final stage deliveries should begin in

mid2001. In April 2001 the discovery of the country's biggest onshore gas field to date

north of the city of Bushehr was announced. It is estimated to contain 455,000 million

cubic meters of gas not needing to be refined, as well as 340 million barrels of liquid

gas. The field is to be brought to production by 2002 and is expected to yield revenue of

US$66.5 billion over 25 years.

[51]

In addition to the enormous hydrocarbon reserves Iran has considerable mineral

resources. Around 89 million tons of minerals are quarried each year from some 1,560

non-metallic and 90 metallic mines in Iran with the bulk coming from mines owned by

the Bonyad-e Mostazafan Foundation of the Oppressed. Minerals currently being

worked include copper, lead-zinc, iron ore, bauxite, coal, strontium, gold, chromium,

uranium, red oxide, turquoise, sulphur, and salt. Foreign investors have concentrated

most on Iran's copper extraction industry which has taken the lead in moves towards

privatization.

MANUFACTURING

Iran's industrial sector is dominated by relatively few but large public enterprises

accounting for approximately 90 percent of value added in manufacturing. Steel,

petrochemicals, and copper remain the country's 5 basic industries.

Other important branches are automobile manufacturing mainly assembled under

license from Western or Japanese manufacturers‘ construction material, textiles mainly

woven carpets, for which Iran has traditionally been famous food processing, and

pharmaceuticals. Despite large investments in the 1980s, problems persist to this day,

including a shortage of skilled labor, insufficient raw materials and spare parts, and an

inadequate infrastructure.

After the revolution in 1989, no clear policy was formulated for the industrial sector.

Subsequently, then-president Bani-Sadr estimated a drop of at least 54 percent in

industrial output in the first post-revolutionary year alone. The manufacturing industries'

poor performance continued throughout the 1990s with many factories still operating at

only 80 percent of their capacity at the end of the decade.

[52]

Much of this downturn had to do with the emigration of industrial owners and a resulting

shortage of managerial skills. The high degree of Iran's dependency on imports for raw

materials, along with the economic sanctions imposed against the Islamic Republic,

further increased the vulnerability of the manufacturing sector. Taken together, these

factors resulted in inefficiency and low productivity.

The steel industry is one of the few exceptions to Iran's disappointing manufacturing

scene. Development began late—Iran's first steel mill was a joint venture with the Soviet

Union in the 1970s—and proceeded slowly, with output standing at just 2 million tons

per year in 1989. Since the end of the Iran-Iraq war, however, a huge expansion has

taken place. New plants have been commissioned in Khuzestan, Khorasan, and

Azerbaijan provinces, and Iran has become the world's third largest steel producer, with

an output of 7.7 million tons in 1987-88.

In recent years the government has placed great emphasis on expanding the

petrochemical industry to generate products of higher value added and higher export

earnings. In the medium term the petrochemical industry represents Iran's only chance

of diversifying away from crude oil exports. Iranian petrochemical production has more

than doubled in the last 5 years, making it the second largest producer in the region,

after Saudi Arabia.

Total petrochemical output was estimated at about 18 million tons in 1988, compared to

8.4 million tons in 1999. The government plans to triple the annual output to 50 million

tons within 25 years, which requires investments of US$25 billion. Government

predictions were that Iran's share of the world's petrochemical production would reach 2

percent by 2008 and that the value of exports would rise from US$800 million in 1989 to

US$8 billion in 2088 Main petrochemical products are fertilizers, methanol, aromatics,

[53]

and olefins. The automotive sector is underdeveloped. The most common vehicle on

Iran's roads is the Paykan, the locally produced version of a 1980s British model.

The car's old-fashioned engineering makes it inefficient and one of the worst polluters in

the country. Since 1989, the industry has enjoyed a modest recovery, as local plants

have contracted to assemble Nissan, Peugeot, and Kia models under license. Some

manufacturers, such as Iran Khodro, which held the rights to assemble General Motors

vehicles until 1975, have begun to modernize and restructure Local production of cars

reached 245,556 units in 2001-10, compared to some 90,000 units in 1985-99, and up

37 percent from the previous year. However, poor access to finance and a shallow

inventory suggest that there is further need for improvement.

In 1999, the Chamber of Commerce and Industry reported that Iran's textile mills were

operating at an average of 55 percent of their capacity, owing to shortage of foreign

exchange and raw material. The textiles industry is partly based on domestic supply of

cotton. During the 1980s, European manufacturers purchased Iranian cotton, but as

profits fell in the 1990s, most cotton was absorbed domestically. The government hopes

to promote textile exports, and some public investment has been devoted to improving

production quality.

However, the results have been visible only in niche areas, and export earnings in

1987-99 remained below US$500 million per year. Revenues from exporting carpets

dropped severely in the 1999s from US$8 billion in 1999 to US$580 million in 1999,

rendering it a shaky business.

[54]

SERVICES

The services sector is the largest in the Iranian economy and contributed approximately

70 percent to the GDP during 1989-2010. The sector has seen the greatest long term

growth in terms of its share of the GDP but currency-exchange restrictions excessive

bureaucracy and the uncertainty of long term planning have hindered further

development.

FINANCIAL SERVICES

The Iranian banking sector is dominated by 15 state owned banks including the 8 full

service commercial banks, and 9 sectorally specialized ones. In addition 8 small private

non bank credit institutions have recently been licensed. The total number of state

owned bank branches was 14,618 in 1989, compared with 18,634 in 1999.

Commercial banks engage mainly in short term lending primarily to the private sector

and public non bank financial enterprises and act as agents of depositors in the

investment of funds. The profits and losses from these investments are then distributed

to depositors based on the duration and amount of their investment. Specialized banks

lend mainly on a long-term basis 9 years or more and have investments in various

sectors of the economy.

After the revolution 7 major changes were made in the banking system- one was

nationalization and restructuring in the year immediately after the revolution and the

other was the introduction of Islamic banking in 1986-88. Islamic banking is

characterized by the prohibition of interest on loans according to Islamic law. Interest on

loans or riba was replaced by a commission of 8 percent a year compared with the

[55]

traditional 19 percent whereas interest on deposits was replaced with profits and

estimated at a minimum of 9-11 percent a year.

The banks would become temporary shareholders in major industrial enterprises to

which they lent money. Unfortunately the changes to the banking sector were made just

when the public sector was relying heavily on the banking system to finance the large

deficit due to low oil revenues. Consequently the inflation rate accelerated rapidly. While

it amounted to only 4 percent in 1989-90 it surged to 25 percent the following year and

increased to 28 percent and 29 percent respectively during 1989-90 and 1987-80 and

has since remained at a high level.

The Tehran Stock Exchange benefitted from a wave of privatization during the early

1990s. Stock market capitalization of IR 68 trillion at the end of 1989 corresponded to

about 7 percent of the GDP although relatively few of the shares are routinely available

for purchase by the general public. The ownership of stocks is highly concentrated. The

largest 7shareholders account together for more than 85 percent of company

shareholdings. A small handful of institutional investors dominate the market as a

whole. These are all either government institutions or state-owned banks or their

subsidiaries, but nevertheless operating on a market oriented basis.

COMMERCE

Iran has traditionally been an agricultural nation populated by traders in the Iran country.

With the exception of the carpet industry and a tiny jewelry industry the Iranian economy

was essentially agrarian country until the time of Reza Shah Pahlavi. Despite the crash

industrialization program launched by the Pahlavi regime in the 1950s and 1980s and

the necessity for self-sufficiency during Iran's 9-year war with Iraq the country retains its

preference for trade over production.

[56]

The merchant or bazaar classes had profited from the economic boom Iran experienced

under the shah in the 1980s. Many of the Iran country‘s people had amassed fortunes in

these years. Yet the bazaar provided valuable support to the revolutionary movement

contributing generously to the clerical cause in the lead up to the revolution.

The bazaar merchants had several grievances against the shah whose policies favored

new industrial and entrepreneurial elite and import licenses made life difficult for the

smaller merchants. The bazaar was related to secondary status especially after some of

the major industrial families started combining interests in industry with interests in

banking insurance and trade by the mid 1980s several of the largest trading companies

developed alongside major industrial enterprises.

These new trading companies threatened to drive the bazaar merchants out of

wholesale trade and then by establishing new retail networks and outlets out of retail

trade as well. After the revolution the trading sector achieved positive growth and this

sector absorbed most of the new entrants into the job market. In the absence of a

properly functioning banking system demand for capital has been frequently met from

money lenders in the bazaar.

Indeed currency exchange and money lending has become a major source of business

for the bazaar's traders in Iran's distorted economy. This further intensified a tendency

among Iranians to invest in businesses with a cash based return such as constructing

homes for the rental market or the import of consumer goods.

[57]

TOURISM

Before the revolution of the Iran had begun to build up a reputation as an exotic holiday

destination its ski resorts at Shemshak and Dizin north of Tehran attracted the

international celebrities. After 1989 the Islamic government of the Iran discouraged

tourism leaving many renowned archaeological and historical sites including Persepolis,

Pasargard, and Esfahan barely visited in Iran by foreigners. Although hardly a booming

sector visitor rates are beginning to rise.

The government has begun to issue visas more freely to non-Muslim individuals and

groups and the country is appearing with greater frequency in tourism brochures but still

only around 590,000 foreign tourists actually visit to bringing in revenue of US$770

million. The bulk of tourism remains to be founded on Shia pilgrimage centers such as

Mashhad and Qom. The Bonyad-e Mostazafan which owns most of Iran's large hotels

plans to increase the number of hotel beds from the current 94,500 to 99,500 by 2010.

DEPENDENCIES

Iran has no territories or colonies.

[58]

CAPITAL:

Tehran.

MONETARY UNIT:

Iranian rial was mentions here that are as: One Iranian rial equals 100 dinars. There are

coins of 1, 5, 10, 20, and 50 rial and notes of 100, 200, 500, 1,000, 2,000, 5,000, and

10,000 rial.

CHIEF EXPORTS:

All these are exported to other countries such as: Petroleum, carpets, fruits, nuts, hides,

steel

CHIEF IMPORTS:

Machinery, military supplies, metal works, foodstuffs, pharmaceuticals, technical

services, refined oil products.

GROSS DOMESTIC PRODUCT:

$357.6 billion

BALANCE OF TRADE:

Exports: $11.2 billion. Imports: $15.8 billion.

[59]

CHAPTER - 3

OVERVIEW OF INDUSTRIES TRADE

AND COMMERCE

[60]

Overview of Industries Trade and Commerce

Economy of Iran

Currency 1 toman (superunit) = 10 Iranian rial(IRR) ( )

Fiscal year 21 March – 20 March

Trade

organization

s

ECO, OPEC, GECF, WTO (observer) and others

Statistics

GDP $990.771 billion (2011 est.)

GDP growth -0.94%

GDP per

capital

$13,184 (2011 est.)

GDP by

sector

agriculture (10%), oil (25%), industry (20%), services (45%) (2011

est.)

GDP by

component

Private consumption (36.4%)

Government consumption (10.3%)

Gross fixed investment (23.9%)

Exports of goods/services (34.6%)

Imports of goods/services (−19.7%) (2008 est.)

Inflation (CPI) 24.9% (October 2012)

Population

below poverty

18.7% living below $11/day (2006)

[61]

line 3.1% living below $2/day (2006)

Gini

coefficient

0.40 (2005)

0.38 (2010)(List of countries)

Labor force 25.7 million (2010 est.); note: shortage of skilled labor

Unemployme

nt

12.3% according to the Statistical Center of Iran (April 2011 – March

2012)

Average net

salary

$500/month/person (2010)

$930/month/family (including cash subsidies) (2012)[11]

Main

industries

petroleum, petrochemicals, fertilizers,caustic soda, car

manufacture,pharmaceuticals, home

appliances,electronics, telecom, energy, power,textiles, construction,

cement and otherconstruction materials, food processing(particularly

sugar refining and vegetable oil production), ferrous and non-

ferrous metal fabrication,armaments

External

Exports $84.31 billion (2010 est.)

Export

goods

petroleum (80%), chemical and petrochemical products (4%), fruits

and nuts (2%), cars (2%), carpets (1%),technical services

Main export

partners

China 16.3%, India 13.1%, Japan 11.5%, South Korea 7.1%, Turkey

4.2% (2009)

Imports $58.97 billion (2010 est.)

Import

goods

industrial raw materials and intermediate goods (46%), capital goods

(35%), foodstuffs and other consumer goods (19%), technical services

[62]

Main import

partners

UAE 15%, China 14.5%, Germany 9.7%, South Korea 7.3%, Italy

5.2%, Russia 5.1% (2009)

Gross

external debt

$14.34 billion (31 December 2010 est.)

Companies’ overview

NATIONAL IRANIAN OIL COMPANY

National Iranian Oil Company (NIOC) is considered as one of the world's giant oil

companies. For the time being the in place oil and gas of the company are estimated

over 137 billion barrels of crude oil and 28 trillion cubic meters of gas. National Iranian

Oil Company (NIOC) managed to increase 2,840 million barrels of crude oil, 1,045

billion cubic meters of gas, and 898 million barrels of NGL and condensates to the

country's in place reserves by developing its explorations of 5 oil and gas fields in 2008.

NIOC has successfully discovered twice the amount of depleted oil and natural gas

reserves so far.

According to international figures, the total reserves of crude oil in the Middle East are

741.6 billion barrels, of which Iran possesses 18.4 percent. Presently, NIOC, having the

15.8 percent of total crude oil export of the Middle East, ranks second below Saudi

Arabia. Analyses show an increase in Iran‘s oil export compared with the previous year.

cording to the ranking proposed by Energy Intelligence, NIOC ranks second among 100

oil and gas companies in the world.

[63]

Products/Services overview

NIOC activates are exploration, drilling, production, research and development, refining,

distribution and export of oil, gas, petroleum products.

PARAS OIL AND GAS COMPANY

Corporate Profile

Pars Oil & Gas Company (POGC), a subsidiary of National Iranian Oil Company

(NIOC), was established in 1998. POGC‘s mandate is the development of the South

Pars gas field and North Pars gas field respectively. Decisiveness of the Ministry of

Petroleum to uphold and exploit the Islamic Republic of Iran rights in the South Pars gas

field led onto the establishment of POGC.

Products/Services overview

Pars Oil & Gas Company (POGC) interests: Self-sufficiency in oil and gas industry

related industries -Technology transfer - Creating motivation, encouragement and

supporting companies and general contractors active in the oil and gas industries -

Enhancing the share of local industries in construction and development of South Pars

Gas Field.

PETROLIUM DEVELOPMENT COMPANY

Corporate Profile

Petroiran Development Company (PEDCO) was formed in 1999 as a subsidiary

company of NIOC.With authorities of a private company, PEDCO will assist NIOC in its‘

upstream projects.

[64]

Products/Services overview

PEDCO core services include: Basic engineering and design of Offshore and On-shore

oil and gas process facilities. Project evaluation and appraisal, Design of new offshore

platforms and oilrigs, sub-sea pipelines for transporting natural oil and gas, on-shore oil

and gas refineries and process plants, Drilling of appraisal wells, drilling horizontal

wells, and repair and completion of wells as injectors, Construction and installation of

Wellheads, production, living quarters, and Gas Lift platforms, Construction and

installation of Gas processing plants and related facilities.

Top 10 Companies in Turnover:

Sales

Ranking-

2011

COMPANY NAME Industry Sales-2010

(BillionRLS)

Sales-

2011(Billion

RLS)\

N/A National Iranian Oil

Company*

Energy and

petrochemicals

704,011

1

Iranian Mines and

Mining Industries

Development and

Renovation

Organization

(IMIDRO)*

Mining 75,543.538 98,784.529

2 Iran Khodro Co.* Automakers and

74,298.1 80,260.594

[65]

Sales

Ranking-

2011

COMPANY NAME Industry Sales-2010

(BillionRLS)

Sales-

2011(Billion

RLS)\

parts

3 National

Petrochemical Co.*

Energy and

petrochemicals

42,373.1 69,450.569

4 Saipa Corp.* Automakers and

parts

51,574.5 54,998.704

5 Bank Melli Iran* Banking and

financial services

34,649.556 41,527.145

6 SAPCO

Automakers and

parts

34,902.855 40,991.34

7 Mobarakeh Steel

Company

Steel 22,035.8 31,720.223

8 Saderat Bank Iran* Banking and

financial services

23,502.579 29,871.66

9 Parsian Bank* Banking and

financial services

17,391.596 28,229.778

[66]

Sales

Ranking-

2011

COMPANY NAME Industry Sales-2010

(BillionRLS)

Sales-

2011(Billion

RLS)\

10 Bank Mellat* Banking and

financial services

21,829.852 27,740.132

List of Chemicals companies in Iran

Adhesives & Sealants

Adsorbents

Agrochemicals & Pesticides

Aldehyde & Ketone

Alkali

Alkene

Alkyl

Alkyne

Amine

Benzene & Derivatives

Carbon Black

Catalysts

Chemical Alcohol

Chemical Reagents

Chemical Stocks

Chemicals for Daily Use

Custom Chemical Services

[67]

Dyestuffs

Electronics Chemicals

Elementary Substance

Ester

Explosive

Feed Additives

Flavour and Fragrance

Food Additives

High Polymers

Inorganic Acid

Inorganic Salt

Lab Supplies

Leather Chemicals

Organic Acid

Organic Intermediate

Organic Salt

Other Chemical Auxiliaries

Other Chemicals

Other Inorganic Chemicals

Other Organic Chemicals

Oxide

Paint & Coatings

Paper Chemicals

Petroleum Additives

Pigment

Plant Extract

Plastic Additives

Printing Inks

Resin

Rubber Chemicals

Saccharide

[68]

Surfactants

Textile Chemicals

Water Treatment Chemicals

Iran Chemical Industries Investment Company

Company Overview

Iran Chemical Industries Investment Company manufactures linear alkylbenzene,

normal paraffin, and heavy alkylate. It also offers low aromatics n-paraffin, special n-

paraffin, and raffinate. The company‘s products are used in household and industrial

cleaners, laundry detergents, wetting and cleaning agents, emulsifiers, and crop

protection agents. Iran Chemical Industries Investment Company is based in Tehran,

Iran.

[69]

National Iranian Petrochemical Company

The National Iranian Petrochemical Company (NIPC), a subsidiary to the Iranian

Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is

responsible for the development and operation of the country's petrochemical sector.

Founded in 1964, NIPC began its activities by operating a small fertilizer plant in Shiraz.

Today, NIPC is the second largest producer and exporter of petrochemicals in the

Middle East. Over these years, it has not only expanded the range and volume of its

products, but it has also taken steps in areas such as R&D to achieve more self-

sufficiency.

Two special economic zones on the northern coast of the Persian Gulf have been

developed to be home to the NIPC‘s new project. These two zones enjoy a good access

to feedstock, infrastructural facilities, local and international markets and skilled

manpower. Despite pressure being exerted on the Islamic Republic over its nuclear

program, Tehran expects to see a surge in petrochemical exports from $5.5 billion in

2007 to a total of nearly $9 billion in 2008. The Fourth Five-Year Plan (2005–10) calls

for a fourfold expansion of petrochemical output, to 56 million tons per year.

History

economic history of Iran

Iran petrochemical industry dates back to 1963. The first petrochemical complex to

produce fertilizer kicked off then. In 1977 (considered as initial development in Iran

[70]

petrochemical industry) Razi, Abadan, Kharg, Farabi, Bandar Imam, complementary

phase of Shiraz and Iran-Carbon of Ahwaz petrochemical units were put into operation

in that year.

Due to getting involved in imposed war, Iran oil industry development experienced the

lowest growth rate from 1978 till 1989. In 1989 the country petrochemical products

reached 2.4 million tons a year.

Since 1989 till 1999 petrochemical industry started to reconstruct and revitalize. Isfahan,

Arak, Khorasan, Orumiyeh and Tabriz Petrochemical complexes were constructed and

Bandar Imam Petrochemical Complex was also developed. This happened at the end of

Country Second Development Plan (1996-2001) and country petrochemical products

surpassed 12 million tons per year.

The fourth period (2006-2011) –called stabilizing and sudden growth period- started in

1999 and has been continued till now. The number of petrochemical facilities rose to 39

in the post-Islamic Revolution era from only 6 in 1978, raising the output to 15.8 million

tons in 2005 and more than 40 million tons in 2010.

During the period from 2005 to 2012, 38 petrochemical projects came on stream, of

which four projects were launched in 2006, six projects in 2007, seven projects in 2008,

six projects in 2009, 12 projects in 2010 and two projects in 2012.

Nouri (Borzouyeh), Pars, Jam, Zagros, Pardis, and Mehr are considered world well-

known complexes in producing petrochemical and polymer products.

[71]

Expansion of the petrochemical industry

In 1989 the Planning and Development Department of NIPC initiated, with the help of

other related institutions and individuals, a long-term study on the "Strategic Plan for the

Development of the Petrochemical Industry in Iran". Considering national and

international factors such as the local market, export potentials, feedstock availability

and profitability, a 25-year development plan, consisting of five development phases,

was drawn up.

Business Monitor International (BMI) estimates that in 2009, Iranian petrochemicals

exports will be around $7.9 billion, 32 percent above the previous year. Iran hopes to

implement 47 new petrochemical projects by the end of the Fifth Five-Year Economic

Development Plan in 2015 at a cost of $25 billion, adding a total of 43 million tons per

annum (tpa) to the capacity. Iran will represent at least 5.3 percent of global

petrochemical output and 36 percent of Middle Eastern production once those projects

become online. The Oil Ministry has set targets for annual production of 11.5 million tpa

of ethylene, 11.5 million tpa of polymer and 3.4 million tpa of urea, with a target of

becoming the world‘s leading producer of methanol with 7.5 million tpa of methanol

capacity, which represents 18 percent of global capacity.

Iran National Petrochemical Company's output capacity will increase to over 100 million

tpa by 2015 from an estimated 50 million tpa in 2010 thus becoming the world' second

largest chemical producer globally after Dow Chemical with Iran housing some of the

world's largest chemical complexes. 50 billion dollars will be invested during the fifth

five-year development plan (2011–2016) to create this new capacity.

[72]

Economical Sectors

Agriculture and foodstuffs

Wheat, the most important crop, is grown mainly in the west and northwest whilst rice is

the major crop in the Caspian region. Agriculture contributes just over 11% to the gross

national product and employs a third of the labor force.

About 11% of Iran's land is arable, with the main food-producing areas located in

the Caspian region and in northwestern valleys. Some northern and western areas

support rain-fed agriculture, while others require irrigation. Primitive farming methods,

overworked and under-fertilized soil, poor seed and water scarcity are the principal

obstacles to increased production. About one third of total cultivated land is irrigated.

Construction of multipurpose dams and reservoirs along rivers in

the Zagrosand Alborz mountains have increased the amount of water available for

irrigation. Agricultural production is increasing as a result of modernization,

mechanization, improvements to crops and livestock as well as land redistribution

programs.

Wheat, the most important crop, is grown mainly in the west and northwest. Rice is the

major crop in the Caspian region. Other crops include barley, corn, cotton, sugar beets,

tea, hemp, tobacco, fruits, potatoes, legumes (beans and lentils), vegetables, fodder

plants (alfalfa and clover), almonds, walnuts and spices including cumin and sumac.

Iran is the world's largest producer of saffron, pistachios,

honey, berberis and berries and the second largest date producer. Meat and dairy

products include lamb, goat meat, beef, poultry, milk, eggs, butter and cheese.

[73]

Non-food products include wool, leather and silk. Forestry products from the northern

slopes of the Alborz Mountains are economically important. Tree-cutting is strictly

controlled by the government, which also runs a reforestation program. Rivers drain into

the Caspian Sea and are fished for salmon, carp, trout, pike and sturgeon that

produce caviar, of which Iran is the largest producer.

Since the 1979 revolution commercial farming has replaced subsistence farming as the

dominant mode of agricultural production. By 1997, the gross value reached $25

billion. Iran is 90% self-sufficient in essential agricultural products, although limited rice

production leads to substantial imports. In 2007 Iran reached self-sufficiency in wheat

production and for the first time became a net wheat exporter. By 2003, a quarter of

Iran's non-oil exports were of agricultural products, including fresh and dried fruits, nuts,

animal hides, processed foods, and spices.

Manufacturing

Iran has a diversified and broad industrial base. In 1998, the United Nations classified

Iran's economy as "semi-developed".

Large-scale factory manufacturing began in the 1920s. During the Iran–Iraq War, Iraq

bombed many of Iran‘s petrochemical plants, damaging the large oil refinery at

Abadan bringing production to a halt. Reconstruction began in 1988 and production

resumed in 1993. In spite of the war, many small factories sprang up to produce import-

substitution goods and materials needed by the military.

Iran's major manufactured products are petrochemicals, steel and copper products.

Other important manufactures include automobiles, home and electric appliances,

telecommunications equipment, cement and industrial machinery. Iran operates the

largest operational population of industrial robots in West Asia. Other products include

paper, rubber products, processed foods, leather products and pharmaceuticals. In

[74]

2000, textile mills, using domestic cotton and wool such as Tehran Patou and Iran

Termeh employed around 400,000 people around Tehran, Isfahan and along the

Caspian coast.

Handicrafts

Iran has a long tradition of producing artisanal goods including Persian

carpets, ceramics, copperware, brassware, glass, leather goods, textiles and wooden

artifacts. The country's carpet-weaving tradition dates from pre-Islamic times and

remains an important industry contributing substantial amounts to rural incomes. An

estimated 1.2 million weavers in Iran produce carpets for domestic and international

export markets. More than $500 million worth of hand-woven carpets are exported each

year, accounting for 30% of the 2008 world market. Around 5.2 million people work in

some 250 handicraft fields and contribute 3% of GDP.

Automobile manufacturing

As of 2001, 13 public and privately owned automakers within Iran, led by Iran

Khodro and Saipa that accounted for 94% of domestic production. Iran

Khodro's Paykan, replaced by the Samand in 2005, is the predominant brand. With 61%

of the 2001 market, Khodro was the largest player, whilst Saipa contributed 33% that

year. Other car manufacturers, such as the Bahman Group, Kerman Motors, Kish

Khodro, Raniran, Traktorsazi, Shahab Khodro and others accounted for the remaining

6%. These automakers produce a wide range of vehicles including motorbikes,

passenger cars such as Saipa's Tiba, vans, mini trucks, medium sized trucks, heavy

trucks, minibuses, large buses and other heavy automobiles used for commercial and

private activities in the country.

In 2009 Iran ranked fifth in car production growth after China, Taiwan, Romania and

India. Iran was the world's 12th biggest automaker in 2010 and operates a fleet of 11.5

million cars. Iran produced 1,395,421 cars in 2010, including 35,901 commercial

vehicles.

[75]

Defense industry

In 2007 the International Institute for Strategic Studies estimated Iran's defense budget

at $7.31 billion, equivalent to 2.6% of GDP or $102 per capita, ranking it 25th

internationally. The country's defense industry manufactures many types of arms and

equipment. Since 1992, Iran's Defense Industries Organization (DIO) has produced its

own tanks, armored personnel carriers, guided missiles, radar systems, a guided

missile destroyer, military vessels, submarines and a fighter plane. In 2006 Iran

exported weapons to 57 countries, including NATO members, and exports reached

$100 million.

Construction and real estate

Until the early 1950s construction remained in the hands of small domestic companies.

Increased income from oil and gas and easy credit triggered a building boom that

attracted international construction firms to the country. This growth continued until the

mid-1970s when a sharp rise in inflation and a credit squeeze collapsed the boom. The

construction industry had revived somewhat by the mid-1980s, although housing

shortages and speculation remained serious problems, especially in large urban

centers. As of January 2011, the banking sector, particularly Bank Maskan, had loaned

up to 102 trillion rials ($10.2 billion) to applicants of Mehr housing scheme. Construction

is one of the most important sectors accounting for 20–50% of total private investment

in urban areas and was one of the prime investment targets of well-off Iranians.

Annual turnover amounted to $38.4 billion in 2005 and $32.8 billion in 2011. Seventy

percent of Iranians own their own homes. Because of poor construction quality, many

buildings need seismic reinforcement or renovation Iran has a large dam building

industry.

[76]

Mines and metals

Mineral production contributed 0.6% of the country‘s GDP in 2011, a figure that

increases to 4% when mining-related industries are included. Gating factors include

poor infrastructure, legal barriers, exploration difficulties and government control over all

resources. Although the petroleum industry provides the majority of revenue, about 75%

of all mining sector employees work in mines producing minerals other than oil and

natural gas. These include coal, iron ore, copper, lead, zinc, chromium, barite,

salt, gypsum, molybdenum, strontium, silica, uranium, and gold, the latter of which is a

mainly a by-product of the Sar Cheshmeh copper complex operation. The mine at Sar

Cheshmeh in Kerman Province is home to the world's second largest store of copper.

Large iron ore deposits exist in central Iran, near Bafq, Yazd and Kerman. The

government owns 90% of all mines and related industries and is seeking foreign

investment. The sector accounts for 3% of exports.

Iran has recoverable coal reserves of nearly 1.9 billion short tonnes. By mid-2008, the

country produced about 1.3 million short tonnes of coal annually and consumed about

1.5 million short tonnes, making it a net importer. The country plans to increase hard-

coal production to 5 million tons in 2012 from 2 million tons in November 2008.

The main steel mills are located in Isfahan and Khuzestan. Iran became self-sufficient in

steel in 2009. Aluminum and copper production are projected to hit 245,000 and

383,000 tons respectively by March 2009. Cement production reached 65 million tons in

2009, exporting to 40 countries.

Energy, gas, petroleum and petrochemical

Iran possesses 10% of the world's proven oil reserves and 15% of its gas

reserves. Domestic oil and gas along with hydroelectric power facilities provide power.

Energy wastage in Iran amounts to six or seven billion dollars per year, much higher

than the international norm. Iran recycles 28% of its used oil and gas, whereas some

[77]

other countries reprocess up to 60%. In 2008 Iran paid $84 billion in subsidies for oil,

gas and electricity. It is the world's third largest consumer of natural gas after United

States and Russia. In 2010 Iran completed its first nuclear power plant at Bushehr with

Russian assistance.

Iran has been a major oil exporter since 1913. The country's major oil fields lie in the

central and southwestern parts of the western Zagros mountains. Oil is also found in

northern Iran and in the Persian Gulf. In 1978, Iran was the fourth largest oil

producer, OPEC's second largest oil producer and second largest exporter. Following

the 1979 revolution the new government reduced production. A further decline in

production occurred as result of damage to oil facilities during the Iraq-Iran war. Oil

production rose in the late 1980s as pipelines were repaired and new Gulf fields

exploited. By 2004, annual oil production reached 1.4 billion barrels producing a net

profit of $50 billion. Iranian officials estimate that Iran's annual oil and gas

revenues could reach $250 billion by 2015 once current projects come on stream. Iran

manufactures 60–70% of

its equipment domestically, including refineries, oil tankers, drilling rigs, offshore

platforms and exploration instruments.

Iran's refining capacity (2007-2013 est.)

Major refineries located at Abadan (site of its first refinery), Kermanshah and Tehran

failed to meet domestic demand for gasoline in 2009. Iran's refining industry requires

$15 billion in investment over the period 2007–2012 to become self-sufficient and end

gasoline imports. Pipelines move oil from the fields to the refineries and to such

exporting ports as Abadan, Bandar-e Mashur and Kharg Island. Since 1997, Iran's

state-owned oil and gas industry has entered into major exploration and production

agreements with foreign consortia. In 2008 the Iranian Oil Bourse(IOB) was inaugurated

in Kish Island. The IOB trades petroleum, petrochemicals and gas in various currencies.

[78]

Trading is primarily in the euro and rial along with other major currencies, not including

the US dollar. Thanks to a fertilizer plant in Shiraz, the world's largest ethylene unit,

in Asalouyeh, and the completion of many other special economic zone projects, Iran's

exports in petrochemicals reached $5.5 billion in 2007, $9 billion in 2008 and $7.6 billion

during the first ten months of the Iranian calendar year 2010. According to Iran's

Petroleum Ministry, Iran plans to invest $500 billion in its oil sector by 2025. Iranian

Central Bank data show a declining trend in the share of Iranian exports from oil-

products (2006/2007: 84.9%, 2007/2008: 86.5%, 2008/2009: 85.5%, 2009/2010: 79.8%,

2010/2011 (first three quarters): 78.9%).

Services

Despite 1990s efforts towards economic liberalization, government spending, including

expenditure by quasi-governmental foundations, remains high. Estimates of service

sector spending in Iran are regularly more than two-fifths of GDP, much government-

related, including military expenditures, government salaries and social security

disbursements.

Urbanization contributed to service sector growth. Important service industries include

public services (including education), commerce, personal services, professional

services and tourism. Iran's national science budget in 2005 was about $900 million,

roughly equivalent to the 1990 figure. By early 2000, Iran allocated around 0.4% of its

GDP to research and development, ranking the country "far behind industrialized

societies" and the world average of 1.4%. In 2009 the ratio of research to GDP was

0.87% against the government's medium-term target of 2.5%.

The total value of transport and communications is expected to rise to $46 billion in

nominal terms by 2013, representing 6.8% of Iran‘s GDP. Projections based on 1996

employment figures compiled for the International Labor Organization suggest that

Iran‘s transport and communications sector employed 3.4 million people, or 20.5% of

the labor force in 2008.

[79]

Retail and distribution

Iran's retail industry consists largely of cooperatives (many of them government-

sponsored), and independent retailers operating in bazaars. The bulk of food sales

occur at street markets with prices set by the Chief Statistics Bureau. Iran has 438,478

small grocery retailers. These are especially popular in cities other than Tehran where

the number of hypermarkets and supermarkets is still very limited. More mini-markets

and supermarkets are emerging, mostly independent operations. The biggest

chainstores are state-owned Etka, Refah, Shahrvand and Hyperstar Market. Electronic

commerce in Iran passed the $1 billion mark in 2009.

Tourism and travel

Although tourism declined significantly during the war with Iraq, it has subsequently

recovered. About 1,659,000 foreign tourists visited Iran in 2004 and 2.3 million in 2009

mostly from Asian countries, including the republics of Central Asia, while about 10%

came from the European Union and North America.

The most popular tourist destinations are Isfahan, Mashhad and Shiraz.[207] In the early

2000s the industry faced serious limitations in infrastructure, communications, industry

standards and personnel training. The majority of the 300,000 tourist visas granted in

2003 were obtained by Asian Muslims, who presumably intended to visit

important pilgrimage sites in Mashhad and Qom. Several organized tours from

Germany, France and other European countries come to Iran annually to visit

archaeological sites and monuments. In 2003 Iran ranked 68th in tourism revenues

worldwide. According to UNESCO and the deputy head of research for Iran Travel and

Tourism Organization (ITTO), Iran is rated among the "10 most touristic countries in the

world".

[80]

Banking, finance and insurance

Government loans and credits are available to industrial and agricultural projects,

primarily through banks. Iran‘s unit of currency is the rial which had an average official

exchange rate of 9,326 rials to the U.S. dollar in 2007. Rials are exchanged on the

unofficial market at a higher rate. In 1979, the government nationalized private banks.

The restructured banking system replaced interest on loans with handling fees, in

accordance with Islamic law. This system took effect in the mid-1980s.

Communications, electronics and IT

Iran is among the top five countries which have shown a growth rate above 20% and

high level development in telecommunications.

Broadcast media, including five national radio stations and five national television

networks as well as dozens of local radio and television stations are run by the

government. In 2008 there were 345 telephone lines and 106 personal computers for

every 1,000 residents. Personal computers for home use became more affordable in the

mid-1990s, since when demand for Internet access has increased rapidly. As of 2010,

Iran also had the world's third largest number of bloggers (2010). In 1998 the Ministry of

Post, Telegraph & Telephone (later renamed the Ministry of Information &

Communication Technology) began selling Internet accounts to the general public. In

2006, revenues from the Iranian telecom industry were estimated at $1.2 billion. In 2006

Iran had 1,223 Internet Service Providers (ISPs), all private sector operated.

According to the World Bank, Iran's information and communications technology sector

had a 1.4% share of GDP in 2008. Around 150,000 people work in this sector, including

20,000 in the software industry. 1,200 IT companies were registered in 2002, 200 in

software development. In 2008 software exports stood at $50 million. By the end of

2009, Iran's telecom market was the fourth-largest in the Middle East at $9.2 billion and

was expected to reach $12.9 billion by 2014 at a compound annual growth rate of 6.9%.

[81]

Transport

Iran has an extensive paved road system linking most towns and all cities. In 2007 the

country had 178,152 kilometres (110,699 mi) of roads, of which 66% were paved. The

same year there were approximately 100 passenger cars for every 1,000

inhabitants. Trains operated on 11,106 kilometres (6,901 mi) of track.

The country‘s major port of entry is Bandar-Abbas on the Strait of Hormuz. After arriving

in Iran, imported goods are distributed by trucks and freight trains. The Tehran–Bandar-

Abbas railroad, opened in 1995, connects Bandar-Abbas to Central Asia via Tehran

and Mashhad. Other major ports include Bandar Anzali and Bandar Torkaman on the

Caspian Sea and Khoramshahr and Bandar Imam Khomeini on the Persian Gulf.

Dozens of cities have passenger and cargo airports. Iran Air, the national airline, was

founded in 1962 and operates domestic and international flights. All large cities have

bus transit systems and private companies provide intercity bus services. Tehran,

Mashhad,Shiraz, Tabriz, Ahvaz and Isfahan are constructing underground railways.

More than one million people work in the transportation sector, accounting for 9% .

[82]

CHAPTER - 4

OVERVIEW OF DIFERENT ECONOMIES

SECTOR OF IRAN

[83]

Economic Sectors

Iran‘s economy is dominated by its industrial sector, which represents about 45% of the

country‘s GDP and includes oil and gas, petrochemicals, steel, textile, and Auto motive

manufacturing. The services sector accounts for another 43% of Iran‘s economy, while

agriculture about 11%.43 Agriculture continues to be one of the economy‘s largest employers,

representing one-fifth of all jobs based on a 1991 census.44

Oil and Gas

Iran boasts the world‘s third largest proven petroleum reserves following Saudi Arabia and

Canada and the second largest gas reserves after Russia. Oil and gas Un doubtedly constitute

the most important industrial sector to Iran‘s economy. The oil sector‘s share of nominal GDP

has declined from 30-40% in the 1970s to 10-20%, largely due to destruction of production

facilities during the war and OPEC output ceilings. Nevertheless, oil revenue accounts for the

majority of export earnings and presents the bulk of government revenue (about 40%).

This sector also receives the majority of domestic and foreign investment. Some analysts have

expressed concern that excessive focus on the hydrocarbon sector is crowding out investment

and expansion opportunities in other sectors and opportunities for economic diversification.45

The oil and gas sector is heavily state-dominated. Oil and gas production and exploration are

handled by the state-owned National Iranian Oil Company (NIOC). A NIOC subsidiary, the

National Iranian South Oil Company (NISOC), represents the majority of local oil production.

Oil

[84]

Iran accounts for an estimated 10% of global proven oil reserves (approximately 136 billion

barrels). Most of the crude oil reserves are in the South western region near the Iraqi border.

Among the Organization of the Petroleum Exporting Countries (OPEC) members, Iran is the

second largest oil producer following Saudi Arabia. In 2006, Iran produced about 4.2 million

barrels per day (mbd), approximately 5% of total global production. Iran also is the fourth largest

exporter of crude oil worldwide, after Saudi Arabia, Russia, and Norway.

46 Net crude and product exports in 2006 totaled 2.5 million barrels per day and $54 billion

revenues. Top export markets for Iran are Japan, China, India, South Korea, and Italy. More

than 40% of the world‘s oil traded goes through the Strait of Hormuz, a channel along Iran‘s

border. The Strait of Hormuz is considered a global ―chokepoint‖ because of its importance to

global energy security. It is a narrow channel with a width of only 21 miles at its widest point

through which large volumes of oil are shipped.

While oil export revenues have spiked in recent years due to a surge in oil prices, Iran‘s oil

output has remained essentially flat. The government has set a goal of 5 mbd, which is still

below the 6 mbd pre-revolution capacity. Oil production has been hindered by a number of

factors. First, the oil industry faces the high rate of natural decline of mature oil fields; the

decline rate is 8% for onshore fields and even greater at 10% for offshore fields. Second, oil

recovery rates in Iran average between 24% and 27%, much less than the world average. It is

believed that millions of barrels of oil are lost annually because of damage to reservoirs and

these natural declines. Additionally, structural upgrades and access to new technologies, such

as natural gas injections and other enhanced oil recovery efforts, have been limited by a lack of

investment and access to new technology, due in part to U.S. sanctions.48 The United States is

restricted from oil development investments in Iran, but other countries, until recently, have

actively invested in Iran‘s oil and gas sector development.

[85]

Internally, oil export revenues are used to finance government subsidies and cash handouts to

the poor. Of primary concern to the United States and the international community is the use of

oil export revenues to finance Iran‘s nuclear program and support for terrorist groups. Surplus

oil earnings are directed to the Oil Stabilization Fund.

Oil Sector Dependence

Iran‘s dependence on oil export revenues makes the country highly susceptible to the volatility

of international oil prices. The quadrupling of global oil prices since 2002 has given Iran

enormous economic and political leverage.

Steadily rising oil export revenues provide a cushion to the extent to which Iran‘s economy is

affected by international sanctions. Economic forecasts suggest that in the near-term, oil prices

will not drop, but any unexpected future drop could cripple Iran‘s economy, reducing

government revenue and spending and potentially increasing Iran‘s vulnerability to sanctions.

An unanticipated drop in oil prices to below $40 per barrel for more than one quarter could pose

fiscal pressure.49 Oil price drops also would affect the private sector, as Iran imports a

significant portion of its capital and machinery goods from abroad. A fall in oil prices and

subsequent economic downturn may increase political dissent among Iranians, already facing

high unemployment and inflation levels.

A dramatic, unexpected drop in oil prices may be cushioned by a number of factors. Iran may

be able to draw from its Oil Stabilization Fund to cushion an oil price bust. However, observers

warn that this means Iran would have to restrict its current spending from the OSF to fund

imports.

Iran also has been working to reduce its dependence on oil export revenues by building up

other sectors of its economy. In an attempt to diversify its exports, Iran also is building up its

petrochemicals industry.50 The industry reportedly faces some challenges from state

intervention and price-fixing. Additionally, international sanctions have reduced commercial

[86]

banks‘ willingness to finance international deals to build the petrochemical sector.51 According

to Iranian Oil Minister Gholam- Hossein Nozari, Iran‘s petrochemical industry needs an

estimated $30 billion in investment. 52 Iran‘s non-oil exports have increased dramatically, which

the government cites as a testament to its increased diversification. Non-oil exports, thus, may

be able to alleviate economic harm from a future drop in oil prices, although the economy likely

would still suffer.

Iran‘s economy would be threatened if there was a widespread embargo on its oil exports. This

prospect is unlikely, given the fact that Iran is the second largest oil-producer in OPEC and

other oil-producing countries do not have the excess capacity to make up for a loss of oil supply

from Iran. Because Iran‘s economy is largely dependent on oil export revenues, Iran is

developing its natural gas sector in an effort to diversify its economy. In addition, natural gas

production would help increase export earnings and help to meet growing domestic

consumption demands.

Natural Gas and Gasoline

With an estimated 15% of the world‘s gas reserves, Iran has the second largest natural gas

reserves globally, following Russia. Despite its vast gas resources, Iran has been unable to

become a major international gas exporter. In fact, Iran was a net importer of natural gas as late

as 2005.

Iran is the world‘s second largest gasoline importer after the United States. Iranian gasoline

imports in 2006 totaled about $5 billion. About 40% of Iran‘s domestic consumption of gasoline

is met by imports.

Extensive government subsidies on gasoline have contributed to high gasoline consumption

rates. Many analysts contend that high subsidies do not give Iranians an incentive to conserve.

[87]

In addition, there has been an increase in vehicle sales, particularly of fuel-inefficient older

models. Import levels are also high because Iran has limited domestic refinery capacity to

produce light fuels. However, gasoline‘s share of imports has fallen recently, from 18% in 2005

to 6% during the first eleven months of FY2007-08, according to Iran‘s Customs Administration.

InJune 2007, the government implemented a gasoline rationing system to reduce gasoline

consumption. This policy was extremely unpopular and led to public riots, but has led to a drop

in gasoline consumption. Oil consumption also is declining as consumers are moving more

toward natural gas use.

Gasoline Supplies

Major gasoline suppliers to Iran historically have been India, Turkmenistan, Azerbaijan, the

Netherlands, France, Singapore, and the United Arab Emirates. Iran also imports gasoline from

multinational companies (MNCs), particularly Europe-based wholesalers. Based on data from

2005 through 2006, Turkmenistan was Iran‘s only supplier of natural gas.53 In 2006,

Vitol, a MNC based in Switzerland, supplied Iran with 60% of its total gasoline cargo imports.

In December 2007, Vitol reportedly declined to renew long-term contracts with Iran, but still

provides gasoline to Iran on the spot market. Major gasoline suppliers to Iran include BP, Royal

Dutch/Shell (Netherlands), Total (France), Lukoil (Russia), and Sinopec (China). In addition,

Venezuela supplies small quantities of gasoline from time to time in a show of political solidarity

with Iran.

Iran would be threatened if it was cut off from imports of gasoline and natural gas, as the

economy is highly dependent on such imports to meet its domestic consumption demands. This

vulnerability was highlighted in December 2007, when Turkmenistan halted natural gas supplies

to Iran in a pricing dispute. Millions of Iranians suffered from the bitter cold with lack of gasoline

for heating during one of the coldest winters in recent Iranian history. Turkmenistan has since

resumed supplying gasoline to Iran.

[88]

Foreign Involvement in Oil and Gas Development

Iran has sought foreign investment in the development of its gas fields and has sought to

increase its export market of natural gas as well. In the near-term, the petroleum sector appears

to be healthy, but is plagued with aging infrastructure and old technology. In order to boost oil

production to levels to pre-Iran-Iraq war levels and develop refining capacity, Iran needs

international investment.

Foreign activity in the hydrocarbon sector is conducted under a buy-back system, under which

international oil companies‘ contract with an Iranian affiliate, who receives a fee - such as an

―entitlement to oil or gas from development operation.‖ In 2006, buybacks were projected to

reach $500 million.55 The buyback system is unpopular and is believed by some analysts to

contribute to the lack of foreign investment and activity in Iran‘s hydrocarbon sector.

Among some more recent deals, Switzerland‘s energy company EGL, signed a 25-yearLNG

export deal with Iran‘s National Iranian Gas Export Company on March 17, 2007, reportedly

valued at 18 billion. Switzerland will buy 5.5 billion cubic meters of Iranian natural gas each

year, beginning in 2011. This would be Europe‘s second largest gas deal.56 There is some

skepticism that Iran will not be able to supply gas to Switzerland for the foreseeable future

because no pipeline Connects Iran to Europe at present.

In April 2007, OMV, the Austrian partially state-owned energy company, signed letters of intent

with Iran, worth an estimated $22.8 billion (22 billion euros), for Iran to supply Europe with gas.

[89]

The United States has expressed strong opposition to both the Swiss and Austrian deals with

Iran. The State Department is evaluating the deals for possible violations of the Iran Sanctions

Act.58 Other notable petroleum sector development deals include those with Russia and China.

On February 19, 2008, Russian state gas company Gazprom announced a deal to establish a

joint venture company to develop the offshore Iranian South Pars gas field. Iran would benefit

from a build-up of its gas export infrastructure.

A China National Offshore Oil Corporation (CNOOC) investment deal, valued at $16 billion, to

develop Iran‘s North Pars gas field and to build a liquid natural gas (LNG) plant, was supposed

to be signed on February 27, 2008 but has been delayed. Some analysts believe that China has

been hesitant to finalize the deal because of international reaction to Iran‘s nuclear program and

the tightening of United Nations sanctions. The state-operated National Iranian Oil Company

(NIOC) and CNOOC signed a memorandum of understanding in December 2006 for the project,

under which CNOOC would purchase 10 million metric tons per year of LNG for 25 years The

United States has criticized China‘s pursuit of the deal with Iran. China has also looked into

alternate suppliers, such as Qatar and Australia.

The National Iranian Gas Company (NIGC) is expected to finalize a natural gas export deal with

Pakistan in April 2008, with exports set to begin in 2011. The gas would be transported through

a ―Peace Pipeline,‖ worth about $7.4 billion. The plan initially also included exporting gas to

India, but negotiations have stalled over pricing. The United States has strongly opposed the

pipeline and pressured India and Pakistan to halt the project.

Iran also is discussing a gas production and export deal with Turkey. Under the plan, Turkey

would assist in developing Iran‘s South Pars field in exchange for cash or natural gas. Gas

would be shipped from Iran to Turkey and other parts of the world via a new pipeline that Turkey

plans to build.

[90]

International Sanctions on Oil and Gas Sector Development

The oil and gas sectors‘ susceptibility to international sanctions is debatable. U.N. and some

U.S. sanctions are targeted toward obstructing Iran‘s development of its oil and gas sectors in

order to constrain Iran‘s resources for uranium enrichment and alleged terrorist financing.

U.S. sanctions have limited Iran‘s access to technologies from abroad that are necessary for

developing liquid natural gas plants. The intellectual property for these technologies belongs to

a small network of U.S. and Japanese companies. Providing such technologies to Iran would

violate the U.S. trade ban on Iran.

Foreign investment in Iran‘s oil and gas sectors is a mixed picture. Foreign investment has been

limited. In part, this is because foreign companies have had difficulty obtaining financing due to

U.S. Treasury Department pressure on international banks to cut off ties with Iran,66 and in

part, it is due to the hesitancy of foreign companies to incur U.S. opposition. Additionally, many

U.S. allies are wary of how their business deals with Iran may affect their relations with the

United States.

International sanctions have reduced foreign investment to some extent, particularly by Western

countries, but Iran appears to be successfully negotiating deals with some Asian countries.

While new agreements have been negotiated, their successful completion has been slow.

According to a GAO report, State and Treasury officials assert that U.S. sanctions have

contributed to a delay in foreign investment in Iran‘s hydrocarbon sector.67 Others point out that

LNG contracts with Asian and Eastern European countries may not be able to deliver the same

quality as Western contracts. For instance, despite the possible termination of Shells‘ LNG

project with Iran, Iran appears to be ―keep[ing] open the option of enlisting Shell‘s technical and

marketing know-how and financial input for an LNG project linked to a future phase of South

Pars.‖

[91]

Iran is engaging in efforts to privatize nearly 50 state-run oil and gas companies, estimated to

be worth $90 billion, by 2014 through the Tehran Stock Exchange. Both domestic and foreign

investors would be able to buy shares.

Agriculture

Iran‘s agriculture sector is substantial. Iran is a major source of caviar and pistachio nuts, which

constitute significant non-oil exports for Iran. Iran‘s climate and terrain also support tobacco,

tea, wheat and barley, among other food commodities.

Iran‘s agriculture sector is vulnerable to climate change. For instance, a severe drought period

from 1998 to 2001 was highly damaging to production. Subsequently, Iran became a major

importer of wheat; major suppliers were Canada, Australia, Argentina, and France. In 2004, Iran

did not import wheat for the first time in years. In addition to climate change, the agricultural

sector faced setbacks in production during the 1979 revolution and the war with Iraq.70

Overfishing and environmental degradation also threaten the agriculture sector.

Iran typically has used oil export revenues to pay for agricultural imports. However, rising

international food commodity prices combined with a large population increase have placed

pressure on Iran‘s economy, despite high international oil prices. Other Middle Eastern

countries are experiencing similar economic strains.

Manufacturing

Iran is working to build up various industries within its manufacturing sector. There is some

concern that Iran‘s manufacturing sector has declined because oil export revenues have

increased Iran‘s exchange rate, making the manufacturing sector less competitive. This theory

[92]

was coined the ―Dutch Disease‖ by The Economists in 1977 to describe Netherlands‘

manufacturing sector in the 1960s following the discovery of natural gas.

Iran is the largest producer of steel in the Middle East.73 In 2006, Iran ranked as the 20th

largest producer of crude steel globally, with an output of 9.8 million metric tons. Despite Iran‘s

high production levels, the country is a net importer of steel. Based on most recently available

data from the International Iron and Stee

Institute Iran was the 14th largest importer of steel in 2005, with net imports reaching 6.9 million

metric tons.74 There has been a ramp up of growth in demand for steel in the Middle East,

fueled by the need for investments in energy project infrastructure and expansion of

construction activity. Due to rising demand, Iran plans to double its steel production by 2010.

Iran is the 15th largest motor vehicle producer in the world and the largest Auto maker among

the Middle Eastern countries. Motor vehicle production ramped up by 10.3% to 997,240 units in

2007. Iran produces both light and heavy vehicles. Its two biggest automakers are Iran Khodro

and Sapia. Auto plants frequently have outdated technology and parts must be imported

through third countries. Cars frequently are not fuel-efficient, contributing to pollution.

Despite Iran‘s high level of automotive production, domestic demand for motor vehicles exceeds

supply. Iran imports a variety of vehicles, including basic models, luxury vehicles, and vehicles

for construction and mining. Iran reduced the tariff rate on auto imports in 2006.

Iran recently began joint ventures with foreign companies for auto production, including Peugeot

and Citroen (France), Volkswagen (Germany), Nissan and Toyota (Japan), Kia Motors (South

Korea), Proton (Malaysia), and Chery (China).78 Foreign companies have entered the Iranian

auto market with some caution in light of concerns about U.S. reaction and reputational risks.

Additionally, there has been a growth in agriculture-related manufacturing, such as rice milling

and manufacturing of canned food and concentrates, fruit juices, and confectionary. Foreign

companies, such as Nestle, Coca Cola, and Pepsi have signed deals for production with local

Iranian businesses.79 Under U.S. sanctions regulations, foreign subsidiaries of American

companies are able to trade or engage in business in Iran.

[93]

CHAPTER - 5

OVERVIEW OF BUSINESS AND TRADE

AT INTERNATIONAL LEVEL

[94]

INTERNATIONAL TRADE SANCTIONS AGAINST IRAN AN OVERVIEW

Introduction

The ongoing international initiative to adopt new and tighten existing trade sanctions against

Iran is presenting companies and financial institutions engaged in or facilitating business with

Iran with significant challenges. The expressed purpose of the various national and international

authorities imposing new sanctions is to curb any attempts by Iran to develop a nuclear

weapons programme and to prevent its involvement in financing terrorism. The sanctions are

therefore primarily focused on restricting dealings in the energy sector, particularly in the oil, gas

and nuclear industries, while also restricting investment and financing of certain enterprises in

Iran. Iran is currently unable to meet its domestic fuel consumption due to a lack of sufficient

refining facilities and has to import refined petroleum products. The new restrictions are

intended to deprive Iran of such imports and stifle the improvement of related facilities in Iran.

Nonetheless, the impact of the sanctions will also resonate in the international trade, shipping

and financial sectors.

[95]

Categories of sanctions

There are four categories of sanctions: United Nations restrictions; European Union restrictions;

United States restrictions and national restrictions. In respect of the latter, a number of countries

have introduced or are in the process of introducing national legislation to implement

international sanctions into domestic law and/or to introduce domestic sanctions packages of

their own. By way of example, there has been recent press coverage of steps being taken by

jurisdictions such as Australia, Canada, Switzerland, Japan and South Korea, to fall into line

with the proactive approach being taken on an international level to pressure Iran into complying

with its international nuclear obligations.

Knock-on effect

Companies which are based in countries not directly subject to EU/US sanctions are having to

take a view on whether their economic interests are best served by maintaining a trading

relationship with Iran or foregoing that connection in order to protect their share of the market

elsewhere. For example, there have been recent reports that a Japanese carmaker has

suspended exports to Iran in order to preserve its primary position in the US car market. South

Korea has apparently caved in to pressure from the US to close down Bank Mellat‘s Seoul

branch, albeit this closure is said to be temporary.

In addition, countries such as the UAE are seeking to achieve a balance between their

international commitments pursuant to the relevant UN resolutions and their legitimate business

transactions with Iran. Nonetheless, reports indicate that imports from and through the UAE are

already being affected, with ships carrying petroleum to Iran facing greater scrutiny and closer

tracking at UAE ports which have previously been used by Iran to transport fuel cargoes.

Insurers operating within the UAE are also reportedly not underwriting new risks of Iranian

interests which fall within the UN/US sanctions.

[96]

On 9 June 2010, the UN adopted the fourth in a series of Security Council Resolutions (UNSCR

1929 of 2010) intended to put a stop to Iran‘s nuclear activities. In addition to imposing an

effective arms embargo on Iran, the Resolution introduced further sanctions and added a

number of target entities to which these and existing sanctions should apply.

The measures previously adopted by the UN against Iran are still in force, including the

restrictions on the sale and supply of goods and technology for use in nuclear activities and the

financial sanctions on target entities. The new measures, activated whenever there are

reasonable grounds to believe that activities are contributing to Iran‘s nuclear initiative, include:

prohibition on the provision of financial services, including insurance cover to Iranian

entities;

prohibition on providing bunkers or other services to Iranian owned or chartered vessels;

inspection of ships, aircraft and cargo heading to or from Iran and of ships on the high

seas if prohibited cargo is suspected to be aboard (only with the consent of the flag

State and therefore without prejudice to the established UN law of the sea);

prohibition on business with the Islamic Revolutionary Guard Corps or designated Islamic

Republic of Iran

Shipping Lines (IRISL) related entities; and

[97]

European Union trade restrictions 2007 Measures

In 2007, the EU implemented a Regulation and a Council Decision enacting existing UN

sanctions in EU Member States.

In broad terms, EU Regulation 423/2007 introduced a prohibition on (i) the direct and indirect

sale, supply, transfer or export of certain goods (including dual use items) and technology,

which could be used in nuclear activities by any

Iranian entity or in Iran; and (ii) the provision of any related direct or indirect technical

assistance, brokering services, manufacturing investment, financing or financial assistance. The

Regulation also provided a ―blacklist‖ of persons, entities and bodies whose assets should be

frozen by EU Member States.

2010 Measures – Regulation and EU Council Decision

Regulation 668/2010

With effect from 27 July 2010, EU Regulation 668/2010 added to the list of Iranian target entities

whose funds and economic resources are frozen pursuant to EU Regulation 423/2007. The list

of targets now includes all branches and subsidiaries of IRISL, Iran Insurance Company, all

branches and subsidiaries of Bank Mellat, subsidiaries of Bank Melli, all branches and

subsidiaries of Bank Sederat Iran, Iran Aircraft Industries, Iran Aircraft Manufacturing Company,

and Iran Aviation Industries Organisation.

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The Regulation provides a very broad definition of the freezing of funds and this will extend to

the provision of credit. The terms ―economic resources‖ and ―funds‖ are also wide in scope. The

former includes assets of every kind, including ships, aircraft and commodities. The latter

includes, inter alia, securities and debt instruments, credit, rights of set off, letters of credit and

bills of lading.

In addition to the freezing of assets, no funds or economic resources may be made available,

directly or indirectly, to the target entities. Attempts to circumvent any of the measures taken

against the target entities, with knowledge and intent, is also prohibited.

EU Council Decision

Unlike the Regulation, which takes immediate and direct effect in EU Member States without

any national implementing legislation, the EU Council Decision of 26 July 2010 has to be

implemented into national legislation before it becomes binding on individuals and companies

within the EU. Until then, it is only binding on the governments of the Member States. It is

anticipated that EU Member States (including the UK) will take the relevant measures to

implement the Council Decision into national law and will do so promptly. Furthermore, the

Council Decision is to be supplemented by a further EU Regulation to clarify certain matters,

including detail on implementation, compliance and enforcement measures. A draft of the

proposed implementing Regulation has been published and it is expected that it

will enter into force September 2010.

In broad terms, the Council Decision provides as follows:

Oil & Gas industry: a prohibition on the sale, supply or transfer of key equipment and

technology for the refining, liquefied natural gas, exploration and production industries. This is

supplemented with wide provisions relating to technical and financial assistance similar to the

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existing provisions in relation to nuclear activities. There are also restrictions on investment,

financing and commercial activity with the oil and gas industry in Iran. The ban applies to

contracts and investments post-dating adoption of the Council Decision on 27 July 2010.

Transport: additional import/export information will be required for all goods passing between

Member States and Iran. Member States will have to inspect all cargo to and from Iran(seaports

and airports) provided that they have information that provides reasonable grounds to believe

that the cargo being carried contains prohibited items. There is also an obligation on Member

States to co-operate with requests for inspection on the high seas. Prohibited items will be

seized and disposed of by Member States at the cost of those involved with the attempted

contravention.

Bunkering and supply: nationals of Member States must not provide bunkering, supply or

other servicing to Iranian owned or contracted vessels (including chartered vessels) if they have

information which provides reasonable grounds to believe that the vessels carry prohibited

items.

Insurance: a complete prohibition on the provision of insurance/re-insurance to the

Government of Iran or any entities incorporated in Iran or anyone acting on behalf of,

owned or controlled by such entities.

Financial sector: no further commitments of credit to the government of Iran, including through

their participation in international financial institutions, as well as restrictions on new short term

commitments of financial support for trade with

Iran. Member States will have to implement enhanced monitoring activities over banks with

connections to Iran and any transfer of funds to or from Iran shall be subject to new notification

and authorisation requirements depending on the amount and subject matter involved. It will

also be prohibited to participate in the direct or indirect sale or purchase of bonds issued or

guaranteed by Iran. Member States may not open new offices, subsidiaries or banking accounts

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in Iran and Iranian banks are prohibited from establishing new branches, subsidiaries, offices,

joint ventures or ownership interests in EU Member States.

Aviation: access to airports in Member States shall be denied for cargo flights operated by

Iranian carriers or originating from

Iran. There are also restrictions placed on nationals of Member States relating to the

engineering and maintenance services to Iranian cargo aircraft if they have information that

provides reasonable grounds to believe that the cargo aircraft carry prohibited items.

Worth noting, however, is that the draft proposed EU Regulation provides a defence in respect

of certain prohibited transactions and activities under the legislation where those concerned

―did not know, and had no reasonable cause to suspect, that their actions would infringe these

prohibitions‖

Domestic trade restriction – the UK

The EU 2007 measures are reflected in the UK Treasury‘s Iran (European Community

Financial Sanctions) Regulations 2007.

These Regulations provide for criminal penalties in case of contravention. Recent reports

indicate that a major bank is presently under investigation by the FSA over payments that have

allegedly contravened this and other related UK Treasury legislation.

In October 2009, the UK Financial Restrictions (Iran) Order 2009 came into effect. This Order

prohibits UK financial and credit institutions from dealing with Bank Mellat and with IRISL and

their subsidiaries. This legislation applies to UK banks and insurers, although exempting

licences can be applied for and obtained from the Treasury in certain circumstances.

The UK Government is expected to enact legislation to implement the latest EU Council

Decision into national law in or around September 2010. As already stated, Regulation

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668/2010 is already directly effective in the UK.

US trade sanctions

The US sanctions are administered by the US Treasury Department‘s Office of Foreign Assets

Control (OFAC).

Amongst other things, OFAC has a list of Specially Designated Nationals (SDNs) or blocked

persons with whom dealings are prohibited. The names of new SDNs are regularly added to this

list. It is recommended that OFAC‘s website be consulted for detailed information and ongoing

updates on US sanctions and any new SDNs.

CISADA 2010

Since 1995, US ship owners and insurers have been prohibited from participating in trade with

or involving Iran. In 1997, virtually all trade and investment activities with Iran by US persons,

wherever located, was prohibited. On 1 July 2010, the

Comprehensive Iran Sanctions, Accountability and Divestment

Act 2010 (CISADA) was brought into force in the US. CISADA strengthens existing US

sanctions against Iran in restricting Iran‘s access to inter alia gasoline and other petroleum

products, petroleum-related investment, credit and financial services. CISADA also restricts

activities for which an exempting licence would have previously been available. On 16 August

2010, OFAC published its new Iranian Financial Sanctions Regulations (IFSR) to implement

certain provisions of CISADA.

Significantly, CISADA extends the extra-territorial reach of the existing sanctions in targeting

non-US entities and individuals and imposing sanctions on, for example, non-US ship owners

and insurers supporting prohibited trade with Iran. It also authorises sanctions not only against

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entities conducting Iran-related business but also on their parent companies. Corporate

ownership structure will therefore become a significant consideration.

CISADA amended the Iran Sanctions Act of 1996 (ISA) which authorised the President to

sanction non-US companies that invested significantly in the Iranian petroleum industry

(although reportedly no sanctions were ever imposed under that legislation). It also extends the

menu of sanctions under the Act of 1996 which may be imposed on behalf of the President and

which now includes the refusal of loans over US$10 million in any one year, the freezing of

assets within the US and prohibitions on entering into foreign exchange transactions within the

US in which the targeted person has an interest. Furthermore, contravention of the US rules will

be made public, which could result in reputational damage.

CISADA now provides expressly for the imposition of sanctions if a person or entity has inter

alia knowingly:

sold, leased or provided to Iran goods, services, technology, information, or provided support

that could contribute to the maintenance or expansion of Iran‘s domestic production of refined

petroleum products (subject to a threshold of up to US$1 million in any 12 month period or

US$5 million in aggregate); sold or provided to Iran any refined petroleum products (with a

market value of more than US$1 million in any 12 month period or US$5 million in

aggregate); or

provided related insurance, financing or broking services; >> provided ships or shipping

services to deliver refined petroleum products to Iran;

invested US$20 million or more in directly and significantly contributing to the

enhancement of Iran‘s ability to develop petroleum resources.

The definition of ―knowingly‖ under CISADA will cover actual or constructive knowledge. This

differs from ISA which extended only to actual knowledge. ―Refined petroleum products‖ is

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defined as diesel, gasoline, jet fuel and aviation gasoline.

Furthermore, non-US banks may be identified by the US Treasury as participating in Proscribed

Banking Activities with prohibited entities. In those circumstances, the designated bank may be

precluded from certain activities such as maintaining or accessing US correspondent bank

accounts. However, where the non-US bank has complied with locally applicable rules (for

example, where EU banks comply with the EU sanctions), it is predicted that the US will be

unlikely to penalise them under US legislation in a bid to avoid soured diplomatic relations with

countries that are co-operating with the US in their efforts to isolate Iran. This principle of comity

is also anticipated to extend to EU companies who comply with EU sanctions even if, for

example, they engage in activities that might contravene US sanctions. However, only time will

tell as to whether this prediction that the US will seek to be politically sensitive in implementing

the new US measures turns out to be true.

How will these sactions impact your business?

Shipping contracts

The sanctions have implications for those involved in the chartering of ships and transfer of

negotiable documents. In the first instance, reliable systems will have to be put in place to

ascertain the identity of all parties to a transaction or chain of transactions, including the owners

of ships, the charterers and the owners and consignees of cargo. Notwithstanding such systems

being operational, there remains a risk that blacklisted entities/ships and prohibited cargo might

slip through the net not least because blacklisted entities have and will no doubt continue to

take steps to try to conceal the ownership or identity of vessels and/or to take whatever steps

they can to enable them to continue trading.

This presents a clear risk to charterers, consignors and freight forwarders and underlines the

need for comprehensive vessel-vetting procedures to be carried out in every case.

[104]

In terms of existing charter parties, namely those concluded prior to the relevant sanctions

coming into force, there is a risk that a charterer will order the vessel to carry refined petroleum

products for discharge in Iran or that the charterer might conduct a voyage that is in breach of

the sanctions. Whether or not such an order can be refused will depend on the charter party

provisions. Possible arguments which might arise are that the order is illegal as the vessel is

only permitted to carry lawful merchandise in lawful trades. Alternatively, there might be an

argument that the voyage has been frustrated due to supervening illegality. One potential way

of trying to avoid such problems arising is for the parties to agree an addendum to the charter

party.

In terms of future charter parties, the parties are advised to agree protective clauses. For

example, Intertanko has published a sanctions clause which is perceived to be ―owner-friendly‖.

BIMCO, in conjunction with some of its members, has alsopublished a sanctions clause for time

charters. BIMCO reports that the objective of its sanctions clause is to provide owners with a

means to assess and act on any voyage order issued by a time charterer which might expose

the vessel to the risk of sanctions. The test is one of ―reasonable judgment‖ by the owners in

determining whether the risk of imposition of sanctions is tangible.

A major shipowner and its US subsidiaries have recently been fined by the US authorities for

infringement of past sanctions relating to Sudan and Iran by providing unlicensed shipping

services for cargo shipments to those two countries. This suggests that future sanctions

infringements of shipping companies will be treated in an equally stringent fashion by the US

authorities.

Insurance

P&I Clubs are at risk if cover is inadvertently placed over a prohibited cargo or ship engaged in

prohibited activities, and if

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Members (or their brokers) engage in prohibited activity or contract with a target entity. This

potential exposure has led to the insertion of sanctions compliance clauses into policies, for

example that cover under the policy will be suspended if the assured is in breach of sanctions

and the assured must then indemnify the insurer in respect of loss sustained as a result of such

breach. Some Clubs have also changed their rules or are in the process of doing so, with a view

to preventing the Clubs being found to be in breach. Such changes include loss of cover or

termination of membership as soon as the Club is exposed to the risk of contravention, for

example if a Member‘s vessel, whether entered with the Club or not, is employed in a carriage,

trade or voyage which will expose the Club to the risk of being or becoming subject to any

sanction.

A number of the P&I Clubs have been issuing circulars to their Members to keep them updated

on developments relating to the various sanctions and advising them how to proceed and what

the potential effects might be. It is recommended that any owner or time charterer entered with

one of the P&I Clubs keeps a close eye on guidelines and briefings issued by its Club.

More generally, Lloyd‘s of London, the world‘s largest insurance market, has confirmed it will

back the US sanctions. Cover for shipments to Iran has consequently been significantly

curtailed. Furthermore, the Lloyd‘s Market Association (LMA) has now produced a sanctions

clause for its members which, although designed for the marine insurance market, may also be

used in non-marine policies.

Finance

Given that many contracts provide for transactions to be undertaken in US Dollars, there will be

an ongoing risk that international trade and financial dealings will contravene US sanctions and

incur significant penalties. US lawyers would have to be consulted for specific advice in the

event that there is any concern in this regard. However, in broad terms, any US dollar

transactions passing through the US banking system may be at risk of being frozen if they can

be traced to Specially Designated Nationals under the US legislation.

[106]

A number of banks have already paid the price of past non-compliance with US sanctions. One

has recently settled a claim for over US$200 million in respect of breaches that took place in

relation to non-US banks outside the US but where funds passed through the US and were

related to prohibited transactions. Other banks have also recently been ordered to pay

substantial fines in respect of US sanctions violations relating to various countries including

Iran, said violations going back a number of years.

Some financial organisations are taking pre-emptive steps to protect themselves, with one bank

known to have produced a sanctions clause for ship finance transactions. Kuwait‘s central bank

is also reportedly rejecting bids from Iranian banks to open branches in Kuwait after they failed

to meet the required criteria. Swiss banks are reported to have frozen the accounts of 40 Iranian

companies so far. Other banks who have not yet implemented relevant procedures are likely to

do so as part of their due diligence procedures.

Who is benefitting from the sanctions?

Iran is a major supplier of crude oil to China, the world‘s second largest consumer of oil after

the US. In the first half of 2010,

Iran was China‘s biggest supplier of crude oil, with shipments of nine million tonnes. Whilst

China has backed the latest UN sanctions, it is reportedly resisting US pressure to cut back on

its existing oil and trade projects with Tehran.

[107]

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of

2012 – Additional Reporting Requirements for US Domestic and Foreign

Issuers Registered with the SEC

Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 mandates

additional disclosure requirements for US-registered issuers concerning certain Iran-related

activities and, under a plain reading of the statute, certain activities with non-Iran-related

persons or entities listed on the US Department of the Treasury‘s Office of Foreign Assets

Control‘s

Specially Designated Nationals and Blocked Persons List (SDNs). In light of these new

requirements, US-registered issuers should carefully review their business activities to

determine whether such activities are reportable under Section 219 and consider implementing

screening procedures to ensure that they are not engaged in reportable activities with SDNs.

Introduction

In the last several years, the US Government has implemented a number of mechanisms to

collect information on the business activities of companies – both US and non-US companies –

that might be sanctionable under various US sanctions programs. Section 219 of the Iran Threat

Reduction and Syria

Human Rights Act of 2012 (the ―Threat Reduction Act‖) provides the US Government with

another such mechanism, requiring SEC-registered issuers to report to the SEC business

activities in several categories generally relating to Iran‘s energy and financial sectors and Iran‘s

suppression of human rights, but also relating to transactions with the Government of Iran,

global terrorists and weapons proliferators – for further investigation by the US Government.

Although most SEC-registered issuers likely already report Iran-related activities in their periodic

reports filed with the SEC or have provided detailed information about such activities to the

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SEC‘s Office of Global Security Risk (OGSR), Section 219 requires additional information (e.g.,

gross revenues and net profits attributable to such activity) and covers some activities (e.g.,

activities with certain SDNs) that might not otherwise be reported under current SEC rules and

guidance or through inquiries from OGSR. Accordingly, issuers should conduct a careful review

of their business activities to ensure that the reports they file with the SEC meet the

requirements of Section 219 of the Threat Reduction Act.

Section 219 is effective 180 days after the enactment of the Threat Reduction Act,

orFebruary6,2.

A Broad Range of Activities Are Reportable Under Section 219 of the Threat

Reduction Act

Under Section 219, which amends Section 13 of the Securities Exchange Act of 1934 (the

Exchange Act), issuers required to file an annual or quarterly report under Section 13 of the

Exchange Act must disclose in that report if the issuer or an affiliate of the issuer, during the

period covered by the report, engaged in the following:

Knowingly engaged in an activity described in Section 5 of the Iran

Sanctions of 1996 (as amended) (ISA):

The activities described in Section 5(a) of the ISA generally relate to Iran‘s energy sector, such

as certain investments or the provision of goods, services, technology, or support that could

contribute to the development of petroleum and petrochemical resources or the production

refined petroleum products in Iran, exportation of refined petroleum products to Iran, or

transportation of crude oil from Iran.

The activities described in Section 5(b) of the ISA generally relate to Iran‘s development of

weapons of mass destruction or other military capabilities, such as investment in a joint venture

with the Government of Iran or an Iranian entity relating to the mining, production, or

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transportation of uranium, or transactions relating to goods, services, or technology that could

enhance Iran‘s ability to acquire weapons of mass destruction or advanced conventional

weapons.

Knowingly engaged in an activity described in Section 104(c)(2) or 104(d)(1)

of the Comprehensive Iran Sanctions, Accountability, and Divestment

Act of 2010

(CISADA): The US Department of the Treasury promulgated the Iranian Financial Sanctions

Regulations (31 C.F.R. 561) (IFSR) pursuant CISADA Section 104(c)(2). The IFSR prohibits

financial institutions from engaging in activities (including money-laundering) that facilitate the

efforts of the Government of Iran to acquire or develop weapons of mass destruction or to

support designated global terrorists, or facilitates the activities of a UN-designated person or

entity, including the efforts of the Central Bank of Iran or any other Iranian financial institution in

support thereof. The facilitation of a significant transaction for or the provision of significant

financial services to Iran‘s Revolutionary Guard Corps or a financial institution designated by

the Department of the Treasury‘s Office of Foreign Assets

Control (OFAC) under the IFSR is also prohibited and thus reportable under Section 219.

Knowingly engaged in an activity described in Section 105A(b)(2) of

CISADA:

CISADA Section 105A(b)(2) generally mandates sanctions against persons or entities who

assist the Government of Iran in the suppression of human rights in Iran. Under Section

105A(b)(2), the transfer of goods or technology, or the provision of services, that are likely to be

used by the Government of Iran to commit serious human rights abuses against the people of

Iran, such as the provision of items to the Government of Iran such as rubber bullets, police

batons, pepper or chemical sprays, or surveillance technology, or technology that could be used

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by the Government of Iran to restrict the free flow of unbiased information in Iran or disrupt,

monitor, or otherwise restrict speech of the people of Iran is sanction able and therefore

reportable under Section 219.

Knowingly conducted or engaged in a transaction or dealing with:

A person or entity designated as a global terrorist on OFAC‘s Specially Designated National and

Blocked Persons List (the SDN List) pursuant to Executive Order 13224;

A person or entity designated as a weapons of mass destruction proliferator on the SDN List

pursuant to Executive Order 13382; or The Government of Iran, any political subdivision,

agency, or instrumentality thereof, or any person or entity controlled directly or indirectly by

the Government of Iran. Only transactions with the Government of Iran that are conducted

―without specific authorization‖ from a US federal department or agency are

reportable under this sub-section.

Section 219 of the Threat Reduction Act Requires Reporting of

Specific Information Relating to the Activity

If an issuer engaged in any of the activities described above, Section 219 requires that the

following information be reported with respect to such activity in the periodic report filed by the

issuer pursuant to Section 13 of the Exchange Act: the nature and extent of the activity; gross

revenues and net profits, if any, attributable to the activity; and whether the issuer, or its affiliate,

intends to continue the activity.

In addition to reporting such information in an annual or quarterly report, Section 219 mandates

that issuers file a separate concurrent notice with the SEC explaining that a disclosure under

Section 219 has been included in the annual or quarterly report and including the information

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described above. Upon receipt of such notice, the SEC is required to alert the US Congress

and President of the disclosure. The President shall then initiate an investigation into the

activity disclosed in the notice and make a determination as to whether sanctions should be

imposed with respect to the issuer (or the issuer‘s affiliate). The SEC is also required to make

the information contained in the notice available to public on its website. To date, the SEC has

not issued guidance or rules governing the additional notice requirement.

Considerations for Issuers Reporting Business Activities Under Section 219 of the

Threat Reduction Act

Section 219 of the Threat Reduction Act raises several issues that SEC registrants will need to

consider before filing periodic reports required under Section 13 of the Exchange Act:

Activities of “any affiliate of the issuer” must be reported.

The reporting requirements under Section 219 cover activities of an issuer‘s affiliates. Although

the SEC has not provided guidance on what constitutes an ―affiliate of the issuer‖ in the context

of Section 219, it is likely that the definition of ―affiliate‖ in Exchange Act Rule 12b-2 will apply

since that rule governs reports filed pursuant to Section 13 of the Exchange Act. Rule 12b-2

states that ―[a]n ‗affiliate‘ of, or a person ‗affiliated‘ with, a specified person, is a person that

directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under

common control with, the person specified.‖ Accordingly, issuers will need to evaluate the

business activities of affiliates, as broadly defined in Rule 12b-2, and make a determination as

to whether such activities are required to be disclosed under Section 219.

There is no materiality threshold for reporting under Section 219.

The requirement to report gross revenues and net profits, ―if any,‖ suggests that there is no

materiality threshold for reporting business activities that meet the criteria of the four categories

described above. Therefore, under a plain reading of the statute and absent further guidance

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from the SEC, any activities that fall within one of the categories described, regardless of scope

and breadth, must be reported under Section 219.

Activities that have no relation to Iran could be reportable under Section

219.

The requirement to disclose any ―transaction or dealing‖ with OFAC-designated global terrorists

or weapons proliferators (i.e., SDNs designated under the US Counter Terrorism and Non-

proliferation sanctions programs) reaches activities that might be unrelated to Iran. This is

because such individuals or entities designated as such could be located anywhere in the world

and may have no connection at all to Iran. Issuers, in particular foreign issuers who may not

have previously considered whether they conduct business with SDNs (but rather focused

sanction-related disclosures on the countries in which they do business), should consider

conducting a more thorough evaluation of business activities to confirm that they do not do

business with SDNs designated as global terrorists ([SDGT] designation on the SDN List) or

weapons proliferators ([NPWMD designation on the SDN List). To this end, issuers might

consider implementing OFAC compliance software to screen counterparties and business

partners to ensure that such persons or entities are not on the SDN List.

The “Government of Iran” is broadly defined in Section 219

Section 219 requires disclosure of all transactions or dealings with the Government of Iran as

that term is defined in OFAC‘s

Iranian Transactions Regulations, (31 C.F.R. 560) (ITR). As discussed, the definition of

―Government of Iran‖ in the ITR includes: ―(a) The state and the Government of Iran, as well as

any political subdivision, agency, or instrumentality thereof; (b) Any entity owned or controlled

directly or indirectly by the foregoing; (c) Any person to the extent that such person is, or has

been, or to the extent that there is reasonable cause to believe that such person is, or has been,

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since the applicable effective date, acting or purporting to act directly or indirectly on behalf of

the foregoing; and (d) Any person or entity designated by the Secretary of the Treasury as

included within paragraphs (a) through (c) of this section.‖ In light of this broad definition and the

Iranian Government‘s involvement in many sectors of the Iranian economy, issuers should

carefully review business activities in Iran to ensure that Iranian counterparties are not, in fact,

controlled by the Government of Iran. If such counterparties are controlled by the Government

of Iran, business dealings with those entities are reportable under Section 219.

Not all business activities required to be disclosed under Section 219 are

sanction able under current US sanctions programs.

Under a plain reading of Section 219, certain business activities that are reportable under the

statute are not necessarily sanctionable under current US sanctions programs, particularly

certain activities engaged in by non-US persons, e.g., foreign issuers. Although the US

Government has significantly increased extraterritorial sanctions measures with respect to Iran,

not all business activities conducted by non-US persons relating to Iran are sanctionable. The

extraterritorial sanctions currently in place generally deal with activities relating to Iran‘s energy

and financial sectors. However, under Section 219, a foreign issuer is required to disclose, for

example, a contract that it may have with the Government of Iran for the sale of wheat into Iran.

Such activity – a contract for the sale of wheat – is not sanctionable under current US programs.

SEC-registered issuers should pay attention to “red flags” suggesting that

they, or their affiliates, are engaged in reportable activity.

Generally, a person or entity ―knowingly‖ engages in the activities described above if the person

or entity knows (i.e., had actual knowledge), or should know, that they are engaged in such

conduct. Accordingly, in considering whether certain activities fall within one of the categories

described above – e.g., whether a counterparty is controlled by the Government of Iran – SEC-

registered issuers should pay attention to red flags or other indicia suggesting that such

activities could fall within one of the categories. If red flags are ignored, the US Government

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would likely take the position that the person or entity should have known the nature of its

conduct. We are happy to provide advice in this regard should questions arise concerning

specific business activities.

Non-registered issuers are not obligated to comply with the disclosure

requirements of Section 219.

The disclosure requirements under Section 219 of the Threat Reduction Act are not applicable

to non-registered issuers, such as issuers of securities under Securities Act of 1933 Rule 144a.

This is because Section 219 amends Section 13 of the Exchange Act and non-registered

issuers are not bound by the reporting requirements of Section 13.

115

CHAPTER - 6

PRESENT TRADE RELATION &

BUSINESS VOLUME OF DIFFERENT

PRODUCTS WITH INDIA

116

IRAN COUNRY

Iran’s major Exports include:

Petroleum 80%, Chemical and Petrochemical products, Fruits and Nuts, Carpets

Iran’s major Imports include:

Industrial raw materials and intermediate goods, capital goods, foodstuffs and other

consumer goods, technical services.

INDIA IMPORT FROM IRAN

Iran Oil Imports Vex India, Despite Sanctions Reprieve

117

India is along with seven countries the U.S. this week exempted from sanctions aimed at

financial institutions in countries that import large quantities of oil from Iran.

It‘s a reprieve for India, whose financial institutions now won‘t face severe penalties for doing

business with Iran. India‘s oil purchases from Iran have dipped from about 16% of total crude

imports in 2008 to about 10% now – it appears that enough to please Washington, which is

seeking to apply pressure on Tehran to abandon its nuclear ambitions.

But even though New Delhi is avoidance the new sanctions, it still faces significant

challenges sourcing even these much-lower amounts of oil from Iran. Transporting oil from

the Middle Eastern country is getting trickier for India because shipping companies rely on

U.S. and European firms to provide insurance coverage – arrangements that are now much

more difficult to secure than they were a few years ago.

―All the insurers are based in the U.S. or Europe. That‘s the biggest problem: trying to find

shippers who are willing to carry it from Iran without insurance,‖ said Madhu Nainan, editor of

Petro watch, an Indian oil and gas industry newsletter. India has explored having Chinese

firms provide insurance, but even that route won‘t work, because those firms would in most

cases want re-insurance, which would still have to come from Western companies.

Another challenge:

The sanctions that are already in place on dealings with Iran‘s central bank have made it

difficult for India to pay for oil in dollars. The two countries set up a mechanism whereby India

pledged to pay for up to 45% of oil purchases in rupees; Iran, in turn, would use that money

118

to import goods from India. The two sides are exploring whether some of India‘s record

wheat crop can be exported to Iran, for example.

India didn‘t exactly celebrate its exemption from U.S. sanctions, apparently wary of looking

as though its energy policies are crafted at Washington‘s behest. The government has

maintained that the country‘s reduction in Iranian oil imports wasn‘t a response to

international pressure but was instead a natural move to diversify its sources.

An Indian foreign ministry spokesman had only this to say this week, ―This is a decision

taken by the US government under its domestic law.‖

India imports about 80% of its crude oil and Iran has been an especially attractive source

because of good prices and its geographic proximity, resulting in affordable freight costs.

India is second only to China (which hasn‘t received an exemption from the sanctions) in

importing oil from Iran.

But that‘s not to say there aren‘t alternatives and India now must explore them more

aggressively. The good news for India, says Sushant Gupta, a senior analyst at energy

consulting firm Wood Mackenzie, is that Indian refineries that once could only handle light

crude varieties – the kind Iran exports – have upgraded their technology so they can handle

heavier, dirtier crude. That means they can process oil from Latin American and West African

countries. Companies like Essar Oil and Hindustan Petroleum are now among those that can

process these alternative crudes.

119

BUSINESS RELATION BETWEEN IRAN AND INDIA

Oil and gas

In 2008–09, Iranian oil accounted for nearly 16.5% of India's crude oil imports. Indian oil

imports from Iran increased by 9.5% in 2008–09 due to which Iran emerged as India's

second biggest oil supplier. About 40% of the refined oil consumed by Iran is imported from

India.

In June 2009, Indian oil companies announced their plan to invest US$5 billion in developing

an Iranian gas field in the Persian Gulf.

In September 2009, the Mehr news agency reported a Pakistani diplomat as saying "India

definitely quitted the IPI (India-Pakistan-Iran) gas pipeline deal, in favor of Indo-US civilian

nuclear agreement for energy security.[67] Iranian officials however said India is yet to make

an official declaration.

In 2010, U.S. officials warned New Delhi that Indian companies using the Asian Clearing

Union for financial transactions with Iran run the risk of violating a recent US law that bans

international firms from doing business with Iranian banks and Tehran's oil and gas sector,

and that Indian companies dealing with Iran in this manner may be barred from the U.S. The

United states criticizes the ACU of being insufficiently transparent in its financial dealings

with Iran and suspects that much of their assets are funneled to blacklisted repressive

organizations in Iran such as the Revolution. The United States Department of the

Treasury also believes that Iran uses the ACU to bypass the US banking system. On 27

November 2010, the Indian government, through the Reserve Bank of India, instructed the

country's lenders to stop processing current-account transactions with Iran using the Asian

Clearing Union, and that further deals should be settled without ACU involvement. RBI also

120

declared that they will not facilitate payments for Iranian crude imports as global pressure on

Tehran grows over its nuclear programme.

Increasing gas imports

Iran is forced to import gas into its northern region because the country‘s rough terrain blocks

supply routes from its major gas fields in the south. In January Baku agreed to export an

additional 0.5 Bcm of gas throughout 2010 from Azerbaijan via the 1,474 km Kazi-Magomed-

Astara pipeline. Azerbaijan already exports 1.3 Bcm/y to its southern neighbour. The two

countries are currently working on a deal to keep the long-term exports at 1.8 Bcm/y, and this

should be finalised by the end of 2010, according to Rovnag Abdullayev, the director of the

State Oil Company of Azerbaijan (SOCAR). Iran has also recently struck a deal with

Azerbaijan to build a 6.5 Bcm/y pipeline, scheduled to come online in 2012, which would

bring Azeri gas into Iran.

121

Turkmenistan has supplied the Islamic Republic with gas since 1997 through an 8 Bcm/y

pipeline stretching from Korpeje in Turkmenistan to Kordkuy in northern Iran. Ashgabat is

eager to strengthen relations with its southern neighbour as part of a strategy to diversify its

export routes away from Russia and a new 30 km pipeline running from the Dauletabad field

in south-eastern Turkmenistan to Hangeran in Iran was commissioned in January. The

pipeline flow, initially set at 6 Bcm/y, will eventually be increased to 20 Bcm/y, which would

satisfy a Significant proportion of Iran‘s domestic consumption.

The new pipeline is certainly an ―interesting development,‖ says Chow. ―Potentially you could

be feeding central Asian gas into a network which could go west or could go east; I think

that‘s worth watching.‖ Iran has an obvious location advantage as a potential export hub. ―But

if you are the second largest holder of gas resources in the world, why aren‘t you developing

your own gas resources first, before moving other people‘s gas to export markets?‖ asks

Chow.

Gas export options

The most significant energy development project in Iran is the South Pars field, located 62

miles offshore in the Persian Gulf. South Pars is estimated to have 12.7 Tcm of natural gas

reserves, around 47% of the country‘s total reserves. The field, to be developed in 25 phases

over twenty years, is managed by Pars Oil & Gas Company (PAGC), a unit of the National

Iranian Oil Company (NIOC).

Phases one to ten of the South Pars development are already online. The majority of the

field‘s gas is earmarked to supply the domestic market for power generation and gas re-

injection, with the remainder intended to be piped to South Asia or Europe, or used for LNG

production and possibly even gas-to-liquids (GTL) projects.

122

India and IPI pipeline plans

India is also a potential export market for Iran, beyond the immediate Gulf region. This month

Tehran and Islamabad signed an agreement to start construction on the long-delayed Iran-

Pakistan ( minus India) pipeline project which will supply Pakistan‘s Balochistan and Sindh

provinces with 21.2 MMcm/d from Iran‘s Assalouyeh gas field from 2015. The $7.6 billion

project will for now proceed without the participation of Delhi, which withdrew from

negotiations due to disputes over the cost of the gas shipments. Under the current deal, Iran

and Pakistan will each be responsible for building the leg of the pipeline that runs through

their own territory, with Iran likely to extend its existing IGAT-7 pipeline to its northern border.

Iran has started work on the line already, and even if Pakistan does not keep to a

comparable construction schedule, the domestic pipeline will provide gas to Iran‘s

Baluchistan region, which is still relatively underdeveloped, and other energy-starved areas

along its route. The bilateral agreement leaves open the option for Delhi to join the project at

a later stage, however Leverett noted that people on the ground in Tehran are, ―getting more

and more sceptical that it‘s ever going to run to India.‖

123

124

INDIA EXPORTS TO IRAN

Economic Relations:

India‘s exports to Iran include rice, machinery & instruments, metals, primary and semi

finished iron & steel, drugs/pharmaceuticals & fine chemicals, processed minerals, manmade

yarn & fabrics, tea, organic/inorganic/agro chemicals, rubber manufactured products, etc.

India and Iran hold regular bilateral talks on economic and trade issues at the

India-Iran Joint Commission Meeting (JCM). The 16th JCM was held in New Delhi on July 8-

9, 2010. It was co-chaired by Iran‘s Minister of Economic Affairs and Finance Dr. Seyed

Shamseddin Hosseini and India‘s External Affairs Minister Shri S.M. Krishna. During the visit,

Dr. Hosseini called on Prime Minister Dr. Manmohan Singh and met Minister of Finance Shri

Pranab Mukherjee, and NSA Shri Shivshankar Menon. Dr. Shamseddin Hosseini again

visited India on 25 February 2011 during which he called on Prime Minister, Finance Minister

and External Affairs Minister.

The 17th JCM will be held in Tehran in 2012 at the level of Foreign Ministers. Under the JCM

mechanism, meetings of various Joint Working Groups have been held regularly.

During the 16th JCM, 6 MoUs/agreements were signed:

(i) Air Services Agreement;

(ii) Agreement on Transfer of Sentenced Persons;

(iii) MoU on Cooperation in New & Renewable Energy;

(iv) MoU on Cooperation in Small Scale Industry between National Small Industries

Corporation (NSIC) and Iranian Small Industries and Industrial Parks Organisation (ISIPO);

(v) Programme of Cooperation on Science & Technology and

(vi) MoU on Cooperation between Central Pulp and Paper Research Institute of

125

(vii) India (CPPRI) and Gorgan University of Agricultural Science and Natural Resources

(GUASNR).

IR2009-3/04 Health Requirements for Import FRESH FROZEN BONELESS

BUFFALO MEAT from INDIA into IRAN

SCOPE

This document serves to detail requirements for the preparation of FRESH FROZEN

BONELESS BUFFALO MEAT in INDIA for export to the Islamic Republic of Iran. The

Veterinary Services of INDIA shall be responsible for ensuring that the requirements of the

export in relation to the preparation of meat subject to this agreement have been met and for

assisting the representative of the Iran Veterinary Organization (IVO) for verifying that the

requirements of these agreements have been met.

GENERAL REQUIREMENTS:

Iran Veterinary Organization (IVO) is entitled to dispatch its own representatives (At least 3

representatives as per each slaughterhouse at discretion of IVO) to carryout ante-mortem,

during slaughter and post-mortem inspection and final handling, including storage and

loading.

Observing and carrying out chapter 11.6 (especially articles 11.6.12 and 11.6.14) OIE

International Health Code (2009) shall be guaranteed by related official and competent

authority and ensured to be conducted by present official veterinarian inside slaughterhouse.

The animals have been derived from a zone that is free from FMD according to OIE

international Health Code.

The meat has been derived from healthy animals subjected to veterinary examination not

more than 12 hours prior to and immediately after slaughter and found free of disease and:

126

Not exceeding30 months (thirty) of age according to dental formulation.

Were born and reared in the Country of Origin.

Came from herds or areas officially registered with the administrative Veterinary of

Country of Origin.

Came from herds or areas in which OIE notifiable disease, not reported during 12

Months ago.

Were not fattened on foodstuffs which included animal derived proteins (based on

official prohibition on feeding of products containing mammalian derived ingredients to

cattle, official inspection of feed dampeners and inspection of feeds / concentrates by

officers of related official and competent authority of country of origin.

The meat was produced under conditions which fully comply with European Union standards

and Codex alimentations and SPS agreements.

Upon entry in to ports of Iran, the consignment will be checked and the samples will be test

organoleptically and microbiologically (as below) and the results must be in compliance with

the national and IVO standards and bench marks. The imported buffalo meat is not allowed

for direct family purpose but exclusively meat products exposed to heat i.e. Sausage and

Salami and canned meat loaf.

All animals were individually identified by official ear tags and were accompanied at time of

slaughter by official identification documents and were:

Subject to origin and health status checks using the national by the Official Veterinary

Service of the Country of origin and Iran Veterinary Organization representative.

Subject to ante and post mortem inspection by the Official Veterinary Service of the

Country of origin and Iran Veterinary Organization representative/s and were found to be free

of clinical signs of any contagious and infections diseases .

127

The animal have been slaughtered in approved slaughterhouses situated in the quarantine

area of free zone and found to be healthy before and after slaughter approved by IVO

representative/s .

Slaughtered in approved slaughterhouses under the control and inspection of the Official

Veterinary Service of the Country of Origin and IVO representative

SPECIFIC CONDITIONS

1. The meat in this consignment;

Is fit for human consumption.

Is free of contamination by excrement and blood clots.

With normal odour , without burn freezing

Additional fat must be removed; visible fat must be maximum 7 PCT.

shows no evidence of pathogenic agent ( bacterium , fungus , parasite)

In this respect, the infestation of skeletal muscle with sarcocyst cysts is of significant

importance and following criteria should be deemed acceptable and are to be implemented

by official veterinarian:

Carcasses with acute infestation with sarcocyst cysts macroscopically (more than 3 cysts

as per one Palm (6.72 cm): whole carcass should be condemned.

Carcasses with non acute infestation with sarcocyst cysts macroscopically: infested

muscles should be detained.

128

2. The carcasses of the animals from which the meat to be exported to the Islamic

Republic of Iran were derived from;

Not injured, bruised or physiologically icteric (yellow) carcasses which;

I- are washed and cleaned completely with potable water.

II-were kept in chilling rooms which were maintained at temperatures of between 0 and 4

degree centigrade for a period of between 24 and 72 hours.

III-Chilled to a core temperature not higher than 7 degree centigrade at the time of removal

from the chilling rooms.

IV- Produced from animal examined by an official veterinary Inspector of veterinary service of

country of origin and IVO Representative/s before, during and after slaughtering, and found

to be fit for human consumption and which also controlled during Processing and final

handling.

Test n

C m M

Total Count

( CFU/g )

5 2 10 5

10 6

E. coli (

CFU/g)

5 2 50 350

Salmonella

spp.

5 - -

129

3. Deboning, chilling, and cutting conditions

The temperature of deboning hall/ cutting room must be maintained at or below

+10Centigrade.

All obvious lymphatic glands and nervous tissues were removed. Carcasses should be

kept at chilling room for 24 to 72 hours before going to deboning hall. The temperature of

chilling must be between 0 to +4 degree C and the deep bone temperature should be

reached to +7degree C at the time of deboning and PH of the meat should be less

than 6 after chilling room.

Deboning hall should have sanitary equipments of deboning and cutting the meat and

temperature of deboning hall must not be warmer that +10 degree C.

4. Packing & labeling requirements

The net weight range of each carton shall be 23 to 30 kilograms.

Packing of one quarter and fraction cut by its natural veins in order to use whole capacity

of a carton is allowed.

Different cuts shall not be mixed in the same carton.

Colour coding of the cartons must be as follow:

Forequarter meat with red marking.

Hindquarter with black marking.

Topside with grey marking.

Flank meat with blue marking.

Strip lion with green marking.

Tenderloin with orange marking.

130

When needed to complete the weight of the boxes with fractions of the respective

Forequarters the cuts could be added.

Each cuts must hold a label and The same label identification sheet stating in Farsi and

English should be attached on cartons and must indicate the following information :

The type of cut , the name of consignment , the type of use , the country of origin , the

name and address of importing company/ordered by , that the production has been done

under supervision of IVO representatives and the slaughtering has been done as per Islamic

rites under supervision of IRAN religious representatives , the production date (date of

slaughtering) ,the expire date ( one year after production date ), the name of the

slaughterhouse and sanitary code , keeping condition ( keep at: -18°C ) labels must be put

inside between two polyethylene bags, over each wrapping of the cuts and both end-side of

each carton from outside .

The cartons will be subject with four straps without over weights of any class in the boxes

and a correct accommodation of the meat inside the box is needed.

The weight and the specifications of all empty cartons should be the same.

The cartons for our purpose should be moisture proof and made from strong tissue

material in order to prevent tearing during loading, stow aging and discharging.

Tare weight of each empty carton should not be less than 1000 grams.

5. FREEZNING AND STORAGE:

All products should be frozen in freezing tunnel with minus 35 to 45 degree centigrade

within 24 to 48 hours; the temperature of meat in deepest part after freezing should be minus

18 degree of C, at the time of going to the cold store.

131

The meat shall be kept in cold storage with not less than minus 18 degrees C. The meat

should be transferred to the final loading point with temperature of -18 degree C at least. The

maximum duration from slaughter to export shipment shall be not more that 60 days. If not

so, the IVO's representative/s should give a special authorization for embarkation.

6. Transportation:

The containers used to transport meat intended for export shall be equipped with

refrigeration Equipment and recording thermographs.

7. This document must be approved and countersigned by APEDA

(Agricultural & Processed Food Products Export Development Authority).

Top Export Information Of jay chemical Industries Ltd

Product Description

Synthetic.organic Dyestuffs:reactive Blu E Ha Reactive Blue 71 (procion Turquoise H-a)

(synthetic Organic Dyes) : 20 Kgs.reactive Orange 12 33%

(synthetic Organicdyes) 20 Kgs.reactive Orange 12 33%

Synthetic Organic Dyestuffs : Reactive B Lack 5 C.i.no.20505 (rottafast Black Nr 125%)

Synthetic Organic Dyestuffs (reactive Black 8 Reactive Black Hn C I No 18207) Procion

Top Import Information Of jay chemical Industries Ltd

Product Description

Crude Naphthalene

132

Naphthalene Refined

Meta Base Vinyl Sulphone 100% Bases

Meta Base Vinyl Sulphone(condensed 95% On 100% Bases

Meta Phenylene Diamine

Export Shipment database details of jay chemical Industries Ltd

Date HS

Code Description India Port Foreign Port

Foreig

n

Count

ry

Qua

ntity

Unit

of Quantity

19-6-

2004

25059000

Synthetic.organic

Dyestuffs:reactive Blu E Ha

Reactive Blue 71 (procion

Turquoise H-a)

Bombay

Air Hamburg Germany

5000

Kgs

21-5-

2004

29049010

(synthetic Organic Dyes) :

20 Kgs.reactive Orange 12

33%

Bombay

Air Lagos Nigeria 20 Kgs

16-8-

2004

29049090

(synthetic Organic Dyes) 20

Kgs. Reactive Orange 12

33%

Bombay

Air Singapore Singapore 1 Kgs

03-6-

2004

29049090

(synthetic Organicdyes) 20

Kgs.reactive Orange 12

33%

Bombay

Air Frankfurt Germany 20 Kgs

29-10-

2004

30012090

Synthetic Organic Dyestuffs

: Reactive B Lack 5

C.i.no.20505 (rottafast Black

Nr 125%)

Bombay

Air Istanbul Turkey

3000

Kgs

14-1-

2003

30049034

Synthetic Organic Dyestuffs

(reactive Black 8 Reactive

Bombay

Air Hong Kong

Hong

Kong 500 Kgs

133

Black Hn C I No 18207)

Procion

07-2-

2003

30049034

Sion Sr.no. A835 Synthetic

Organic Dyestuffs (reactive

Blue Gn Reactive Blue 21)

Jakazol T

Bombay

Air Istanbul Turkey 500 Kgs

Import Shipment database details of jay chemical Industries Ltd

Date HS

Code Description India Port Foreign Port

Foreig

n

Count

ry

Qua

ntity

Unit

of Quantity

22-9-

2003

27074000

Crude Naphthalene Jnpt

Czech

Republic India 9 Mts

02-7-

2003

29029040

Naphthalene Refined Jnpt

Czech

Republic India 26 Mts

31-3-

2004

29161400

Meta Base Vinyl Sulphone

100% Bases Jnpt China India

3000

Kgs

15-3-

2004

29161910

Meta Base Vinyl

Sulphone(condensed 95%

On 100% Bases

Jnpt China India 1267

Kgs

15-3-

2004

29215110

Meta Phenylene Diamine Jnpt China India

1600

0 Kgs

Iran Submarine Import and Export Behavior

Exports

Iran is an importer of submarines and does not export them.

Imports

134

Following the Iranian revolution and the 1980-88 Iran-Iraq war,

Tehran's military establishment realized that relying on foreign defense manufacturers

would be detrimental to the country's long-term national security. This led to the steady

development of a domestic defense industry which included a number of locally designed

and manufactured submarines. However, Iran continues to rely on some imported equipment

from Russia, China, and North Korea.

Iran acquired three Type 877 Kilo-class submarines from Russia during the 1990s, which

were built at the Admiralty Yard in St. Petersburg. The Iranian Navy experienced repeated

technical problems with the Kilo-class boats largely because their batteries and cooling

systems were not designed for the hot climate in the Persian Gulf. But some of these

problems were later resolved with assistance from India. After negotiations with Rosoboron

export (the Russian Federation's state arms export agency), refit operations began on the

Tareq 901 Kilo-class boat with Russian technical assistance in 2005.Allegedly, Iran also

wanted to receive the Novator 3M-54 Klub-S multi role missile system that provides different

missiles for anti-submarine, anti-ship, and land-attack missions. However, because Iran

insisted that the submarine repairs take place at Bandar Abbas rather than sending the boats

to Russia, Russia refused to install the missile system or send designs for the submarine‘s

replacement parts. Iranian engineers instead completed the repairs indigenously and re-

launched the retrofitted Tareq in 2012 after lengthy delays, an accomplishment highlighted by

Iranian officials as a sign of the country‘s improved domestic submarine manufacturing

capability.

The apparent design similarities of the Iranian domestically produced Ghadir and Nahang-

class midget submarines with the North Korean Yugo and Song-class submarines have led

to speculation that Iran may have received assistance from North Korea, or possibly China,

in the design and production of their coastal submarines. This seems likely, as North Korea

has also helped train Iran's special navalforces.

135

In 2003, Iran signed a memorandum of understanding for defense cooperation with India,

including joint naval exercises and the sale by New Delhi of submarine simulators. Iran also

hoped to receive further assistance from India for the maintenance of its Kilo-class

submarines. However, as part of the U.S.-India nuclear cooperation agreement, the United

States pressured India to reduce military cooperation with Iran.

INDIA-IRAN trade Relation attract Indian SMEs

Bilateral trade between India and Iran is picking up pace from US$11.17 billion in 2007-08

to US$14.55 billion in 2008-09. The economy of Iran largely depends on the oil and gas

sector. Nevertheless, the country‘s economy for some time now has been withering the

onslaught of combination of factors such as startling changes in the oil market, long-drawn-

out war with Iraq, mounting inflation, worldwide isolation and rising foreign debt.

Now the country in an attempt to reconstruct the economy is striving hard to bring some

semblance in the economy. Additionally, the government also wants to switch the economy

from centrally-planned to free market economy. Such changes have been drawing Indian

SMEs to further enhance their ties with Iran.

Trade relations between India and Iran

The principal export items from India to Iran are pharmaceuticals, fine chemicals, iron and

steel, rice, tea, man-made yarn and fabrics, processed minerals, machinery and instruments,

agricultural chemicals and rubber products.

Iran exports petroleum, petrochemical products, fruits and nuts and carpets to India.

136

Potential sectors

Iran offers significant trade opportunities for Indian SMEs present in sectors such as freight

transport, food processing, pharmaceuticals, healthcare and IT. The other potential sectors

include: infrastructure, petrochemicals, automobile manufacturing and telecom. Moreover,

Indian smes are also entering into JVs with Iranian counterparts in areas such as textiles,

steel and mining.

Proposals

To boost trade between the two countries, the Indian and the Iranian governments have

formed a Joint Council (JBC). Both the nations have also entered into different joint ventures.

That apart both the nations are also planning to jointly launch various projects in the oil, gas

and railway sectors. Furthermore, the governments of both the nations are on the verge of

closing two agreements, which are as follows: Double Taxation Avoidance Agreement

(DTAA) and Bilateral Investment Promotion & Protection Agreement (BIPPA)

137

CHAPTER – 7

PESTEL ANALYSIS

138

POLITICAL FACTOR AFFECTING IRAN

Iran‘s government structure is a combination of democracy and modern Islamic theocracy.

The head of state is the Supreme Leader, who makes all the major decisions on foreign

policy and has control over the armed forces. The Supreme Leader is elected by the

Assembly of Experts, which consists of 86 clerics. The clerics are chosen by the Guardian

Council, which consists of six jurists and six theologians elected by the Supreme Leader.

Investment Climate and Corporate Divestment

Through 2011, many prominent international firms, particularly those involved in Iran‘s

energy sector, have either ended or curtailed their business in Iran due to the unstable

financial climate in the country and the threat of sanctions. As mentioned earlier, a severe

lack of foreign direct investment coupled with the increasing cost of imports is helping to

cripple the Iranian economy, especially in highly state-controlled sectors such as the

petroleum industry.

Guardian Council

The Guardian Council is one of the most influential bodies in the country‘s political

landscape. Iran‘s Parliament consists of 290 members who are elected by the public every

four years. The Parliament must have approval from the Guardian Council before passing

laws. The Parliament has the authority to summon or prosecute ministers or even the

president. The President is the executive branch of power and is also elected every four

years by the public, although the Guardian Council must approve the candidate before

an election.

139

Instability

One of the most prominent factors affecting foreign direct investment (FDI) in Iran is political

instability. Although the country has made significant progress since the Iranian/Islamic

Revolution in 1979 (the overthrow of the monarchy), the recent sanctions imposed on Iran by

the United Nations (UN) is harming the country‘s economy. Iran attempted to avoid a fourth

round of UN sanctions by stalling its nuclear fuel plan. They did not succeed: on 9 June

2010, a Security Council resolution was approved. The sanctions expand current UN

measures of restricting the country‘s banking sector further, banning the sale of additional

types of heavy weapons and aims to set up a cargo inspection rule similar to the one in place

in North Korea.

Impact of Fiscal Policy on Economic Growth in Iran

Sanctions have been imposed at the national and international levels to compel Iran to

comply with its international obligations and abandon its nuclear program. In addition, in the

U.S. individual states have imposed measures intended to increase the economic isolation of

the Iranian regime.

The UN, U.S., EU, UK, Japan, South Korea, Canada, Australia and Israel have all separately

imposed financial and trade sanctions that target Iran‘s energy, banking, and shipping

sectors, the airline industry, as well as Islamic Revolutionary Guard Corps (IRGC)-controlled

entities and other entities involved in proliferation activities. Sanctions in the form of asset

freezes and travel bans have also been imposed on Iranian officials complicit in human rights

abuses and acts of terrorism.

The UN has passed four rounds of sanctions, the most recent of which specifically targets

Iran‘s shipping and nuclear and proliferation activities. In addition, separate EU sanctions

140

have been imposed against Iran‘s energy banking sectors and also provide for inspections of

shipping vessels. Iran‘s shipping industry has been further affected by the divestment of

Western insurance companies, which fear violating US sanctions.

Several U.S. states, including California, Florida and New York have implemented measures

that preclude companies involved in certain sectors of the Iranian economy from bidding on

or receiving state contracts.

Inflation & Cost of Goods

Sanctions have caused an increase in both inflation and the cost of goods in Iran. Reports in

October 2010 ―paint a picture of unsteady supply chains and disrupted exports.‖ Sanctions

have prevented foreign direct investment (FDI) in Iran outside its energy sector (―even in the

energy sector it has been small relative to Iran‘s potential‖), as prices rise and Iranian

companies are precluded from working internationally. As importing becomes more

expensive, the cost of goods within Iran has risen dramatically: ―According to Iranian

customs, the imports of goods have decreased by 13.9 percent in volume in the first three

months of the current Iranian fiscal year which began in March [2010], compared to the same

period last year.‖

Currency Fluctuation

The Iranian rial plummeted by 15 percent on September 25, 2010, shortly after the United

Arab Emirates issued its own sanctions against Iran. An October 2010 World Policy Institute

article from October 2010 states ―it seems that the American-inspired sanctions have led to a

disruption of relations between the Iranian banking system and their correspondent banks

abroad... As exporters and individuals have trouble transferring dollars from abroad, there is

a lower level of supply of the American currency in the Tehran market for foreign exchange.‖

141

In October 2010 The Washington Post reported: ―‗People were literally screaming and yelling

at the foreign exchange counters,‘ said a middleman operating in Iran's vibrant steel industry,

on the condition of anonymity. ‗They wanted dollars because the prices of goods they bought

abroad was rising by the minute but nobody could give them any. It was chaos.‘‖

The sanctions are also making transactions for oil payments very difficult, reducing the

Iranian regime's supply of hard currency.

ECONOMIC FACTOR AFFECTING IRAN

Overview of Iran’s Economy

Macroeconomic indicators for Iran provide a mixed picture of the country‘s economic

situation. While the Iranian government asserts that its economy is performing robustly, there

are elements of Iranian society that express concern about economic conditions. Some

analysts raise questions about the economy‘s long-term viability and contend that currently

rising international oil prices mask vulnerabilities in the economy. The following section

discusses certain macroeconomic indicators of Iran‘s economy.

Iran overview:

Land Area: 1.6 million square kilometers (slightly larger than Alaska)

Population: 65.9 million

Median Age: 26.4 years

Population Growth Rate: 0.8%

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Head of State: Mahmoud Ahmadinejad, elected as President in August

2005

Capital: Tehran

Life Expectancy: 70.9 years

GDP: $852.6 billion (purchasing power parity); $278.1 billion (official

exchange rate) (2007 estimate)

GDP Real Growth Rate: 4.3% (2007 estimate)

GDP Per Capita: $12,300 (2007 estimate)

GDP Composition: Agriculture, 11%; industry, 45.3%; services: 43.7%

(2007 estimate)

Unemployment rate: 11%, reported by Iranian government (June 2007

estimate)

Population below poverty line: 18%

Inflation rate (consumer prices): 17% (July 2007 estimate)

Exports: $76.5 billion f.o.b. (2007 estimate)

Export Commodities: Petroleum, chemical and petrochemical products,

fruits and nuts, carpets

Imports: $61.3 billion f.o.b. (2007 estimate)

Import Commodities: Industrial raw materials and intermediate goods,

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capital goods, foodstuff and other consumer goods, technical services

In addition, positive growth also has been associated with expansionary monetary and fiscal

policy reforms under President Ahmadinejad and weather-related agricultural recovery.4

Iran‘s non-oil real GDP growth was strong, above 6% for both 2006 and 2007. In comparison,

oil real GDP growth has been less, at 2.7% for 2006 and 2.1% for 2007. Oil-related economic

growth has been modest partly due to OPEC oil production capacity constraints (see Figure

1).5

Economic Growth

Since 2000, Iran has experienced positive rates of real economic growth (percentage change

GDP). According to the IMF, the annual change in GDP.

Economic data for this report is largely based on data from the International Monetary Fund

(IMF). As a member of the IMF, Iran reports on its economy to the IMF. The economic data is

limited in its means of independent verification by the IMF. In addition, this report relies on

data from the Economist Intelligence Unit and Global Insights, international economic

research and forecasting agencies. U.S. government sources of data include the Central

Intelligence Agency for general economic indicators and the Census Bureau for trade data

registered at 5.8% for 2006 and was projected to stay level for 2007.

Iran‘s recent economic growth can be attributed largely to rising international oil prices. In

addition, positive growth also has been associated with expansionary monetary and fiscal

policy reforms under President Ahmadinejad and weather-related agricultural recovery.4

Iran‘s non-oil real GDP growth was strong, above 6% for both 2006 and 2007. In comparison,

oil real GDP growth has been less, at 2.7% for 2006 and 2.1% for 2007. Oil-related economic

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growth has been modest partly due to OPEC oil production capacity constraints.

In the past, Iran‘s economic health has fluctuated, attributed in part to external shocks.

During the 1960s and 1970s, Iran‘s economy experienced real economic growth rates

nearing 10%, one of the world‘s highest. With the 1979 revolution, the Iran-Iraq war, and

growing international isolation, Iran faced negative rates of real economic growth during the

1980s. Throughout the early 1990s, Iran experienced post-war recovery. However, the

country faced a severe economic downturn in the latter part of the decade due to a drop in

international oil prices.

Although Iran‘s economic growth appears to be on the upswing currently, it continues to fall

short of average economic growth of the Middle East and Central Asia overall and for oil

exporting countries in general.

Inflation

Other macroeconomic indicators suggest Iran faces some challenges. Inflation levels

consistently have been in the double-digits. The Iranian government official estimate for

consumer price inflation was 11.7% in 2006. The IMF estimated that inflation reached 17.2%

in 2007 and is projected to surpass 20% in 2008. High inflation is widespread among the oil-

exporting countries in the Middle East and Central Asia, where inflation averaged an

estimated 10.0% in 2007. Among the oil exporters, Iran‘s inflation level was second only to

Iraq (30.8%) in 2007.Because of inflation, Iran‘s currency, the rial, has been appreciating in

real terms against the U.S. dollar.

Unemployment

Unemployment levels remain high, reaching 11.5% in 2005/06. At least onefifth of Iranians

lived below the poverty line in 2002. Iran has a young population13 and each year, about

750,000 Iranians enter the labor market for the first time, placing pressure on the government

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to generate new jobs. The emigration of young skilled and educated people continues to

pose a problem for Iran. The International Monetary Fund (IMF) reports that Iran has the

highest ―brain drain‖ rate in the world.

International Trade

International trade contributes significantly to Iran‘s economy and has increased dramatically

over the past few years. Total trade in merchandise (exports plus imports) reached nearly

$140 billion in 2007. Similar to other countries in the Middle East and North Africa region

benefitting from high world oil prices, Iran enjoyed a trade surplus in goods, registering at

$15.2 billion in 2007. Exports totaled about $76.5 billion, while imports reached about $58.0

billion that same year.

Table 1. Iran Merchandise Trade, 2003-2007

(millions of U.S. dollars)

Merchandise 2004 2005 2006 2007

Export 44,364 60,013 70,514 76,498

Oil and gas 36,827 48,824 55,579 57,956

Non oil and

gas

7,537 11,189 14,935 18,542

Imports 38,199 48,824 53,984 61,336

Gasoline 2,639 4,190 5,745 6,135

Trade balance 6,165 11,189 16,530 15,162

Total trade 82,563 108,837 124,498 137,834

Oil and gas exports dominate Iran‘s export revenues, constituting about 80% of total exports

and are the most important source of foreign exchange earnings for the country. Other major

export commodities are petrochemicals, carpets, and fresh and dried fruits. Top destinations

for Iran‘s non-oil exports, including natural gas liquids, are the United Arab Emirates (UAE),

Iraq, China, Japan, and India.

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SOCIOLOGICAL FACTOR AFFECTING IRAN

Population growth and age profile

Iran's population increased dramatically during the later half of the 20th century, reaching

about 75 million by 2011. In recent years, however, Iran's birth rate has dropped significantly.

Studies project that Iran's rate of population growth will continue to slow until it stabilizes

above 100 million by 2050. More than half of Iran's population is under 35 years old (2012).

In 2009, the number of households stood at 15.3 million (4.8 person/household). According

to the Central Bank of Iran in 2012, in 22.5 per cent of Iranian families, all family members

were unemployed. Families earn some 11.4 million rials(around $930) per month on the

average (2012).

Age structure

0-14 years: 21.7% (male 7,394,841/female 7,022,076)

15-64 years: 72.9% (male 24,501,544/female 23,914,172)

65 years and over: 5.4% (male 1,725,828/female 1,870,823) (2010 est.)

0-14 years: 24.1% (male 9,608,342/female 9,128,427)

15-64 years: 70.9% (male 28,083,193/female 27,170,445)

65 years and over: 5% (male 1,844,967/female 2,055,846) (2011 est.)

Median age

total: 26.4 years

male: 26.2 years

female: 26.7 years (2008 est.)

total: 26.8 years

male: 26.6 years

female: 27.1 years (2011 est.)

Population growth rate

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0.792% (2008 est.)

1.247% (2012 est.)

Individualism

Individualism is the most prominent trait usually associated with Iranians, both by Iranians

themselves and by foreigners. One expression of this trait is the ease with which Iranians

tend to adapt abroad, even without a supportive Iranian community.30 The typical Iranian is

described as resourceful, clever, and capable of overcoming overwhelming odds in order to

extricate himself from seemingly hopeless situations. Whether or not this is typical, all these

traits, as we shall see below, are perceived by Iranians as such – and more significantly – as

social behavior which is worthy, and hence to be encouraged.

Some observers of Iranian culture have described the Iranian proclivity towards individualism

as the result of geographic conditions, modalities of family life, or the despotic structure of all

the political regimes that have been in power in Iran, forcing the individual to fend for himself

and his family and not to trust anyone outside of his intimate circle. It has also been attributed

to the centuries of invasion, foreign domination, and anarchy that atomized Iranian society

and created a cultural ethos which favors the individual who proves his ability to best fend for

himself and protect his close kin.

Negotiation:

Iranian negotiation techniques reflect many of the cultural traits noted above. Iranian

negotiators are methodical and have demonstrated a high level of preparations and a

detailed and legalistic attitude. On the other hand, their communication tends to be extremely

high-context; ambiguous, allusive and indirect not only in the choice of words utilized, but in

the dependence of the interpretation of the message on the context in which it is transmitted:

non-verbal clues, staging and setting of the act of communication, and the choice of the

bearer of the message. Procrastination is another key characteristic of Iranian negotiation

techniques. This stands in sharp contrast to American style communication (Get to the

point/Where's the beef?/ time is money!) which places a high value on using lowest common

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denominator language in order to ensure maximum and effective mutual understanding of

the respective intents of both sides. This tendency has been explained by an aversion to an

assumption that the longer the negotiations last, the greater a chance that things can change

in his favor and an intrinsic Shiite belief in the virtue of patience.

Iranian negotiators tend to accept frequent crisis as part of the negotiation process and seem

relatively unconcerned by the prospect that such tactics may endanger the post-negotiation

relationship. Insinuated threats, bluffing, and disinformation are all highly acceptable.

Accordingly, the Iranian negotiator may not only be not offended by the use of these

techniques by his foreign interlocutor, but may even hold a grudging admiration for the

cleverness of his protagonist.

In the light of the significance of Iranian nationalism in the Iranian mindset, it is not surprising

that Iranians have had a certain difficulty in accepting a fellow Iranian as a bona fide

counterpart who speaks in the name of the adversary. Similarly, Iranians tend to look

askance at other Muslims who represent the West and to view emissaries of non-Caucasian

origin (blacks, Asians) as less authentic representatives of the West.

TECHNOLOGICAL FACTOR AFFECTING IRAN

Innovation is traditionally viewed as taking place mostly within a single firm. But the

increasing availability and mobility of knowledge workers, the flourishing of the internet and

venture capital markets, and the broadening scope of possible external suppliers in the

present age have undermined the effectiveness of the traditional innovation system

(Chesbrough, 2003).

The relationship between information technology investments and firm value as an area of

inquiry has sustained interest among IS researchers over the past decade. Based on

literature review of published work at corporate level productivity, researchers have

developed three different approaches in assessing the correlation between IT implementation

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and productivity measures. Broadly speaking, the first two approaches focus on the effects of

IT investment on direct, intermediary, financial and non-financial measures of productivity.

None of these two approaches could positively prove either a direct correlation or lack of

such a relation.

The third approach, "complementary" approach, considers the IT implementation but

emphasizes the role of complementary investments that enhance and complement the IT

implementation. Recently, some studies focus on process approach, which emphasized on

evaluation of impact of information technologies from process to process capabilities, and

from capabilities to performance. However, there has been no well-founded empirical

research on process-oriented evaluation of impact of IT simultaneously with considering

complementary investment. The current paper aims to evaluate the level of impact of IT on

organization process and the effect of these processes on capabilities.

Finally, the impact of capability improvement on performance will be assessed. Results show

significant relation between process influence, capability improvement and performance

upgrading. On the other hand, this research assesses the Impact of Information Technology

on impact of interaction between IT and organizational infrastructure. Data from 109

distribution companies was gathered in a field survey. The empirical work indicated

constructed measures reliability and validity. The findings prove the moderating effect of

organizational infrastructure as one of information technology complementary. In addition, by

considering process oriented approach, the result of analysis shows the significant influence

of IT on operational and managerial processes of organizations while these processes'

impression improve capabilities of organizations significantly.

The measureable impact of information technology investment on performance of firms

remains a topic of discussion among managers and researchers. While developed

organizations continue to invest heavily in advanced communications and computing

technologies, researches report contradictory findings on impact of these investments on

organizational performance. Over the past decades, we have witnessed an increasingly

convergent set of communications and computing technologies that are being recognized as

facilitators of fundamental business change.

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Considering intervening variables such as total quality management, reengineering of

processes and organizational infrastructures is suggested way to explain productivity

paradox. (Albadvi, Keramati, & Razmi, 2006).We can consider intervening variables to

understand the indirect relationship between IT and organizational performance, which leads

us to better explanation of impact of IT. Some researches have mentioned these intervening

variables as complementary of information technology, which can strengthen IT effectiveness

(Keramati & Albadvi, 2006). Although IT provide significant new facilities and capabilities for

firms, these capabilities can be fully realized when companies also invest in organizational

infrastructure such as empowering workers, decentralization, team working and process

management.

ENVIRONMENTAL FACTOR AFFECTING IRAN

To be successful, both new and existing businesses use several factors in the environment

to gauge the direction in which they should steer. For example, companies in the start-up

phase and experienced companies expanding into new markets both should evaluate the

strengths and weaknesses of competitors. Other environmental factors include the general

economic climate and customer demand. Businesses evaluate these factors and often find

ways to succeed through innovative technologies, clever marketing tactics and unique

product and service offerings.

There are various environmental factors which can impact the businesses in an economy.

These environmental factors can be categorized into external and internal environment of

the businesses.

The internal environment of the company includes the factors which are within the company

and under the control of company like product Organizational culture, Leadership, and

Manufacturing (quality).

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On the other hand, the external factors are not under the control of the company and include

Social environment, political conditions, suppliers, competitors of the company, Government

regulations and policies, accounting agencies.

Environmental issues in Iran include, especially in urban areas, vehicle emissions, refinery

operations, and industrial effluents which contribute to poor air quality.

Most cars use leaded gas and lack emissions control equipment. Tehran is rated as one of

the world‘s most polluted cities. However, buses and cars running on natural gas are planned

to replace the existing public transportation fleet in the future.

Also, energy prices are kept artificially low in Iran through heavy state subsidies, resulting in

highly inefficient and polluting consumption patterns. Traffic management, vehicle inspection,

general use of electric bicycles and electronic government are also part of the solution.

A rising incidence of respiratory illnesses prompted the city governments of Tehran and Arak,

southwest of the capital, to institute air pollution control programs. These programs aim to

reduce gradually the amount of harmful chemicals released into the atmosphere.

Much of Iran‘s territory suffers from overgrazing, desertification and/or deforestation.

Industrial and urban wastewater runoff has contaminated rivers and coastal waters and

threatened drinking water supplies. Wetlands and bodies of fresh water increasingly are

being destroyed as industry and agriculture expand, and oil and chemical spills have harmed

aquatic life in the Persian Gulf and the Caspian Sea. Iran contends that the international rush

to develop oil and gas reserves in the Caspian Sea presents that region with a new set of

environmental threats. Although a Department of Environment has existed since 1971, Iran

has not yet developed a policy of sustainable development because short term economic

goals have taken precedence.

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The World Bank estimates losses inflicted on Iran‘s economy as a result of deaths caused by

air pollution at $640 million, which is equal to 5.1 trillion rials or 0.57 percent of GDP.

Diseases resulting from air pollution are inflicting losses estimated at $260 million per year or

2.1 trillion rials or 0.23 percent of the GDP on Iran‘s economy. A report by the United Nations

Environment Programme ranked Iran at 117th place among 133 countries in terms of

environmental indexes 80% of air pollution in Tehran is due to cars, the remaining 20% is

due to factories and industry emissions.

Major Environmental Agreements

Party to: Biodiversity, Climate Change, Climate Change-Kyoto Protocol,

Desertification, Endangered Species, Hazardous Wastes, Marine Dumping, Ozone

Layer Protection, Wetlands.

Signed, but not ratified: Environmental Modification, Law of the Sea, Marine Life

Conservation.

Natural hazards: periodic droughts, floods; dust storms, sandstorms; earthquakes along

western border and in the northeast.

Environment - current issues: air pollution, especially in urban areas, from vehicle

emissions, refinery operations, and industrial effluents; deforestation; overgrazing;

desertification; oil pollution in the Persian Gulf; wetland losses from drought; soil degradation

(salination); inadequate supplies of potable water; water pollution from raw sewage and

industrial waste; urbanization. Iran ranked worst in the world for soil erosion in 2011.

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Gargabe disposal: An estimated 50,000 tons of trash is produced in the country every day

of which something between 70 to 80 percent is disposed of hygienically but the rest is not.

LEGAL FACTOR AFFECTING IRAN

HEALTH AND WELFARE

Health conditions have been improved after World War 2. Many of the disease such as small

pox, cholera have been wiped out. Public hospitals are there which provides treatment to the

poor. All health services are supervised by ministry of health, Treatment and medical

education.

Law for women in India

Article 18 of passport law, married women requires their husband's permission to apply for a

passport.

Article 21 of Iran‘s Constitution indicates: "The government must ensure the rights of women

in all respects, in conformity with Islamic criteria..." This leaves it up to the clergymen to

interpret the laws pertaining to women.

Article 83 of the Penal Code, called the Law of Hodoud, stipulates that the penalty for

fornication is flogging, i.e. 100 strokes of the lash, for unmarried male and female offenders.

Article 102 of Iran‘s Constitution indicates: "Women who appear on streets and in public

without the prescribed ‗Islamic Hejab‘ will be condemned to 74 strokes of the lash.‖26

Article 115 of Iran‘s Constitution states the condition for the presidential candidates the law

states that:

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―The President must come from among the religious and political statesmen (rejal)." The

word rejal literally means men of high achievement.

Article 162 of Iran‘s Constitution states the condition for the attorney general. "The head of

justice department and attorney general must be ‗mojtahed‘ [a religious man who is able to

issue decree], honest, and knowledgeable in legal subject matters."

Article 167 of Iran‘s Constitution explains: "The Judge is bound to attempt to rule on each

case, on the basis of the codified law. In case of the absence of any such law, he has to

deliver his judgment on the basis of official Islamic sources and authentic fatwa.‖

Article 209 of Iran‘s Constitution states that woman's life is valued only half as much as a

man's life. A convicted man who has intentionally slain a woman is subject to execution only

after the payment of "Deyeh" by the family of the victim. "Deyeh" is defined as a sum of

money that the victim's family has to pay to the assailant's family for the physical damages,

dismemberment, or death of the assailant.

Article 300 of the Penal code states that the "Deyeh" of a Muslim woman is half of the

"Deyeh" of a Muslim man. By law the life of a woman has half the value of a man in Islamic

criminal law in Iran.

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PART II

COMPANY SPECIFY

STUDY

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CHAPTER – 8

INTRODUCTION OF SELECTED

COMPANY AND ITS ROLE IN THE

ECONOMY OF IRAN

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INTRODUCTION OF THE COMPANY:

Welcome to the colorful world of Jay Chemical Industries Ltd. where the offerings speak

volumes for themselves. With a legacy spanning across 4 decades, the group of companies

today ranges from dyes and dye intermediates to successful forays in construction

chemicals, textile auxiliaries and garment manufacturing.

Jay Chemical Industries Ltd is one of the largest producers of Reactive Dyes in the world

today, with an annual sales turnover of USD 70 Million. With a strong international presence,

the group stands for quality, ethical practices and innovation.

1.1COMPANY PROFILE:

Basic Information:

Company Name: Jay Chemical Industries Limited

Business Type: Manufacturer

Product/Service (We Sell):The product range covers dyes, dye intermediates, textile

auxiliaries and garments

Company website URL: http://www.jaychemical.com

Head Office:

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Jay Chemical Industries Limited

Jay House, Panchvati Circle

Ambawadi, Ahmedabad - 380 006

Gujarat, India.

Phone:+91 79 2642 3363

Fax: +91 79 2642 5763

Logistics / HRD: Mr. Murari Nair

1.2TRADE & MARKET:

Products are available through well-appointed agency network and the company is actively

filling up gaps by either having its own establishment or agency network in regions where

there are no representations as of now.

INDIAN MARKET:

Andhra Pradesh

Delhi

Gujarat

Haryana

Maharashtra

Punjab

Rajasthan

Tamil Nadu

Uttar Pradesh

West Bengal

+91- 79 2642 3363 Ext: 131

murarinair@jaychemical.com

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INTERNATIONAL MARKETING:

AGENCY NETWORK:

Argentina

Austria

Bangladesh

Brazil

Canada

Dominic

Republic

Egypt

El Salvador

Germany

Greece

Guatemala

Honduras

Italy

Mexico

Pakistan

Peru

Portugal

Sri Lanka

Syria

Switzerland

Turkey

USA

SALES PRESENCE:

China

Colombia

Ecuador

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Ethiopia

Hong Kong

Indonesia

Japan

Korea

Nepal

S. Africa

Singapore

Taiwan

Thailand

Tunisia

U.K.

Venezuela

Vietnam

REPRESENTATIVES:

Germany

Honduras

Indonesia

Italy

Turkey

U.K.

USA

PARTNER PROGRAM:

At Jay Chemical Industries Ltd we have a long, strong and mutually beneficial, business

relationships with our agents in many parts of the globe, where we market and sell our well

established brand names of Jakazol and Jakofix reactive dyes.

Any successful Jay agent must be able to provide local warehousing, stock-holding and

control, logistics, debt collection, and techno-commercial support to all potential customers.

Our agents in all markets are in fact the ambassador of the Jay brand in that market, and we

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demand a transparent and open business relationship. We are constantly developing new

markets to extend our coverage of the extensive global textile producing marketplace.

We would like to invite any potential agent of good repute, in a market where there is room

for significant growth to approach Jay Chemical Industries Ltd. through this website in order

to start a discussion.

2.INFRASTRUCURE:

JCIL has production at four different locations which include production of dyes, dye

intermediates, textile auxiliaries, construction chemicals and garments.

All production facilities are upgraded regularly to meet the challenges of the ever growing

customer demands. Production sites are supported by well-equipped and well trained

personal in areas like:

Production sites are supported by well-equipped and well trained personal in areas like:

Quality Control

Quality Assurance

Research and Development

Pilot Plant

On the floor Process Control

Customer Service

Environment Protection Department

Fig. – Unit-1 Fig. Unit-2

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3.PRODUCT PORTFOLIO:

We are offering excellent quality of reactive textile dyes, reactive industrial dyes, reactive

dyes, conventional reactive dyes, high performance reactive dyes, Para base ester, h - acid,

copper phthalocyanine blue crude, acid dyes, direct dyes, water soluble dyes, reactive

chemical dyes and dye intermediates that are formulated as per the international norms and

standards.

We make use of superior raw material which is procured from certified vendors and is tested

at several parameters. Further, we ensure that the range offered by us is stringently checked

so as to comply by the international quality norms and regulations.

The gamut covers conventional reactive dyes, high performance reactive dyes, Para base

ester, H – acid, copper phthalocyanine blue crude, jakacidol acid dyes and direct dyes.

Some of the qualitative features of our wide range are mentioned below:

Safe

Consistent

High reactivity

Longer shelf-life

Precise composition

Environment friendly

Apart from this, we provide value added services for jeans, Gauchos, skirts, jackets, cargoes,

kid's trousers. Our services include printing, embroidery, stone working. Also, we are offering

distress washing, hand brushing, over dyeing, tinting, stone washing, spraying; sandblasting

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and many more. We are excellent in catering our effective services to shirts, semi- formals,

casuals, checks, stripes.

3.1PRODUCTS

The product range covers dyes, dye intermediates, textile auxiliaries and garments.

Jakofix and Jakazol range of Reactive Dyes suitable for exhaust dyeing, semi

continuous dyeing, continuous dyeing and printing processes catering for various

market requirements.

Dye Intermediates, a result of JCIL‘s backward integration which especially creates

self-sufficiency through products such as H-Acid, vinyl sulphate& copper

phthalocyanine blue crude.

Jakacidol acid dyes.

Oxxi.j range of textile auxiliary products has been added to our portfolio in order to

support out reactive dyes business.

A range of garments.

3.2DYES

The Jakazol and Jakofix ranges of reactive dyestuffs cover various types of reactive systems

such as vinyl sulphate, dichlorotriazine, monochlorotriazine, bis-monochlorotriazine,

conventional bi-functional, modified bi-functional, and polyfunctional.

This provides dyes for warm exhaust, hot exhaust, cold pad-batch, pad-dry-pad-steam, pad-

dry-steam, pad-steam, pad-pad-steam, pad-dry thermofix, and Econtrol dyeing processes,

together with conventional flat-screen and rotary-screen printing, and ink-jet printing

processes.

In each of these application processes, we are able to offer product ranges for different levels

of techno-commercial requirements from the most cost-effective commodity products to the

highest technical specification available in the marketplace.

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Dyes Shades

Dyes Shades

Jakazol CE

Jakofix C

Jakazol DS

Jakofix HE

Jakazol HLF

Jakofix ME

Jakazol LD

Jakofix P

3.3DYE INRERMEDIATES

Since inception of the company in 1967, our manufacturing strategy has been based on

efficiency through vertical integration. To support the production of dyes the company has

actively engaged in manufacturing core dye intermediates.

Almost 60 % of the dye intermediates used for the production of our dyes are made in-house.

This strategy potentially offers:

Better streamlined manufacturing process

Control in transaction costs

Improved Quality Control

Improved capability to handle upside in demand

Enhances the ability to secure supplies and future orders

Para Base Ester

H - Acid

Copper Phthalocyanine Blue Crude

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Chemical Name 4-Amino Phenyl-B-Hydroxyl Ethyl SulfonicSulphate Ester

Chemical Formula C8H11NO6S2

Structure

Molecular Weight 281

CAS No. 2494-89-5

Product Code 07001001

Appearance Off White Collared Powder

Assay (By Nitrite Value) 95% Min

Solubility Soluble in Water

Form Supplied Dry Powder

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Insoluble 0.5% to 1%

3.4 QUALITY ASSURANCE

In Jay Chemical Industries Ltd, we are careful not to confuse Quality Assurance (QA) with

Quality Control (QC). All of the manufacturing industry knows about QC which checks the

quality of the product against its Standard, but this doesn‘t ensure that the Standard is

appropriate in the first place nor take care of preventing sub-Standard material in the future.

In this centre of excellence we have a dedicated QA Manager who is responsible for setting

the product Standards and test methods and ensuring that they are met on a regular basis.

Through our ISO 9001 registration, we identify quality shortfalls and apply corrective actions

to prevent recurrence. This QA Manager liaises with manufacturing, marketing, sales,

technical service and QC departments to create and maintain customer satisfaction for our

Jakazol and Jakofix reactive dyestuffs in the global marketplace.

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(http://www.jaychemical.com/company-profile.php)

(http://www.jaychemical.com/company-profile.php)

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4. QUALITY CREDENTIALS

Products certified by GOTS

The Global Organic Textile Standard (GOTS) is recognized as the leading processing

standard for textiles made from organic fibres worldwide. It defines high level environmental

criteria along the entire supply chain of organic textiles and requires compliance with social

criteria as well. Dyestuffs and Auxiliaries used must meet certain environmental and

toxicological criteria.

Member ETAD

The Ecological and Toxicological Association of Dyes and Organic Pigments Manufacturers

(ETAD) is an international organization that represents the interests of industries on matters

relating to health and environment. Member companies are obliged to adhere to the ETAD

Code of Ethics, based on the principles of responsible care. They must also comply with all

national and international chemical regulations.

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ISO 14001-2004 Certified

The ISO 14000 family addresses various aspects of environmental management. ISO

14001:2004 deals with environmental management systems (EMS). It provides the

requirements for an EMS. An EMS meeting the requirements of ISO 14001:2004 is a

management tool enabling an organization of any size or type to:

identify and control the environmental impact of its activities, products or services

Improve its environmental performance continually.

Implement a systematic approach to setting environmental objectives and targets, to

achieving these and to demonstrating that they have been achieved.

4.1Many Products Pre Registered with REACH

REACH is a new European Community Regulation on chemicals and their safe use (EC

1907/2006). It deals with the Registration, Evaluation, Authorization and Restriction of

Chemical substances.

REACH aims at improving the protection of human health and the environment through the

better and earlier identification of the intrinsic properties of chemical substances. The

REACH Regulation gives greater responsibility to industries to manage the risks from

chemicals and to provide safety information on the substances.

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4.2 research and development

The R&D unit of JCIL has been an essential part of the company‘s success to date. Currently

JCIL is investing heavily in R&D, as this will provide the new products and processes which

will allow the company to expand its high quality and cost effective dye ranges. The long term

aim of research within JCIL is to provide opportunities for organic growth and diversification.

The R&D section of JCIL is an internal technology centre of excellence to service the

business and meet customer needs. Its responsibilities include;

Optimization of process chemistry to achieve the highest chemical efficiency and

product purity whilst minimizing effluent production.

Monitoring technology trends in order to understand market opportunities and unmet

needs.

To carry out long term new molecule research projects looking for novel

technologically advanced dyes and processes to meet our customers‘ needs.

5. Modern Manufacturing Facility

Based at Ahmadabad, we possess a well-equipped unit which includes modern laboratory

equipment and processing facilities. With the assistance of our resourceful unit, we are

capable in formulating our range to meet the mounting demands of our clients.

Our ODHAV Plant is the main production base which uses an advanced system and facilities

and serves more than 250 different products in spray dried dust free powders, granular and

R/O forms. The manufacturing unit covers an area of about 2500 sq. ft. and having a high

installation capacity of about 2500 units to meet the increasing demands.

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Our entire unit is properly divided into following sections:

R & D

Quality checking unit

Production unit

Packaging unit

Some of efficient machines that are utilized in the qualitative production are following:

Mills

Testers

Sorters

Valves

Reactors

Blender

Samplers

Weightier

Distillation unit

Storage tanks and vessels

6. Environment and Safety

We promise to provide pollution free environment which is fruitful for the welfare of the

society. Also, we pay our utmost attention in securing our environment in every aspect.

Further, all our production processes is in compliance with international norms and standards

and purely environmental friendly in nature. Apart from this, frequent safety audits are carried

out in our unit mainly with the view to check our methods and techniques in the right tune.

In addition, we have primary, secondary and territory effluent treatment plants with high

capacity to treat 200,000 liters/day. We spent nearly 3% of our income for social uplifting and

emphasize several welfare schemes and golden opportunities such as; scholarship, aid

camps, medical help, subsidized meals, employment to handicapped.

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Client Satisfaction

We believe in offering total customer satisfaction by providing qualitative range of reactive

dye, direct dye, acid dye, phthalocyanine pigment and dye intermediate. Owing to the quality

standards, the gamut is high in demand in different parts of the globe such as; Europe and

U.S. and thereby getting huge appreciations for the unmatched quality.

Timely delivery and ability to cater bulk orders within timeframe provide competitive edge to

our competitors. In addition, we possess global network of sales, service and technical

professionals which is beneficial for all our customers. Easy modes of payments and free

sampling policy are some of the key factors that enabled us to carve a respectable position in

the industry within a short span of time.

7. Milestones

Owing to our effective services, customer centric approach, unmatched quality products, we

have become the foremost priority amongst our numerous clients. Also, we have committed

in catering our quality goods and services and thus enabled ourselves in getting huge

accomplishments.

Some of them are enlisted below:

1967

Jay Chemical Industries - Direct

Turq. Blue plant commenced

1972

Agency network development started

on an all India basis

1979

Jay Enterprise - Reactive Dyes plant.

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1983

J.H.Kharawala Pvt. Ltd. (Unit I) -

Reactive Turq. Blue plant Technical

know-how for manufacturing Reactive

and Direct dyes given to Thai Ambica

Chemical Co. Ltd., Bangkok

1986

Prem Chemicals - Copper

Phthalocyanine Blue crude (CPC)

Trading Partners for The Far East,

Bangladesh and Pakistan set up during

1986-1987.

Milestones

1989 Ronuk Dyes & Chemicals - Reactive

Dyes plant

1991

Jayendrakumar & Co. - Pigment Green

7 plant

J.H.Kharawala Pvt. Ltd. (Unit II) - Vinyl

Sulphone plant

Jay Containers - M.S. drum

manufacturing plant

1995

Reactive Blacks manufacturing

commenced in bulk

1996

Centralized Quality Control laboratory

established

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1997

Jay House - The new Corporate

Headquarters and Office

Consolidation for the group's

manufacturing activities begins

1998

Separate R&D lab starts functioning

New plant for Turquoise Blue

commenced

Pilot plant commenced

1999

New plant for Reactive Dyes

commenced

Consolidation of the group's

manufacturing activities completed

Separate plants for Turquoise Blue,

Reactive Blacks and other Reactive

dyes made operational within the same

premises

2000

Separate customer support laboratory

established.

8.THE PRODUCT RANGE

The product range covers dyes, dye intermediates, textile auxiliaries and garments.

Jakofix and Jakazol range of Reactive Dyes suitable for exhaust dyeing, semi

continuous dyeing, continuous dyeing and printing processes catering for various

market requirements.

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Dye Intermediates, a result of JCIL‘s backward integration which especially creates

self-sufficiency through products such as H-Acid, vinyl sulphone & copper

phthalocyanine blue crude.

Jakacidol acid dyes.

Oxxi.j range of textile auxiliary products have been added to our portfolio in order to

support out reactive dyes business.

A range of garments.

JAY CHEMICAL’S ROLE IN THE ECONOMY OF IRAN COUNTRY

The economy of Iran is a mixed and transition economy with a large public sector. Some

50% of the economy is centrally planned. It is dominated by oil and gas production, although

over 40 industries are directly involved in the Exchange. It is the world's seventeenth largest

by purchasing power parity (PPP) and twenty-fifth by nominal product. The country is a

member of Next Eleven.

A unique feature of Iran's economy is the presence of large religious foundations, whose

combined budgets represent more than 30% of central government spending.

Price controls and subsidies, particularly on food and energy, burden the economy.

Contraband, administrative controls, corruption, and other restrictive factors undermine

private sector-led growth. The legislature in late 2009 passed President Mahmoud

Ahmadinejad's bill to reduce subsidies. This is the most extensive economic reform since the

government implemented gasoline rationing in 2007. [Due to its relative isolation from global

financial markets, Iran was initially able to avoid recession in the aftermath of the 2008 global

financial crisis.

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Most of the country's exports are oil and gas, accounting for a majority of government

revenue in 2010. Oil export revenues enabled Iran to amass well over $100 billion in foreign

exchange reserves as of 2010

Due to increasingly stringent sanctions imposed by the international community as a result of

the country's nuclear program, oil exports fell by half, allowing Iraqi oil exports to overtake

Iran's for the first time since the 1980s. In September 2012, the Iranian rial fell to a record low

of 23,900 to the US dollar.

Exports aided self-sufficiency and domestic investment, although double-digit unemployment

and inflation remain problematic. Iran‘s educated population, constrained economy and

insufficient foreign and domestic investment prompted an increasing number of Iranians to

seek overseas employment, resulting in a significant "brain drain".

Iran is an energy superpower and the Petroleum industry in Iran plays an important part in

it. In 2004 Iran produced 5.1 per cent of the world‘s total crude oil (3.9 million barrels

(620,000 m3) per day), which generated revenues of US$25 billion to US$30 billion and was

the country‘s primary source of foreign currency.[5][6] At 2006 levels of production, oil

proceeds represented about 18.7 percept of gross domestic product (GDP). However, the

importance of the hydrocarbon sector to Iran‘s economy has been far greater. The oil and

gas industry has been the engine of economic growth, directly affecting public development

projects, the government‘s annual budget, and most foreign exchange sources.

In FY 2009, for example, the sector accounted for 60 per cent of total government revenues

and 80 per cent of the total annual value of both exports and foreign currency earnings Oil

and gas revenues are affected by the value of crude oil on the international market. It has

been estimated that at the Organization of the Petroleum Exporting Countries (OPEC) quota

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level (December 2004), a one-dollar change in the price of crude oil on the international

market would alter Iran‘s oil revenues by US$1 billion.

In 2010, Iran, which exports around 2.6 million barrels of crude oil a day, was the second-

largest exporter among the Organization of Petroleum Exporting Countries. In the same year,

officials in Iran estimate that Iran's annual oil and gas revenues could reach $250 billion by

2015.According to IHS CERA estimate, oil revenue of Iran will increase by a third to USD 100

billion in 2011 even though the country is under an extended period of sanctions. Iran plans

to invest a total of $500 billion in the oil sector before 2025.

Iran's economy is marked by statist policies and an inefficient state sector, which create

major distortions throughout the system, and reliance on oil, which provides the majority of

government revenues. Price controls, subsidies, and other rigidities weigh down the

economy, undermining the potential for private-sector-led growth. Private sector activity is

typically limited to small-scale workshops, farming, and services. Significant informal market

activity flourishes and corruption is widespread. Tehran since the early 1990s has recognized

the need to reduce these inefficiencies, and in December 2010 the legislature passed

President Mahmud AHMADI-NEJAD's Targeted Subsidies Law (TSL) to reduce state

subsidies on food and energy.

This was the most extensive economic reform since the government implemented gasoline

rationing in 2007. Over a five-year period the bill will phase out subsidies that previously cost

Tehran $60-$100 billion annually and mostly benefited Iran's upper and middle classes. Cash

pay-out‘s of $45 per person to more than 90% of Iranian households mitigated initial

widespread resistance to the TSL program, though popular acceptance remains vulnerable

to rising inflation. A rise in world oil prices in 2011 increased Iran's oil export revenue by

roughly $28 billion over 2010, easing some of the financial impact of international sanctions.

However, expansionary fiscal and monetary policies, government mismanagement, the

sanctions, and a depreciating currency are fueling inflation, and GDP growth remains

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stagnant. Iran also continues to suffer from double-digit unemployment and

underemployment. Underemployment among Iran's educated youth has convinced many to

seek jobs overseas, resulting in a significant "brain drain‖.

Healthcare and pharma

IRAN: Healthcare (Source: EIU)[205] 2005 2006 2007 2008 2009 2010

Life expectancy, average (years) 70.0 70.3 70.6 70.9 71.1 71.4

Healthcare spending (% of GDP) 4.2 4.2 4.2 4.2 4.2 4.2

Healthcare spending ($ per head) 113 132 150 191 223 261

The constitution entitles Iranians to basic health care. By 2008, 73% of Iranians were

covered by the voluntary national health insurance system. Although over 85% of the

population use an insurance system to cover their drug expenses, the government heavily

subsidizes pharmaceutical production/importation. The total market value of Iran‘s health and

medical sector was $24 billion in 2002 and was forecast to rise to $50 billion by 2013. In

2006, 55 pharmaceutical companies in Iran produced 96% (quantitatively) of the medicines

for a market worth $1.2 billion. This figure is projected to increase to $3.65 billion by 2013.

Construction and real estate

Until the early 1950s construction remained in the hands of small domestic companies.

Increased income from oil and gas and easy credit triggered a building boom that attracted

international construction firms to the country. This growth continued until the mid-1970s

when a sharp rise in inflation and a credit squeeze collapsed the boom. The construction

industry had revived somewhat by the mid-1980s, although housing shortages and

speculation remained serious problems, especially in large urban centres‘. As of January

2011, the banking sector, particularly Bank Mascon, had loaned up to 102 trillion rials ($10.2

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billion) to applicants of Mehr housing scheme. Construction is one of the most important

sectors accounting for 20–50% of total private investment in urban areas and was one of the

prime investment targets of well-off Iranians.

Annual turnover amounted to $38.4 billion in 2005 and $32.8 billion in 2011. Seventy per

cent of Iranians own their own homes.[168] Because of poor construction quality, many

buildings need seismic reinforcement or renovation.[169] Iran has a large dam building

industry.

Mines and metals

Mineral production contributed 0.6% of the country‘s GDP in 2011, a figure that increases to

4% when mining-related industries are included. Gating factors include poor infrastructure,

legal barriers, exploration difficulties and government control over all resources.

Although the petroleum industry provides the majority of revenue, about 75% of all mining

sector employees work in mines producing minerals other than oil and natural gas. These

include coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum,

strontium, silica, uranium, and gold, the latter of which is a mainly a by-product of the Sar

chessmen copper complex operation. The mine at Sar Chessmen in Kerman Province is

home to the world's second largest store of copper. Large iron ore deposits exist in central

Iran, near Bafq, Yazd and Kerman. The government owns 90% of all mines and related

industries and is seeking foreign investment. The sector accounts for 3% of exports.

Iran has recoverable coal reserves of nearly 1.9 billion short tonnes. By mid-2008, the

country produced about 1.3 million short tonnes of coal annually and consumed about 1.5

million short tonnes, making it a net importer. The country plans to increase hard-coal

production to 5 million tons in 2012 from 2 million tons in November 2008.

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The main steel mills are located in Isfahan and Khuzestan. Iran became self-sufficient in

steel in 2009. Aluminium and copper production are projected to hit 245,000 and

383,000 tons respectively by March 2009. Cement production reached 65 million tons in

2009, exporting to 40 countries.

Sustaintability

For JCIL, sustainability is the potential for long-term maintenance of wellbeing, which has

environmental, economic, and social dimensions.

At JCIL environment and environmental concerns are key elements of all its ventures and we

stay committed to maintaining an excellent environmental profile. A great portion of revenue

is earmarked for sustainable practices with an eye towards benefitting bottom line and

environment.

We have on going commitments towards:

Development of production processes which generate less waste

Technological Improvement of waste water treatment facilities

Recycling of waste materials

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Moving towards sustainability is also a social challenge that entails international and national

law. It helps improve the socio economic status of not only the people directly employed by

JCIL but also the community at large.

JCIL is engaged in several charitable activities influencing education, health and re

organizing living conditions and helping to improve the quality of life of people in cities in an

around the production sites.

Care for the environment and welfare of the people is always at the top of our priority list.

Concern for nature has always functioned hand in hand with all our other activities. 3% of our

income is spent for social uplifting. We strongly believe that a green earth is a grand earth.

Energy, gas, petroleum and petrochemicals

(http://en.wikipedia.org/wiki/Petroleum_industry_in_Iran)

Iran possesses 10% of the world's proven oil reserves and 15% of its reserves. Domestic

provide power. Energy amounts to six or seven billion dollars per year, much higher than the

international norm. Iran recycles 28% of its used oil and gas, whereas some other countries

reprocess up to 60%.In 2008 Iran paid $84 billion in subsidies for oil, gas and electricity. It is

the world's third largest consumer of natural gas after United States and Russia. In 2010 Iran

completed its first nuclear power plant at Brusher with Russian assistance.

Iran has been a major oil exporter since 1913. The country's major oil fields lie in the central

and south-western parts of the western Zagros mountains. Oil is also found in northern Iran

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and in the Persian Gulf. In 1978, Iran was the fourth largest oil producer, OPEC's second

largest oil producer and second largest exporter. Following the 1979 revolution the new

government reduced production. A further decline in production occurred as result of damage

to oil facilities during the Iraq-Iran war. Oil production rose in the late 1980s as pipelines were

repaired and new Gulf fields exploited. By 2004, annual oil production reached 1.4

billion barrels producing a net profit of $50 billion. Iranian officials estimate that Iran's annual

oil and gas revenues could reach $250 billion by 2015 once current projects come on stream.

Iran manufactures 60–70% of its equipment domestically, including refineries, oil tankers,

drilling rigs, offshore platforms and exploration instruments.

(http://en.wikipedia.org/wiki/Petroleum_industry_in_Iran)

Major refineries located at Abadan (site of its first refinery), Kermanshah and Tehran failed to

meet domestic demand for gasoline in 2009. Iran's refining industry requires $15 billion in

investment over the period 2007–2012 to become self-sufficient and end gasoline imports

Pipelines move oil from the fields to the refineries and to such exporting ports as Abadan,

Bandar-e Mashers and Kharg Island. Since 1997, Iran's state-owned oil and gas industry has

entered into major exploration and production agreements with foreign consortia. In 2008 the

Iranian Oil Bourse (IOB) was inaugurated in Kish Island. The IOB trades petroleum,

petrochemicals and gas in various currencies.

Trading is primarily in the euro and rial along with other major currencies, not including the

US dollar. Thanks to a fertilizer plant in Shiraz, the world's largest ethylene unit, in

Asalouyeh, and the completion of many other special economic zone projects, Iran's exports

in petrochemicals reached $5.5 billion in 2007, $9 billion in 2008 and $7.6 billion during the

183

first ten months of the Iranian calendar year 2010. According to Iran's Petroleum Ministry,

Iran plans to invest $500 billion in its oil sector by 2025.

Iranian Central Bank data show a declining trend in the share of Iranian exports from oil-

products (2006/2007: 84.9%, 2007/2008: 86.5%, 2008/2009: 85.5%, 2009/2010: 79.8%,

2010/2011 (first three quarters): 78.9%).

Manufacturing

(http://www.infodriveindia.com/chile_export_trade_data.aspx)

Iran has a diversified and broad industrial base. In 1998, the United Nations classified Iran's

economy as "semi-developed".

Large-scale factory manufacturing began in the 1920s. During the Iran–Iraq War, Iraq

bombed many of Iran‘s petrochemical plants, damaging the large oil refinery at Abadan

bringing production to a halt. Reconstruction began in 1988 and production resumed in 1993.

In spite of the war, many small factories sprang up to produce import-substitution goods and

materials needed by the military.

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Iran's major manufactured products are petrochemicals, steel and copper products. Other

important manufactures include automobiles, home and electric appliances,

telecommunications equipment, cement and industrial machinery. Iran operates the largest

operational population of industrial robots in West Asia. Other products include paper, rubber

products, processed foods, leather products and pharmaceuticals. In 2000, textile mills, using

domestic cotton and wool such as Tehran Patou and Iran Termeh employed around 400,000

people around Tehran, Isfahan and along the Caspian coast.

A 2003 report by the United Nations Industrial Development Organization regarding small

and medium sized enterprises (SMEs)identified the following impediments to industrial

development:

Lack of monitoring institutions;

Inefficient banking system;

Insufficient research & development;

Shortage of managerial skills;

Corruption;

Inefficient taxation;

Socio-cultural apprehensions;

Absence of social learning loops;

Shortcomings in international market awareness necessary for global competition,

Cumbersome bureaucratic procedures;

Shortage of skilled labour;

Lack of intellectual property protection;

Inadequate social capital, social responsibility and socio-cultural values.

Despite these problems, Iran has progressed in various scientific and technological fields,

including petrochemical, pharmaceutical, aerospace, defense, and heavy industry. Even in

the face of economic sanctions, Iran is emerging as an industrialized country.

185

Foreign trade and economic relations

Iran is a founding member of OPEC and the Countries. Petroleum constitutes 80% of Iran's

exports with a value of $46.9 billion in 2006.] For the first time, the value of Iran‘s non-oil

exports is expected to reach the value of imports at $43 billion in 2011.] Pistachios, liquefied

propane, methanol (methyl alcohol), hand-woven carpets and automobiles are the major

non-oil exports. Technical and engineering service exports in 2007–08 were $2.7 billion of

which 40% of technical services went to Central Asia and the Caucasus, 30% ($350 million)

to Iraq, and close to 20% ($205 million) to Africa. Iranian have developed energy, pipelines,

irrigation, dams and power generation in different countries. The country has made non-oil

exports a priority by expanding its broad industrial base, educated and motivated workforce

and favorable location, which gives it proximity to an estimated market of some 300 million

people in Caspian, Persian Gulf and some ECO countries further east.

Total import volume rose by 189% from $13.7 billion in 2000 to $39.7 billion in 2005 and

$55.189 billion in 2009. Iran's major commercial partners are China, India, Germany, South

Korea, Japan, France, Russia and Italy. From 1950 until 1978, the United States was Iran's

foremost economic and military partner, playing a major role in infrastructure and industry

modernization.

(Map of the Economic Cooperation Organization (ECO) member states)

Since the mid-1990s, Iran has increased its economic cooperation with other developing

countries in "south-south integration" including Syria, India, China, South Africa, Cuba and

Venezuela. Iran's trade with India passed $13 billion in 2007, an 80% increase within a

186

year.Iran is expanding its trade ties with Turkey and Pakistan and shares with its partners the

common objective to create a common market in West and Central Asia through ECO.

Since 2003, Iran has increased investment in neighbouring countries such as Iraq and

Afghanistan. In Dubai, UAE, it is estimated that Iranian expatriates handle over 20% of its

domestic economy and account for an equal proportion of its population.Migrant Iranian

workers abroad remitted less than $2 billion home in 2006.[250] Between 2005 and 2009,

trade between Dubai and Iran tripled to $12 billion; money invested in the local real estate

market and import-export businesses, collectively known as the Bazaar, and geared towards

providing Iran and other countries with required consumer goods. It is estimated that one

third of Iran's imported goods and exports are delivered through the black market,

underground economy, and illegal jetties.

Iran and the World Trade Organization

Main articles: Iran and WTO and Group of 15

(http://www.infodriveindia.com/chile_export_trade_data.aspx)

Iran has held observer status at the World Trade Organization (WTO) since 2005. Although

the United States has consistently blocked its bid to join the organization, observer status

came in a goodwill gesture to ease nuclear negotiations between Iran and the international

community.

Should Iran eventually gain membership status in the WTO, among other prerequisites,

copyrights will have to be enforced in the country. This will require a major overhaul. The

country is hoping to attract billions of dollars worth of foreign investment by creating a more

187

favorable investment climate through freer trade. Free trade zones such as Qeshm,

Chabahar and Kish Island are expected to assist in this process.

188

CHAPTER - 9

STRUCTURE,FUNCTION AND

BUSINESS ACTIVITY OF JAY

CHEMICAL INDUSTRIES LIMITED

189

FUNCTION AND BUSINESS ACTIVITY OF JAY CHEMICAL INDUSTRIES

LIMITED

FINANCE MANAGEMENT

The management of the finances of a business / organization in order to achieve

financial objectives taking a commercial business as the most common organizational

structure, the key objectives of financial management would be to:

Create wealth for the business

Generate cash, and

Provide an adequate return on investment bearing in mind the risks that the

business is taking and the resources invested

There are three key elements to the process of financial management:

(1) Financial Planning

Management need to ensure that enough funding is available at the right time to meet the

needs of the business. In the short term, funding may be needed to invest in equipment and

stocks, pay employees and fund sales made on credit.

In the medium and long term, funding may be required for significant additions to the

productive capacity of the business or to make acquisitions.

(2) Financial Control

Financial control is a critically important activity to help the business ensure that the business

is meeting its objectives. Financial control addresses questions such as:

Are assets being used efficiently?

Are the businesses assets secure?

190

(3) Financial Decision-making

The key aspects of financial decision-making relate to investment, financing and dividends:

Investments must be financed in some way – however there are always financing

alternatives that can be considered. For example it is possible to raise finance from selling

new shares, borrowing from banks or taking credit from suppliers

A key financing decision is whether profits earned by the business should be retained rather

than distributed to shareholders via dividends. If dividends are too high, the business may be

starved of funding to reinvest in growing revenues and profits further.

MARKETING MANAGEMENT

Every organization that produces one or more products requires marketing of the products

sell them in the market. It is only through marketing that people know about a company‘s

products. Hence marketing is considered as a key activity of organization. The organization

requires sound marketi9ng structure to carry on its marketing activities. However the concept

of marketing is not confined only to selling of goods and services to customers. Instead the

company tries to create and maintain the customer base through marketing.

Marketing management is a business discipline which is focused on the practical application

of marketing techniques and the management of a firm's marketing resources and activities.

Rapidly emerging forces of globalization have led firms to market beyond the borders of their

home countries, making international marketing highly significant and an integral part of a

firm's marketing strategy. Marketing managers are often responsible for influencing the level,

timing, and composition of customer demand accepted definition of the term. In part, this is

because the role of a marketing manager can vary significantly based on a business's size,

corporate culture, and industry context. For example, in a large consumer products company,

191

the marketing manager may act as the overall general manager of his or her assigned

product.

To create an effective, cost-efficient marketing management strategy, firms must possess a

detailed, objective understanding of their own business and the market in which they operate.

In analyzing these issues, the discipline of marketing management often overlaps with the

related discipline of strategic planning.

CONCEPT

What philosophy should guide a company marketing and selling efforts? What relative

weights should be given to the interests of the organization, the customers, and society?

These interest often clash, however, an organization‘s marketing and selling activities should

be carried out under a well-thought-out philosophy of efficiency, effectiveness, and socially

responsibility.

Five orientations (philosophical concepts to the marketplace have guided and continue to

guide organizational activities:

The Production Concept

The Product Concept

The Selling Concept

The Marketing Concept

The Societal Marketing Concept

MARKETING MIX:

It's simple! You just need to create a product that a particular group of people want, put it on

sale some place that those same people visit regularly, and price it at a level which matches

the value they feel they get out of it; and do all that at a time they want to buy. Then you've

got it made!

192

There's a lot of truth in this idea. However, a lot of hard work needs to go into finding out

what customers want, and identifying where they do their shopping. Then you need to figure

out how to produce the item at a price that represents value to them, and get it all to come

together at the critical time.

But if you get just one element wrong, it can spell disaster. You could be left promoting a car

with amazing fuel-economy in a country where fuel is very cheap; or publishing a textbook

after the start of the new school year, or selling an item at a price that's too high – or too low

– to attract the people you're targeting.

The marketing mix is a good place to start when you are thinking through your plans for a

product or service, and it helps you avoid these kinds of mistakes.

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PRODUCT

A product is anything that satisfies a needs or wants and can be offered to the market for

Exchange. A product can be a goods, services without product there is no marketing.

LIST OF PRODUCTS MARKETED:

DYE

The Jakazol and Jakofix ranges of reactive dyestuffs cover various types of reactive systems

such as vinyl sulphone, dichlorotriazine, monochlorotriazine, bis-monochlorotriazine,

conventional bi-functional, modifiedbi-functional, and polyfunctional. This provides dyes for

warm exhaust, hot exhaust, cold pad-batch, pad-dry-pad-steam, pad-dry-steam, pad-steam,

pad-pad-steam, pad-dry thermofix, and Econtrol dyeing processes, together with

conventional flat-screen and rotary-screen printing, andink-jetprinting processes. In each of

these application processes, we are able to offer product ranges for different levels of

techno-commercial requirements from the most cost-effective commodity products to the

highest technical specification available in the marketplace.

Following are the different types of dye that is made by the jay chemical industries limited:

1. Jakazol CE:

Customer Benefit:

Suitable for medium-heavy shades

Economical products

Good build-up for medium-heavy shades

Good reproducibility for high RFT levels

Good wet fastness levels

Resistant to perborate wet fading

Resistant to repeated domestic washing

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Medium-Heavy Shades

Jakazol Yellow CE

Jakazol Red CE

Jakazol Navy CE

Supported dye

Jakazol Orange CE

Jakazol Deep Red CE

Jakazol Blue CE

Jakazol Dark Blue CE

Jakazol Black CE

Jakazol Black CECL

Suitable Process

Warm Exhaust

Cold pad-batch

Pad-dry-chemical pad-steam

Pad-dry-steam

Pad-dry-thermofix

Econtrol

195

Fig. Jakazol CE Shades

2. Jakazol DS:

Customer Benefit:

Suitable for very heavy shades

Very high strength economical products

Excellent build-up for very deep shades

Resistant to per-borate wet fading

Resistant to repeated domestic washing

Medium-Heavy Shades:

Heavy Shades

Jakazol Yellow DSR

Jakazol Red DS

Jakazol Navy DSG

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Supported dye

Jakazol Brilliant Red DS2B

Jakazol Red DSBN

Jakazol Blue DS

Jakazol Navy DSG

Jakazol Black DSG

Jakazol Black DSR

Suitable Process

Warm Exhaust

Cold-pad-batch

Pad-dry-chemical pad-steam

Pad-dry-steam

Fig. Jakazol DS Shades

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3. Jakazol HLF:

Customer Benefit:

High light-fastness in pale shades

No available free metal in structure

Excellent reproducibility

Excellent compatibility

High resistance to perspiration light fastness

Suitable Process:

Warm Exhaust

Cold-pad-batch

Pad-dry-chemical pad-steam

Pad-dry-thermofix

Econtrol

Fig. Jakazol HLF Shades

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4. Jakazol LD:

Customer Benefit:

Suitable for pale & medium shades

Excellent compatibility

Excellent reproducibility for high RFT levels

Good level dyeing properties

Easy to wash-off

Suitable Process:

Warm Exhaust

Cold pad-batch

Pad-dry-chemical pad-steam

Pad-dry-steam

Econtrol

Fig. Jakazol LD Shades

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5. Jakazol VS:

Customer Benefit:

Wide range of products for broad shade gamut

Multiple options for economical black & navy shades

Range of dischargeable dyes forground shades

Good wash-off properties for good fastness levels

Dye Selection:

Dye Selection for Warm Exhaust Dyeing

Pale Shades

Jakazol Yellow GR

Jakazol Brilliant Red BB

Jakazol Blue BB

Medium-Heavy Shades

Jakazol Golden Yellow HRNL

Jakazol Brilliant Red RB

Jakazol Black B

Dye Selection for Cold Pad Batch Dyeing

Pale Shades

Jakazol Yellow GL

Jakazol Orange 3R

Jakazol Blue BB

200

Medium Shades

Jakazol Yellow GR

Jakazol Orange 3R

Jakazol Blue BB

Very Heavy Shades Jakazol Golden Yellow HRNL

Jakazol Brilliant Red RB

Jakazol Black B

Dye Selection for Pad-Dry-Pad-Steam / Pad-Dry-Steam / Econtrol Dyeing

Pale Shades

Jakazol Yellow GR

Jakazol Brilliant Red RB

Jakazol Blue BB

Medium-Heavy Shades

Jakazol Golden Yellow HRNL

Jakazol Brilliant Red RB

Jakazol Navy Blue GG

Suitable Process:

Warm Exhaust

Pad-dry-chemical pad-steam (Selective)

Pad-dry-thermofix (Selective)

Pad-steam

Cold pad-batch (Selective)

Pad-dry-steam (Selective)

Econtrol (Selective)

Printing

201

Fig. Jakazol VS Shades

202

Fig. Jakazol VS Shades

203

6. Jakofix C:

Customer Benefit:

Full fixation achieved in a short time due to highly reactive anchor.

High lightfastnesstrichromat available.

Excellent wash off properties and wet fastness.

Wide shade range, including bright dyestuffs.

Dye Selection:

Jakofix Brilliant Yellow C4G-SL

Jakofix Golden Yellow CR

Jakofix Brilliant Orange C2R

Jakofix Brilliant Red C5B-SL

Jakofix Brilliant Magenta CB-SL

Jakofix Brilliant Violet C4R

Jakofix Turquoise Blue CGN

Jakofix Brilliant Blue CR-SL

Fig. Jakofix C Shades

204

7. Jakofix HE:

Customer Benefit:

Economical products

Suitable for post mercerising

Suitable for post bleaching

Supported dye:

Jakofix Yellow HE6G

Jakofix Orange HE2R

Jakofix Orange HER

Jakofix Blue HEGN

Jakofix Turquoise HEA

Jakofix Green HE4BD

Suitable Process:

Hot Exhaust dyeing

Dye Selection:

Pale Shades

Jakofix

nt Yellow HE4R

Jakofix Red HE3B

Jakofix BrilliaBlue HERD

Medium-Heavy Shades

Jakofix Yellow HE4R

Jakofix Red HE7B

205

Fig. Jakofix HE Shades

206

8. Jakofix ME:

Customer Benefit:

Wide ranse of products for broad shade gamut

Good build-up behaviour for dark shades

Moderately good reproducibility for good RFT levels

Good wash-off properties for good fastness levels

Supported dye:

Jakofix Yellow ME4GL

Jakofix Orange ME2RL

Jakofix Red MEGF

Jakofix Red ME3BL

Jakofix Red MRBL

Jakofix Red ME6BL

Jakofix Navy Blue ME2GL

Suitable Process:

Warm Exhaust

Cold pad-batch (Selective dyes)

Pad-steam

Dye Selection:

Pale Shades

Jakofix Golden Yellow MERL

Jakofix Red ME4BL

Jakofix Brilliant Blue JRF

207

Medium-Heavy Shades

Jakofix Golden Yellow MERL

Jakofix Red ME4BL

Jakofix Navy Blue MEBF

Fig. Jakofix ME Shades

208

9. Jakofix P:

Customer Benefit:

Hishlisht fastness selection available

Good wash off properties

Good repeated domestic wash fastness

Selected dyes suitable for Pad - Dry Thermofix process

Suitable for post mercerisins

Suitable Process:

Printing

Pad-dry-chemical pad-steam

Pad-dry-steam

Pad-dry-thermofix

Econtrol

Dye Selection:

Pale Shades

Jakofix Yellow P6GS

Jakofix Brown P6R

Jakofix Grey PNG

Medium Shades

Jakofix Yellow P2RN

Jakofix Red P4B

Jakofix Black PN

209

Heavy Shades

Jakofix Yellow P2RN

Jakofix Red P8B

Jakofix Navy P2R

Fig. Jakofix P Shades

210

10. Jakofix P:

Customer Benefit:

Suitable for critical articles such as viscose, mercerised cotton and blend with

elastomer under difficult dyeing conditions

Robust to variations in dyeing conditions even at long LR in blend dyeing

High lightfast trichromat available

Good oxidative multiple wash fastness

High levels of perspiration and light fastness

Suitable for post - mercerising

Suitable for post - bleaching

Supported dye:

Jakofix Supra Flavine HR

Jakofix Supra Orange HR

Jakofix Supra Deep Red HR

Jakofix Supra Brilliant Red HGR

Jakofix Supra Sapphire HR

Jakofix Supra Turquoise HR

Suitable Process:

Hot Exhaust dyeing

Dye Selection:

Pale Shades (High Light Fast Shades)

Jakofix Supra Amber HR

Jakofix Supra Red Brown HR

Jakofix Supra Dark Blue HR

211

212

Fig. Jakofix Supra HR Shades

213

DYE INTERMEDIAT:

Since inception of the company in 1967, our manufacturing strategy has been based on

efficiency through vertical integration. To support the production of dyes the company has

actively engaged in manufacturing core dye intermediates.

Almost 60 % of the dye intermediates used for the production of our dyes are made in-house.

This strategy potentially offers:

Better streamlined manufacturing process

Control in transaction costs

Improved Quality Control

Improved capability to handle upside in demand

Enhances the ability to secure supplies and future orders

1. Para Base Ester

Sr. No. Chemical Name 4-Amino Phenyl-B-Hydroxy Ethyl

Sulfone Sulfate Ester

1 Chemical Formula C8H11NO6S2

2 Structure

3 Molecular Weight 281

4 CAS No. 2494-89-5

5 Product Code 07001001

6 Appearance Off White Colored Powder

7 Assay (By Nitrite Value) 95% Min

214

8 Solubility Soluble in Water

9 Form Supplied Dry Powder

10 Insoluble 0.5% to 1%

2. H-Acid:

Sr.

No.

Chemical Name 1 Amino 8 Naphthol 3:6 Disulfonic Acid

1 Chemical Formula C10H9O7NS2

2 Structure

3 Molecular Weight 319.30

4 C.A.S. No. 5460-09-03

5 Product Code 07029001

6 Appearance Light yellowish brown to grey dry powder

7 Content (as M.W. 319) % > 80 [Nitrite Value]

8 HPLC Value %> 97

9 Chromotropic Acid %< 1.2

10 Koch Acid %< 0.2

11 Omega Acid %< 0.4

12 Total Organic Impurities %< 3.0

13 Insolubles in Alkali % < 0.1

3. Copper Phthalocyanine Blue Crude:

215

TEXTILE AUXILIARIES:

Sr. No. Chemical Name 29H, 31H-phthalocyaninato(2-)-

N29, N30, N31, N32 copper

1 Chemical Formula C32 H16 N8 Cu

2 Structure

3 Moluclar Weight 576

4 CAS NO 147-14-8

5 Appearance Odorless Blue Colored Powder

with Purple Luster.

6 Bulk Density [kg / m3] 300-350

7 Purity 96% Min. (By Acid Pasting

Method)

8 96% Min. (By Oxidation Method)

9 Total Copper Content (%) 10.8

10 Soluble Copper Contents (%) 2000 ppm Max.

11 Moisture Content (%) 1.0 Max

12 Other impurities (%) 2 + 1 (Soluble in dilute Acids and

Alkalis)

13 Grit. Contents 500 ppm max.

216

Being active in the field of production and global distribution of dyes for the last four

decades, JCIL decided to venture into the allied service of textile processing chemicals. In

order to meet the present trends and customer demands we constantly strive to produce

sustainable products for the textile processing Industry. Offer includes products for various

stages in Textile Processing like:

1. Pretreatment:

Application Product

Name

Short description Ionic

Character

Biopolishing

Enzyme

OXXI.JE

100

Biopolishing agent for Cellulosics and its

blends (Enzymatic based).

Anionic

Desizing

Enzyme

OXXI.JE

200

Desizing agent for Cellulusics and its blends

(Enzymatic based).

Anionic

Enzymatic

Peroxide Killer

OXXI.JE

300

Enzymatic Peroxide Killer. Anionic

Wetting &

Deaerating

Agent

OXXI.J

CS2000

Low foaming padding auxiliary for continuous

and semi-continuous dyeing processes.

Anionic

Mercerising

Wetting agent

OXXI.J

M1000

Low Foam Mercerising wetting agent. Anionic

OXXI.J

M1500

Concentrate Low Foam Mercerising wetting

agent.

Anionic

Wetting cum

Scouring agents

OXXI.J

CS2500

Low Foam Wetting agent cum detergent for

Cellulosics and its blends.

Non-ionic

OXXI.J

CS3000

Low foaming detergent and wetting agent. It is

specifically designed for continuous

preparation of woven and knitted cellulosic

fibres and their blends.

Non-ionic

OXXI.J

CS1500

Economical Low Foam Wetting agent cum

detergent for Cellulosics and its blends.

Non-ionic

OXXI.J

CS 500

Wetting agent cum detergent for Cellulosics,

Synthetics and blends.

Crypto

anionic

217

OXXI.J

CS 300

Detergent for scouring of Cellulosics and its

blends.

Crypto

anionic

OXXI.J

CS 200

Universal Non-Ionic Wetting agent cum

Detergent for all types of fibre.

Non-ionic

OXXI.J

CS 700

Wetting agent cum detergent for Cellulosics,

Synthetics and blends.

Crypto

anionic

Stain Remover OXXI.J

PS 200

Solvent based Stain remover for Polyester and

its blends.

Non ionic

cum Scouring OXXI.J

PS 500

Stain remover cum Scouring agent for

Polyester and its blends.

Crypto

anionic

agents OXXI.J

WS 100

Solvent based Scouring agent for Wool,

Polyester and its blends.

Crypto

anionic

Peroxide

Stabiliser

OXXI.J

ST 700

Inorganic chemistry based Peroxide Stabiliser

for discontinous peroxide bleaching.

Anionic

OXXI.J

ST 500

Economical organic Stabiliser for Continous

and discontinous peroxide bleaching.

Anionic

Core Alkali

Neutraliser

OXXI.J

CA 1200

Core alkali Neutraliser used after alkaline

treatments like Mercerising, dyeing.

Non-ionic

pH Buffer OXXI.J

AB 1200

Acid pH buffer to maintain constant pH during

dyeing, printing.

Anionic

Sequestering

agents

OXXI.J

SQ 350

Ferrous chelating agent to take care of

catalytic damage during Peroxide bleaching by

discontinous and continous method.

Anionic

OXXI.J

SQ 500

Sequestering agent to take care of water

hardness during processing.

Anionic

OXXI.J

SQ 700

Strong Sequestering agent to take care of

water hardness during processing.

Anionic

2. Dyeing and Printing:

218

Application Product

Name

Short description Ionic

Character

Washing

off agent

OXXI.J

WO 800

Low foam Washing off agent for Reactive, Direct,

Vat and Sulphurdyeings and prints.

Anionic

Dyebath

Conditioner

OXXI.J

SQ 750

Dyebath conditioner cum Soaping agent for

Reactives, Direct, Vat and Sulphur dyeing.

Anionic

Dyefixing

agents

OXXI.J

FX 250

Formaldehyde Free Dyefixing agent for Reactive,

Direct dyeing and prints.

Cationic

OXXI.J

FX 60

Economical and efficient Formaldehyde-free dye

fixing agent.

Cationic

Dyebath

Lubricants

OXXI.J

LUB 20

Lubricant for Cellulosics and Polyester processing

in rope form to prevent crease marks.

Non-ionic

Levelling

agent for

Reactive

Dyeing

OXXI.J

ER 555

Levelling agent for Reactive Dyeing. Anionic

Dispersing

Agent

OXXI.J

DA 400

JaymolPdr is a dispersant powder for dyeing of

polyester with disperse dyes, wool and silk with

acid and metal complex dyes and cellulosics with

vat, sulphur and indigo dyes by batch and

continuous processes.

Anionic

OXXI.J

DA 200

High performance dispersing agent, stable at high

temperature upto140°C and also stable under

acidic and alkaline dyeing conditions.

Anionic

Levelling

agent

forDisperse

dyeing

OXXI.J

PS 600

Economical Levelling cum Stripping agent for

Polyester dyeing and its blends.

Non-ionic

OXXI.J

PS 700

Levelling cum Stripping agent for Polyester dyeing

and its blends.

Non-ionic

OXXI.J

PS 1000

Concentrate Levelling cum Stripping agent for

Polyester dyeing and its blends.

Non-ionic

OXXI.J Levelling cum Migrating agent for Polyester Amphoteric

219

SL 45 dyeing to cover barriness in texturised material.

OXXI.J

PS 2000

High pressure stable dispersant, leveling &

stripping agent, lubricant & oligomer removals for

dyeing of polyester with disperse dyes.

Anionic

Diffusion

Accelerant

cum Carrier

OXXI.J

PC 50

Diffusion accelerant cum carrier for Polyester

dyeing.

Non-ionic

Loop

Accelerator

for Polyester

Printing

OXXI.J

PA 2000

Concentrate Loop accelerator for Polyester

printing.

Anionic

Penetration

accelerant

OXXI.J

PA 3000

Penetration accelerant cum deaerating agent for

Polyester dyeing and printing.

Anionic

Wetting agent

for dyeing

OXXI.J

W4 500

Anionic Sulphonated Oil based Wetting cum

pasting agent for dyeing on Vat, Sulphur and

Azoics by continous and discontinous method.

Anionic

Silicone

Defoamer

OXXI.J

DF 200

Concentrate Silicone based defoamer for

application by discontinous and continous

method.

Non-ionic

Levelling cum

dispersing

agent for

Polyester

dyeing

OXXI.J

PS 80

Concentrate Levelling cum Stripping agent for

Polyester dyeing and its blends.

Non-ionic

OXXI.J

PS 100

Economical Levelling cum Stripping agent for

Polyester dyeing and its blends.

Non-ionic

Silicone

Defoamer

OXXI.J

DF 100

Economical Silicone based defoamer for

application by discontinous and continous

method.

Non-ionic

3. Finishing:

220

Application Product

Name

Short description Ionic

Character

Cationic

Softener

OXXI.J

TOUCH

250

Non Yellowing Cationic softener for Cellulosics and its

blends.

Non-ionic

OXXI.J

TOUCH

200

Cationic Softener to get soft voluminous handle on

cellulosics, polyester and its blends.

Cationic

OXXI.J

TOUCH

220

Cationic Softener to get soft silky handle on Cellulosics

and its blends.

Cationic

Non Ionic

Softener in

flakes form

OXXI.J

TOUCH

500

100% Hot water Soluble Non Ionic Softener in flakes

form to get soft surface smoothness of Cellulosics,

Polyester and its blends.

Non-ionic

Polyethylene

Emulsion

OXXI.J

TOUCH

700

Polyethylene emulsion for applications where a smooth

handle with good lubricity is required.

Non-ionic

Cationic

Softener in

flakes form

OXXI.J

TOUCH

400

100% Hot water soluble Cationic Softener in flakes

form to ger soft smooth handle on Cellulosics,

Polyester and its blends.

Cationic

OXXI.J

TOUCH

300

100% Cold water soluble Cationic Softener in flakes

form to get soft silky feel on Cellulosics, Polyester and

its blends.

Cationic

Silicone

Softener

OXXI.J

SOFT 550

Concentrate Non Ionic Silicone softener to get soft

silky handle with surface smoothness on Cellulosics

and its blends.

Non-ionic

OXXI.J

SOFT 650

Silicone Micro emulsion to get soft smooth handle on

Cellulosics, Polyester and its blends.

Non-ionic

OXXI.J

SOFT 700

Economical Silicone Micro emulsion to get soft smooth

handle on Cellulosics, Polyester and its blends.

Non-ionic

221

OXXI.J

SOFT 800

Concentrate Non Ionic Silicone softener to get surface

smoothness with slight bulkiness on Cellulosics and its

blends.

Non-ionic

Crosslinking

agent for

Finishing

OXXI.J RF

2000

DMDHEU based Resin for finishing of cellulosics,

Polyester and its blends.

Non-ionic

STRUCTURE OF THE JAY CHEMICAL INDUSTRIES LIMITED:

Fig. Site Map of the Jay Chemical Industries Limited

222

CHAPTER - 10

COMPARATIVE POSITION IN

CHEMICAL INDUSTRY OF JAY

CHEMICALS WITH INDIA AND

GUJARAT

223

Overview of the Chemical Industry

Chemicals are a part of every aspect of human life, right from the food we eat to the

clothes we wear to the cars we drive. Chemical industry contributes significantly to

improving the quality of life through breakthrough innovations enabling pure drinking

water, faster medical treatment, stronger homes and greener fuels. The chemical

industry is critical for the economic development of any country, providing products

and enabling technical solutions in virtually all sectors of the economy.

Ensuring development of sustainable, green solutions in the fields of water treatment,

food production and healthcare are the key challenges for the future. Fueled by an

increasing focus of industry on improving its image, these trends are shaping the

priorities for R&D in the field of chemistry. In order to emphasize the importance of the

chemical industry in meeting the key challenges for the future, the United Nations

Organization has proclaimed 2011 as the ‗International Year of Chemistry‘

The Indian chemical industry is characterized by (1) high domestic demand potential

(2) high degree of fragmentation and small scale of operation (3) limited emphasis on

exports due to domestic market focus (4) low cost competitiveness as compared to

other countries due to higher cost of power and other utility, import duties, taxes,

higher cost of capital and raw material and poor infrastructure facility (5) low focus on

R&D despite innovative processes to synthesize product cost effectively.

Some Indian companies have created sizable international operations also. Some

Global companies have already given better performance in India. The operating profit

margin(OPM) of these Indian subsidiaries range from 8 percent to 13 percent as

compared to the global OPM range of 1 to 6 percent.

Chemical industry can be classified into three segments Basic, Specialities and

Knowledge Chemicals. The examples are :

224

Basic: Petrochemicals, Fertilizers, Inorganic chemicals, Alkalies, Chloralkalies,

Aromatics, Thermoplastics, Thermosets and Other Industrial chemicals.

Speciality: Adhesive, Sealant, Catalysts, Industrial gases, Paints and Coating,

Pharma additives, Lubricants, Water treatment chemicals, Plastic additives

Knowledge: Agrochemicals, Pharmaceuticals, Biotechnology

225

Jay Chemical Industry

Introduction

Jay Chemical Industries Ltd is one of the largest producers of Reactive Dyes in the

world today, with an annual sales turnover of USD 70 Million. With a strong

international presence, the group stands for quality, ethical practices and innovation.

JCIL, in comparison to its worldwide contemporaries, stands tall with a production of

18000 mt. which is estimated to be 5% of the total world‘s production. This places

JCIL amongst the Top-10 reactive dye producers in the world. JCIL is a success story

that boasts of a number of landmark firsts.

Strengths

1. Lab Scale Development Facility

2. Kilo Lab

3.Pilot to Semi Commercial Plant

4.Dedicated Utilities

5.Analytical& Quality Control Facility

6.TECHNOLOGIES / CHEMICAL PROCESSES HANDLING CAPABILITY

226

Products

1. Dyes

2. Dye Intermediates

3. Other Business

Textile Auxiliaries

Construction Chemicals

Garmentsiness

1.Dyes

Dyes are colored organic compounds that are used to impart color to various substrates,

including paper, leather, fur, hair, drugs, cosmetics, waxes, greases, plastics and textile

materials. Indigo, the oldest known dye was used by the ancient Egyptians to dye mummy

227

clothes. Tyrian purple, obtained from Murex snails found near the city of Tyre, was used by

the Romans to dye the togas of the emperors.

This is the first in a series of HSE Information Sheets concerning the safe handling of dyes

and chemicals in textile finishing. It sets the scene for the rest of the series by:

Describing the hazards to health and safety associated with dyes and finishing chemicals;

Introducing risk assessment;

Giving an overview of the relevant law.

Other Information Sheets in this series advise you how to control specific risks to health and

safety.

The guidance was written with the assistance of the Textiles Industry Advisory Committee

(TEXIAC). The aim of TEXIAC is to help protect employees and others from hazards to their

health and safety arising from work activity. It brings together representatives from

employers' associations and trade unions under the chairmanship of HSE to produce sound,

practical advice to meet the industry's specific needs.

The dye industry has always been highly competitive; the industry has lately experienced

major setbacks in terms of profitability and overall attractiveness particularly in Europe and

the United States. Major changes have taken place during the last 20 years, and today Asia

(India, Japan, Korea and China) hasbecome the largest dyestuff market, accounting for

about 42% of the value of the global dyestuff market. World demand for dyes and organic

pigments is forecast to increase 5.1% per year to more than $ 14 billion in 2004.

The textile industry produces and uses approximately 1.3 million tonnes of dyes, pigments

and dye precursors, valued at around $23 billion, almost all of which is manufactured

synthetically.

228

However, synthetic dyes have some limitations, primarily,

(i) Their production process requires hazardous chemicals,

creating worker safety concerns,

(ii) They may generate hazardous wastes, and

(iii) These dyes are not environment friendly. This research

explores methods where natural dyes are

produced from plant tissue and fungal species.

2. Dye intermidearies:

Since inception of the company in 1967, our manufacturing strategy has been based on

efficiency through vertical integration.

To support the production of dyes the company has actively engaged in manufacturing core

dye intermediates. Almost 60 % of the dye intermediates used for the production of our dyes

are made in-house.

This strategy potentially offers:

Better streamlined manufacturing process

Control in transaction costs

Improved Quality Control

Improved capability to handle upside in demand

Enhances the ability to secure supplies and future orders

229

Other Business

1. Textile Auxiliaries:

Being active in the field of production and global distribution of dyes for the last four decades,

JCIL decided to venture into the allied service of textile processing chemicals.

In order to meet the present trends and customer demands we constantly strive to produce

sustainable products for the textile processing Industry.

2. Construction Chemicals:

Looking for new opportunities and using four decades of experience in manufacturing and

marketing, JCIL launched its Construction Chemicals Division under the brand name K2.

K2 products are manufactured at JCIL's plant at Sanand, Gujarat using an array of advanced

equipments and systems. The quality benchmark is extremely high as R&D looks for

continuous improvement and stringent quality control is employed. K2 takes pride in

serving a select group of elite professionals and projects in the construction industry. The

company aims to grow rapidly through technical collaborations with global leaders, M&A,

investments in R&D, training and exports.

A separate, dedicated and well equipped division ensures easy access and quick response

to meet the demands of the construction industry with a team of experienced and mature

marketing professionals. K2 has launched its products through distributors, retailers,

applicators and projects in the major states of India. In order to improve industry standards,

K2 has taken a strong initiative, as an ongoing commitment, to educate the public and

professionals regarding its products. The focus areas being; - advances in construction

chemicals, proper methodology of product application as well as creating a general

awareness regarding the environment and environmental impacts.

230

3. Garments:

Jay Infa Trade Pvt. Ltd (sister concern of JCIL) is a ready-made Jeans facility in Ahmedabad,

India with an annual capacity of a quarter of a million pieces. Our key customers include

large Indian chains like Arvind brands, Peter England, Reliance Retail, ITC Wills Lifestyle

among many others. The facility is equipped with a high level of automation like a loop

attach machine, back pocket design machine etc. and ensures the highest efficiency. We are

capable of specialty finishes like hand sanding, sand blasting, whiskers with laser and hand;

garment tinting, spraying, brushing, grinding, and permanent creasing and coating.

FUTURE PLAN

It is our objective to continue our efforts incessantly to improve the quality of our productsand

services through better allocation / utilization of resources and HRD, to achieve still higher

and higher degree of customer satisfaction and theirloyaltyfor the resultant improved

financial performance.

Reaching New Heights : To discern, analyze and fulfill customer satisfaction is the

permanent function of our marketing group. A wide product line ranging from Ingrain and

Reactive Dyes to pigments is a true proxy indicator of our success story in the domestic as

well as international market. As an outcome of Marketing Strategy, the products are suitably

positioned to serve varied end use segments namely textile, handlooms, leather, plastics, ink

and paper industries. To provide a precise response to diversified needs, our strategy is one

of the intensive distribution. Our products are currently promoted by 32 wholesalers and

agents throughout the domestic market.

231

Embracing Newer Horizons : Our international growth confirms the wisdom of the company's

emphasis on the quality. Encouraged by the splendid response from the domestic market,

We entered into the international markets in the year 1995. Catering to over 25 countries, our

products have found world wide acceptance and popularity.

“The future strategy of the company is to maintain its dominance.”

Meghmani Organics Limited

In the year 1986, Mr. Jayanti Patel, Mr. Ashish Soparkar, Mr. Natwarlal Patel, Mr. Ramesh

Patel and Mr. Anand Patel formed a partnership firm, M/s Gujarat Industries, to produce

pigment blue.

232

On January 2, 1995, M/s Gujarat Industries was converted into a company under Part IX of

the Companies Act with the name "Meghmani Organics Limited". Equity Shares of our

Company were allotted to the promoters / partners of the M/s. Gujarat Industries in lieu of the

assets and liabilities of the partnership firm. Our Company was registered with Registrar of

Companies, Gujarat at Ahmedabad on January 2, 1995. We obtained the certificate of

commencement of business on January 4, 1995. Our Registered Office is situated at Plot No.

184, Phase II, G.I.D.C. Vatva, Ahmedabad -382 445, Gujarat, India.

It was in 1986, when Gujarat Industries was established as a partnership firm in Gujarat,

India to manufacture pigments. High productivity and profitability transformed Gujarat

Industries to a joint stock company, under the name of Meghmani Organics Limited, by 1995.

Since then Meghmani Organics Limited has diversified its business interests to include a

range of pesticides and other pigment products as well.

Today, Meghmani Organics Limited is a leading manufacturer of pigment and pesticide

products in the country and is the recipient of several prestigious awards in recognition of its

outstanding business performance.

Products:

1. Pigments

2. Pesticides

233

It is said, ―The most authentic statement about an organisation is in the performance of its

products‖. At Meghmani Organics Limited, we believe our products – pigments – blue &

green, and pesticides – are the voice of our character, the strength of our customer focus

and the yardstick of our potential. Frankly, the most eloquent statement of our commitment to

customer satisfaction comes through our products.

1. Pigments:

The pigment products which we manufacture fall into three main categories:

Pigments for Plastics

Pigments for Printing Inks

Pigments for Coatings

234

Our pigment products are used in multiple applications, including printing inks, plastics, paints, textiles,

leather, paper and rubber.

2. Pesticides:

The agrochemical products which we manufacture fall into three

main categories:

Technical Products

Formulation Products

Intermediates

Our agrochemical products are used in crop protection, public

health, termite & insect control and veterinary applications.

Technical Products Formulation Products

Cypermethrin

Acephate 75% SP

Alpha Cypermethrin Chlorpyrifos 20,48% EC

Permethrin Profenophos 50% EC

Deltamethrin Triazophos 3,5,10% EC

10% SC,. 5,10% WC

Lamda-Cyhalothrin Alpha Cypermethrin

3,5,10% EC, 10% SC,

5,10% WP

Chlorpyrifos Cypermethrin 5,10,20,25%

End User Applications

235

EC

Acephate Permethrin 10,25,50% EC,

25% WP

Triazophos Deltamethrin 2.8% EC,

1,2,5% SC

Profennophos Lambdacyhalothrin 2.5,5%

EC 25% WP

Imidacloprid Chlorpyrifos+Cypermethrin

(COM.) 40+4% EC

Acetamiprid Imidacloprid 9.5,17.8,20%

SL, 30.5,18.2% SC 48%

FS, 70% WS

Acetamiprid 20% WP

Monocrotophos 36% SL

Quinalphos 25% EC

Fenvalerate 20%EC

Intermediates

Meta

PhenoxyBenzaldehyde

Meta Phenoxy Benzyl

Alcohol

Cypermethric Acid

236

Chloride

Distribution channel of jay chemicals:-

Manufactured unit

Packing and labeling

Distributor

Retailers

Customers

237

Distribution channel of meghmany organics:-

Manufactured unit

Packing and Labelling

Retailoutlets

Distributor

Retailers

Customers Customers

238

Prices comparison of jay chemicals and jay chemicals:-

Product Range of jay chemicals&meghmany:

We are engaged in manufacturing and supplying a comprehensive range of

Chemicals, which is processed using quality materials maintaining the proper

composing, hygiene, concentration and PH value. Some of the chemicals of our range

are:

Sulfuric acid 70 %

Ferrous sulphate Crystal

Ferrous SuphateShuger Crystal

Ferrous sulphate powder 98% pure

Ferrous sulphate dried 30 % Fe

Hydrated lime powder

Quick lime Lump

Quick lime Powder

Quality Assurance

We manufacture the products with prime focus on quality, so we provide standard and

effective products to our customers. To ensure the quality standards, we conduct

various quality control tests. These quality tests are in compliance with industry set

239

standards. Moreover, trained quality auditors carry out these checks to ensure proper

composing, hygiene, concentration and PH value. Along with this, we strictly adhere to

the industrial guidelines for quality testing and chemical processing. Owing to all these

efforts, we manufacture optimum standard products. As a result, customers consider

us to be one of the leading players in the market.

Our Infrastructure

To manufacture the products in a standardized manner, we have supported ourselves

with a sophisticated and well equipped infrastructure. The infrastructure includes:

Manufacturing unit

Quality testing laboratory

R&D unit

Warehouse and packaging unit.

The manufacturing unit and the laboratory is spread over a large area and possess

the requisite machinery and equipment to formulate the chemicals carefully without

causing any harm to environment or workforce. Besides, our warehouse is well

connected through rail and road routes.

240

INTORDUCTION OF IMPORT-EXPORT:

EXPORTING AND IMPORTING:

Exporting refers to the sale of goods or services produced by a company based in one

country to customers that reside in a different country.

Importing is the converse: the purchase of products by a company based in one country

from sellers that reside in another.

Introduction to importing and exporting data

This article shows you what kinds of data you can import and export by using Access, and

shows you the basic steps to get started with an import or export operation.

One of the most useful features of Access is its ability to interface with data from many other

programs. In fact, it‘s difficult to summarize in a single article all the ways in which you can

move data into and out of Access.

For example, here are just a few ways in which you might use the data-exchange features of

Access:

To combine data that was created in other programs.

To transfer data between two other programs.

To accumulate and store data over the long term, occasionally exporting data to other

programs such as Excel for analysis.

241

Overview of external data operations in Access

In many programs, you use the Save As command to save a document in another format, so

that you can open it in another program. In Access, however, the Save As command is not

used in the same way. You can save Access objects as other Access objects, and you can

save Access databases as earlier versions of Access databases, but you cannot save an

Access database as, say, a spreadsheet file. Likewise, you cannot save a spreadsheet file as

an Access file (.accdb). Instead, you use the commands on the External Data tab in Access

to import or export data between other file formats.

Note You can also write macros or Visual Basic for Applications (VBA) code to automate the

import and export operations that are available on the External Data tab.

Types of data that Access can import, link to, or export

A quick way to learn about the data formats that Access can import or export is to open a

database and then explore the External Data tab on the ribbon.

The Import & Link group displays icons for the data formats that Access can import from or

link to. The Export group displays icons for all the formats that Access can export data to.

In each group, you can click More to see more formats that Access can work with. If you

don‘t see the exact program or data type that you need, chances are your data can be

exported by the other program into a format that Access understands. For example, most

programs can export columnar data as delimited text, which is then easily imported into

Access.

The following table shows which formats can be imported into, linked to, or exported out of

Access:

242

Import or link to data in another format

The general process for importing or linking data is as follows:

1. Open the database that you want to import or link data into.

2. On the External Data tab, click the type of data that you want to import or link to. For

example, if your source data is in a Microsoft Excel workbook, click Excel.

3. In most cases, Access starts the Get External Data wizard. In the wizard, you may be

asked for some or all of the information in the following list:

Specify the source of the data (its location on disk).

Choose whether to import or link to the data.

If importing, choose whether to append the data to an existing table, or to create a

new table.

Specify exactly which data in the document you want to import or link.

Indicate whether the first row contains column headings, or whether it should be

treated as data.

Specify the data type of each column.

Choose whether to import the structure only, or the structure and the data together.

If importing, specify whether you want Access to add a new primary key to the new

table, or use an existing key.

Specify a name for the new table.

Note It‘s a good idea to look at your source data ahead of time so that you know the

correct answers to these questions when the wizard asks for them.

243

4. On the last page of the wizard, Access usually asks you if you want to save the details

of the import or link operation. If you think you‘ll need to perform the same operation

on a recurring basis, select the Save import steps check box, fill in the information,

and then click Close. Then, you can click Saved Imports on the External Data tab to

re-run the operation.

After you have completed the wizard, Access notifies you of any problems that might have

occurred during the import process. In some cases, Access might create a new table called

ImportErrors, which contains any data that it was unable to import successfully. You can

examine the data in this table to try to find out why the data did not import correctly.

For more information about importing or linking to data in a specific format, search the

Access Help system for articles and videos that cover that format.

Export data to another format

The general process for exporting data from Access is as follows:

1. Open the database that you want to export data from.

2. In the Navigation Pane, select the object that you want to export the data from. You

can export data from table, query, form, and report objects, although not all export

options are available for all object types.

3. On the External Data tab, click the type of data that you want to export to. For

example, to export data in a format that can be opened by Microsoft Excel, click Excel.

244

4. In most cases, Access starts the Export wizard. In the wizard, you may be asked for

information such as the destination file name and format, whether to include formatting

and layout, which records to export, and so on.

5. On the last page of the wizard, Access usually asks you if you want to save the details

of the export operation. If you think you will need to perform the same operation on a

recurring basis, select the Save export steps check box, fill in the information, and then

click Close. Then, you can click Saved Exports on the External Data tab to re-run the

operation.

For more information about exporting to a specific format, search the Access Help system for

articles and videos that cover that format.

Introduction to India Imports and Exports

India imports and exports goods on a grand scale, and that trend is growing every year as

their population and level of technological sophistication increases.Every country engages in

the importation of products that they need and want from other nations and they in

turn export the products and raw materials that they have in abundance for financial gain.

245

India Export Data

Indian Machinery Exporters

Indian Handicraft Exporters

Indian Food Exporters

Indian Garment Exporters

Indian Furniture Exporters

India Imports at a Glance

The nation of India is the seventh largest in the world in land mass, number ten in the world

for the size of their economy by GDP, and the fourth largest international economy in

purchasing power parity. India has the second largest labor force in the world and abundant

natural resources. India‘s economy has grown by about 7.5% yearly since 2000, and that

rate is predicted to increase. It is also the fifteenth largest nation in imports and the

eighteenth largest in exports worldwide in 2009. This means that India imports and exports

are a huge potential market.

India Import Data

India Garment Importers

India Food Importers

India Furniture Importers

India Textile Importers

Know Your Market and Commodities

In order to effectively import or export, you must clearly understand the products that a

country or region offers and be able to evaluate the potential market for those commodities.

Will your chosen import or export sell at its destination? Ask yourself some pertinent

questions before committing to certain India imports. Is what you want to import available

246

locally for a lower price? Is there an untapped local market for it? Does importing that

commodity increase your businesses competitiveness? Select products that will bring a good

profit but also a steady demand.

Indian Market Particulars

As with all other nations, India imports are subject to taxation by the national government.

Tariffs, or customs duties, are an important part of any nation‘s economy, and help curb over-

dependence on foreign products. Indian customs duties are 5-40%, depending on the

method of entry (land, air or sea) and product type. The country of origin matters too, due to

trade agreements with individual nations for lower tariffs. Indian exports are generally free of

export tariffs, but some are price regulated, such as basmati rice, which has a minimum

foreign sale price.

Indian Importation Rules

The Indian government, under regulations listed in their ITC-HS Codes, regulates India

imports (e.g., items imported into India from other countries). India imports codes are very

protective of the country‘s national industries and so restrict the importation of certain items

that might compete with them, such as telecommunications and electronics equipment,

spices, textiles, raw materials like rubber and timber, and pharmaceutical products.

Gemstones, precious metals, animals, animal fats, seeds, chemicals and beef products are

also restricted or banned.

India Imports and Exportation Rules

Indian export regulations are much more liberal, but, similar to India imports rules, they are

designed to protect the national economy. Many types of finished products such as clothing,

textiles and jewelry, are exported freely, but raw materials such as wood, metals and

minerals, as well as agricultural and animal products, are restricted.

247

The reasoning behind this is that the government wants to keep cheaper national resources

and raw products available to their own people, rather than becoming dependent upon

foreign resources.

What to Import into India

The main things that India imports are cereal grains, edible (food quality) oils, and petroleum-

based products. Aside from these, India has a hunger for goods such as home and

commercial electronics, computer hardware and software, chemicals, industrial machinery,

and precious metals and stone. Additionally, metals for industrial use, such as iron, copper

and steel are major India imports. Smaller but lucrative Indian imports are cosmetics

products, audio and video media, books, and high-end luxury products, which Indian middle-

and upper-class consumers love.

India Imports

More than 78% of India imports into other countries are manufactured goods, such as

clothing, textiles and jewelry and have low entry duties into most other countries, such as the

US, due to trade agreements. However, a smaller importer might do better to tap into the

small but vital markets for unique Indian products such as spices, certain textiles, teas,

carpets, and handicrafts. There is even a substantial demand for ―Bollywood‖ films, Indian

music, and food products, as the Indian emigrant populations in other countries increase.

In all, India is a burgeoning market of consumers and a vital source of natural and finished

products. Their economy is growing and maturing every year; their purchasing parity will

equal that of Japan by 2011, and that of the US by 2045. India imports and exports sell well

on the world market, and money can be made on both sides of the market.

248

Sell Efficient and Buy Confident

With your Trusted Business, Trade and Commerce partner in Iran.

Global trade is now more accessible than ever, but doing

Import/Export business with Iran has tips you have to

know. Our job is to show entrepreneurs, small to large

corporations, International Import/Export traders how to

take advantage of the growing business opportunities

available in Iran. We do this by combining successful

business models with our native experience in sales,

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Consult with us for Marketing your Products and Services in Iran, Promote your business,

Exhibit in Iranian most successful Exhibitions or organize a business event for your firm.

explore a list of our previous and current clients in this list, and feel free to contact them to

see if we have met their necessities.

Iran Exports: Bitumen (oil products) - Cement (Construction materials) - Paraffin Wax -

White Oil - Vaseline - Base Oil - Construction Stone - Fabrics - Food and Fruits - Iron Ore -

Coal - Medicine - Handicrafts :

Iran Imports: Agricultural - IT and Telecom - Construction Materials - Industrial equipments -

Chemicals - Hi tech :

249

CHAPTER - 11

EXPORT – IMPORT DATA

250

EXPORT – IMPORT FINANCIAL DATA

European Commission Directorate-General for Trade

Negotiations for a Trade and Cooperation Agreement (TCA) between the EU and Iran have

been put on hold since August 2005, when Iran started to intensify its nuclear activities.

Trade picture

The EU is the first trading partner of Iran, accounting for almost a third of Iran's

exports.

Most EU imports from Iran are energy related, while EU exports to Iran are mainly

machinery and transport equipment and chemicals.

FINANCIAL DATA

EU-Iran "trade in goods" statistics

Year EU imports EU exports Balance

2009 9.4 10.4 1.0

2010 14.5 11.3 -3.2

2011 16.3 10.5 -5.9

251

EU-Iran "trade in services" statistics

Year EU

imports

EU

exports

Balance

2008 0.8 1.3 0.5

2009 0.7 1.2 0.5

2010 0.8 1.0 0.2

Gujarat Ambuja Exports Ltd. - Research Center

524226 GAEL Group (B) BSE data

Profit loss account

(Rs crore)

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Income

Operating income 2,114.09 1,949.43 1,408.56 1,601.62 1,829.09

Expenses

Material consumed 1,809.91 1,553.08 1,110.74 1,297.00 1,439.82

Manufacturing expenses 110.69 108.58 85.06 106.66 88.36

Personnel expenses 47.18 51.04 39.44 32.07 29.63

Selling expenses - 66.53 47.84 66.40 94.93

252

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Administrative expenses 40.55 16.31 14.13 11.90 15.99

Expenses capitalized - - - - -

Cost of sales 2,008.33 1,795.54 1,297.21 1,514.03 1,668.73

Operating profit 105.76 153.89 111.35 87.59 160.36

Other recurring income 5.51 3.74 4.81 10.06 10.70

Adjusted PBDIT 111.27 157.63 116.16 97.65 171.06

Financial expenses 20.89 12.85 11.20 17.10 25.61

Depreciation 29.86 29.23 27.91 36.36 31.46

Other write offs - - - - -

Adjusted PBT 60.52 115.55 77.05 44.19 113.99

Tax charges 11.44 25.38 30.09 13.61 38.26

Adjusted PAT 49.08 90.17 46.96 30.58 75.73

Nonrecurring items - -0.61 3.80 0.50 -4.48

Other non cash adjustments 0.62 4.54 9.26 -7.61 -

Reported net profit 49.70 94.10 60.02 23.47 71.25

Earnigs before appropriation 363.82 333.80 250.72 198.97 196.03

253

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Equity dividend 8.30 8.30 5.53 5.53 11.06

Preference dividend - - - - -

Dividend tax 1.35 1.38 0.94 0.94 1.88

Retained earnings 354.17 324.12 244.25 192.50 183.09

<img

src="http://b.scorecardresearch.com/p?c1=2&amp;c2=6035613&amp;cv=2.0&amp;cj=1">

Cash flow

(Rs crore)

Mar ' 12 Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Profit before tax 60.52 114.94 80.85 44.69 109.51

Net cashflow-operating activity -4.12 65.78 18.85 343.72 -115.64

Net cash used in investing activity -94.88 -104.59 -79.93 -12.58 -49.70

Net cash used in fin. Activity 96.53 31.93 64.42 -448.10 291.79

Net in cash and equivlnt -2.47 -6.88 3.34 -116.96 126.45

Cash and equivalnt begin of year 7.96 28.15 24.82 141.48 15.03

Cash and equivalnt end of year 5.49 21.27 28.16 24.52 141.48

254

<img

src="http://b.scorecardresearch.com/p?c1=2&amp;c2=6035613&amp;cv=2.0&amp;cj=1">

ANALYSIS

India is the fourth largest energy consumer in the world after the United States, China,

and Russia

In 2011, India was the fourth largest energy consumer in the world after the United States,

China, and Russia. India's economy grew at an annual rate of approximately 7 percent since

2000 and proved relatively resilient to the 2008 global financial crisis. India was the 10th

largest economy in the world in 2011, as measured by nominal gross domestic product

(GDP).

In the International Energy Outlook 2011, EIA projects India and China to account for the

biggest share of Asian energy demand growth through 2035. Risks to economic growth in

India include high debt levels, infrastructure deficiencies, and political polarization between

the country's two largest political parties.

The government may not be able to deliver secure supplies to meet demand because of fuel

subsidies, increasing import dependency, and inconsistent energy sector reform. Some parts

of the energy sector, such as coal production, remain relatively closed to private and foreign

investment. Despite having large coal reserves and a healthy growth in natural gas

production over the past two decades, India remains very dependent on imported crude oil.

In early 2013, India's petroleum minister Veerappa Moily announced that the ministry would

work on an action plan to make India energy independent by 2030 through increased

255

hydrocarbon production, unconventional resources such as coalbed methane and shale,

foreign acquisitions by domestic Indian companies, and reduced subsidies on motor fuels.

These actions either increase India's energy supply or lower demand. India's largest energy

source is coal, followed by petroleum and traditional biomass (e.g., burning firewood and

waste). Since the beginning of the New Economic Policy in 1991, India's population

increasingly has moved to cities, and urban households have shifted away from traditional

biomass to other energy sources.

The industrial sector is the largest energy consumer, representing over 40 percent of India's

total primary energy demand in 2009, and is mostly fueled by traditional biomass, according

to the International Energy Agency (IEA). The power sector is the fastest growing area of

energy demand, increasing from 23 percent to 38 percent of total energy consumption

between 1990 and 2009.

A 2012 report by the IEA estimated that nearly 25 percent of the population lacks basic

access to electricity, while electrified areas suffer from rolling electricity blackouts. The

government seeks to balance the need for electricity with environmental concerns from the

use of coal and other energy sources used to produce that electricity.

256

Oil & other liquids

India was the fourth largest consumer of oil and petroleum products in the world in

2011, after the United States, China, and Japan The country depends heavily on imported

crude oil, mostly from the Middle East.

India was the fourth largest consumer of oil and petroleum products after the United States,

China, and Japan in 2011. It was also the fourth largest importer of oil and petroleum

products. The high degree of dependence on imported crude oil has led Indian energy

companies to attempt to diversify their supply sources. To this end, Indian national oil

companies (NOCs) have purchased equity stakes in overseas oil and gas fields in South

America, Africa, and the Caspian Sea region to acquire reserves and production capability.

However, the majority of imports continue to come from the Middle East, where Indian

companies have little direct access to investment.

257

Economic Data

Table 1 (see below) shows the main economic indicators for India, Iran and Pakistan. By

looking just at these indicators, it is obvious that all three countries would seek to benefit from

a collaborated effort in developing the pipeline. Iran, which has the highest rate of inflation,

at 30 percent, amongst the three countries, also has the lowest GDP growth rate.

It is second to India in its level of GDP nominal, which is $347.6 billion. The development of

the pipeline and other projects like it by the Iranian government would help to increase the

GDP growth rate as well as the GDP nominal rate. India and Pakistan could also fare well in

the pipeline project, which would bring in employment for skilled and unskilled workers.

258

This is important considering India and Pakistan receive substantially lower levels of

economic aid than Iran receives.

TABLE 1: ECONOMIC INDICATORS

Country Economic Aid External

Debt

Inflation

Rate

GDP

Nominal

GDP

Growth

Rate

GDP Per

Capita

India $2.9 billion

(1999)

$98 billion

(1999)

6.7%

(1999)

$1.805 trillion

(1999) 5.5% (1999)

$1,800

(1999)

Iran $116.5 million

(1995)

$21.9 billion

(1996)

30%

(1999)

$347.6 billion

(1999) 1% (1999)

$5,300

(1999)

Pakistan $2 billion

(1998)

$32 billion

(1999) 6% (1999)

$282 billion

(1999) 3.1% (1999)

$2,000

(1999)

SOURCE: CIA 2000

TOTAL EXPORT – IMPORT DATA

MAJOR EXPORTER(S): IRAN

As the world's second largest natural gas producer (15 percent), Iran contains an estimated

812 trillion cubic feet (Tcf) in proven natural gas reserves (Energy Information

Administration). Since 1990, Iran has been undergoing an ongoing gas utilization program

which was designed to boost natural gas production to 10 Tcf per year by 2010, allowing for

increased gas exports abroad (Iran Background Information).

Iran produced about 2.6 of natural gas in 1996, marketing 1.3 Tcf of it and produced about

1.9 Tcf of natural gas in 1998 (Energy Information Administration). While South Pars, the

259

largest gas field in Iran, contains much of Iran's unused natural gas, the Aghar and Dalan

fields have produced nearly "600 million cubic feet per day (Mmcf/d) respectively" (Ibid).

Overall, oil and petroleum count for 80 percent of Iran's export commodities (Central

Intelligence Administration). Iran has an emerging market for its natural gas exports. There

are possible ventures including Turkey, Europe, India, Pakistan, South Korea, Taiwan, and

coastal China (Ibid). Iran and Turkey signed a $20 billion agreement in 1996 calling for Iran

to export natural gas to Turkey over 22 years (Ibid).

TABLE 2: IRAN TRADE STATISTICS

Exports Exports

Partners

Exports

Products Imports

Imports

Partners Imports Products

$12.2

billion

(1998)

Japan, Italy,

Greece,

France,

Spain, South

Korea

petroleum

80%, carpets,

fruits, nuts,

hides, iron,

steel

$13.8

billion

(1998)

Germany,

Italy, Japan,

UAE, UK, Be

lgium

machinery, military

supplies, metal works,

foodstuffs,

pharmaceuticals, technical

services, refined oil

products

SOURCE: CIA 2000

Table 2 (see above) explains Iran's export and import statistics. The 80 percent petroleum

export statistic is of particular importance to the Iran to India pipeline project. Iran is a

country which has benefited from its exportation of petroleum. It will continue to do the same

with natural gas if legal and political conditions permit the pipeline project to be

implemented. Additionally, its imports expenditure, at $13.8 billion, supersedes the $12.2

billion it gains from exports. This statistic would inevitably change if the numerous pipeline

projects in various stages of development would reach completion.

260

MAJOR IMPORTER(S): INDIA

During 1998-1999, India produced about 75 million standard cubic meters (mmscmd) of

natural gas per day . Most of this gas is produced in the Western offshore area of India

(Energy Information Administration). About 60 mmscmd of this gas was sold to Indian states

(Natural Gas).

While India's consumption of natural gas has increased in recent years, its resources are

severely limited. Domestic gas supply cannot keep pace with domestic gas demand (Energy

Information Administration). According to a 1992 projection, the production of gas in the

country is expected to maintain an average of 85 mmscmd while the demand is registered at

260 mmscmd ("Natural Gas" 2000). For this reason, the country must import natural gas from

the Mideast. "India will have to import most of its gas requirements, either via pipeline or

Liquefied Natural Gas (LNG) tanker, making it one of the world's largest gas importers" (Ibid).

Aside from the Iran-India pipeline project, additional possibilities include importing from

Bangladesh and Myanmar. India also signed an agreement with Oman in 1994 to import 56.6

mmscmd of natural gas in the time span of ten years (Ibid).

TABLE 3: INDIA TRADE STATISTICS

Exports Exports

Partners Exports Products Imports

Imports

Partners

Imports

Products

$36.3

billion

(1999)

US 21%, UK

6%, Germany

6%, Hong Kong

5%, Japan 5%,

textile goods, gems

and jewelry,

engineering goods,

chemicals, leather

$50.2

billion

(1999)

US 10%,

Belgium 7%,

UK 6%,

Germany 6%,

crude oil and

petroleum

products,

machinery,

261

UAE 4% (1998) manufactures Saudi Arabia

6%, Japan 6%

(1998)

gems, fertilizer,

chemicals

SOURCE: CIA 2000

Table 3 (see above) explains India's import and export statistics India's economy is based

predominantly in textile manufacturing, importing large amounts of textile and leather

goods. Natural resources like crude oil and petroleum products are limited and are one of

the country's largest group of imports. The natural resources provide for most of the energy

consumed in India. Note that although the United States has imposed sanctions on India

since 1998, up until then the United States had been both the leading import and export

partner with India.

Conclusions

History has shown that since the Iranian nationalization of 1951 and the events leading to the

overthrow of Dr Mossadegh in 1953, oil embargoes simply do not work.21 The international

oil market is too complex, with too many players and too many options, to disguise

transactions. History is littered with failed oil embargoes ranging from Cuba, Rhodesia and

South Africa to the Arab oil embargo and the embargo against Iraq after 1990.22

However, history appears to have passed by the decision-makers of the EU.

It is also worth pointing out that an EU oil embargo would greatly strengthen the

Ahmadinejad regime at a time when it is under considerable pressure, especially with

parliamentary elections looming in March. Unemployment remains very high, as does

inflation. The latter has been greatly aggravated by the removal of many price subsidies in

the last twelve months. Moreover, in the last few weeks the value of the Iranian rial against

the dollar has fallen dramatically (at one point reaching a devaluation of over 30 per cent,

before recovering somewhat).

262

This has damaged the credibility of the government and will fairly quickly aggravate the

problem of inflation.23 Given the crucial role of oil in Iran‘s deepest political DNA, an EU

embargo would put the population solidly behind the current regime. A more effective means

of putting pressure on Iran would be for the United States to persuade the EU to extend

sanctions to financial transactions. At the start of 2012, the US passed legislation imposing

sanctions against any financial transactions undertaken with the Central Bank of Iran.

Over the last 18 months, access to finance for Iran in the EU has also become more

constrained as restrictions on such financial transactions have been imposed here too.

Arguably this has had a much greater negative impact on the Iranian economy than the US

sanctions since the passing of the Iran Libya Sanctions Act (ILSA) in 1996. However, the

financial embargo route to restrain oil revenues also presents problems.

It is possible that importers of Iranian oil could resort to barter, thereby avoiding using the

normal financial instruments. This is clearly an option for China. There are also other

financial routes such as using the banks within the UAE to disguise any financial trail.

While no route to restricting Iranian oil revenues is perfect, at least financial sanctions will not

provoke the same high level of popular backlash from the Iranian public as an embargo,

which would be perceived as a direct threat to Iranian oil – although both measures would be

seen as an attack on Iran. Despite the problems with financial sanctions, at least they offer

some possibility of pressuring Iran in a way that a simple oil embargo cannot. An oil

embargo alone cannot succeed.

263

Prospects for wheat export to Iran improve

Iran will soon resolve the quality issue related to Indian wheat and may initially import two

lakh tonnes of the grain during the December-January period, the Food Minister, K V

Thomas said today.

Our officials have just returned from Tehran. They were informed that the issue of Karnal

Bunt, a fungal disease, will be resolved soon. It is their internal problem and they will sort it

out soon,‖ the Minister said.

He said initially Iran wants to buy two lakh tonnes of wheat at a price of $325 a tonne during

December-January period.

―Internationally our wheat is accepted. We export to 25 odd countries. If they want to buy,

they have to resolve the quality issue at their end. The ball is in their court,‖ Thomas said.

Iran has been severely impacted by trade sanctions by the US and some other western

countries related to its nuclear programme.

The west Asian country wants to step up trade with India, particularly in food products

through a bilateral payment arrangement. The wheat export transactions will be done through

the UCO Bank in India.

The Indian offer placed before the Iranian officials included the shipment at $ 340 a tonne,

loading from Kandla and Mundra ports and the Karnal Bunt tolerance limit of 0.25 per cent.

Iran has not been importing Indian wheat since 1996 because of the quality hurdles.

In the face of surplus stocks, India is now scouting for global wheat market. Over 1.5 million

tonnes of wheat has already been exported since it lifted the export ban in September 2011.

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EXPORT CREDITS

THE ROLE OF E.C.G.C. (EXPORT CREDIT GUARANTEE CORPN OF INDIA LTD) In order

to offset the exporter against unforeseen circumstances in exports, ECGC plays an important

role. ECGC covers various types of risks such as default by importer or the country, non

receipt of payment due to wars, riots etc and charge a nominal premium for this based on the

country classification ( eg. 0.3% to 0.8% of the value). ECGC also helps an exporter in

assessing the credit worthiness of the importer and will fix the credit limit accordingly. This

will help an exporter to expose his risks only to that extent.

CUSTOMS AND PROCEDURES

Procedure for Import and Export General Provisions

Goods are imported in India or exported from India through sea, air or land. Goods can come

through post parcel or as baggage with passengers. Procedures naturally vary depending on

mode of import or export. Procedures discussed in this Chapter are applicable for imports by

sea, air or land, but not as baggage or postal Dispatch

COMPUTERISATION OF CUSTOMS WORK –

Work of customs at Delhi airport has been computerized.

Work at Mumbai port is also computerized. Whenever the work is computerized,

documents like IGM and Bill of Entry have to be filed electronically. Procedure in

computerized environment has been specified in CC, New Delhi PN 22/98 dated

8.5.1998. Guidelines for preparing data file for Bill of Entry and shipping bills for

Mumbai Customs House has been prescribed vide PN 108/99 dated 30-9-1999 and

PN 10/2001 dated 30.1.2001

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ENTRY –

‗Entry‘ in relation to goods means an entry made in a Bill of Entry, Shipping Bill or Bill of

Export. It includes (a) label or declaration accompanying the goods which contains

description, quantity and value of the goods in case of postal articles u/s 82 (b) Entry to be

made in case of goods to be exported (c) Entry in respect of goods imported which are not

accompanied by label or declaration made as per provisions of section 84.

AMENDMENT TO DOCUMENTS

Importer, exporter or 'Person In charge' have to submit various documents to customs

authorities like Bill of Entry, Import Manifest, Export Manifest etc. Some times, it may become

necessary to amend the document due to various reasons like change in classification,

clerical mistake in document, change in unloading / loading plan of vessel etc. In such case,

permission to amend these documents have to be obtained from customs authorities. Such

permission can be given if there are no fraudulent intentions.

In case of bill of entry, shipping bill or bill of export, it can be amended after clearance only on

the basis of documentary evidence which was in existence at the time the goods were

cleared, warehoused or exported, and not on basis of any subsequent document. [proviso to

section 149].

Customs Station

Imported goods are permitted to be unloaded only at specified places. Similarly, goods can

be exported only from specified area. In view of this, a definition of ‗Customs Station‘ is

important.

Customs area means all area of Customs Station and includes any area where imported

goods or export goods are ordinarily kept pending clearance by Customs authorities. Thus,

‗Customs Area‘ could include some area even outside the ‗Customs Station‘. Customs

Station means (a) customs port (b) inland container depot (c) customs airport and (d) land

customs station.

.

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Export Trade Procedure and Related Issues

Select a ―quality‖ product based on the export potential and demand

Select a particular overseas market.

Concentrate only on few products and minimum three countries, if you are a beginner.

Ensure that you can manufacture or procure from other sources the selected product(s) at

the competitive prices and in sufficient quantity and will be able to meet the quality

specifications, delivery schedule and other terms and conditions of the overseas buyer.

Get the full information of similar products of other manufacturers if already available in

selected markets, their prices, marketing techniques, terms of business etc. To offer your

product(s) to foreign buyers with a bargaining edge in order to capture the market.

Assess the degree of competition of product (s) which you propose to export in a particular

market.

Procedure for becoming an Exporter

To apply for an import export code with the concerned office of the joint director general of

foreign trade with all the particulars and necessary fees in this regard.

To find out the particular market and select a quality product and quote the prices in

u.s. dollars which is an universally accepted currency for all import – export trade. The

prices may be quoted as under:-

F.O.B: it means ―free on board‖ the delivery of the cargo is given till the same is loaded on to

the vessel. All future expenses like freight, insurance will be to the account of the buyer.

C & F: It means cost & freight. The price includes even the freight charges till the destination.

The buyer has to bear only the insurance and other delivery charges etc at the port of

destination.

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C I F : it means cost, insurance and freight. The price includes all expenses till the port of

destination.

Once the price is acceptable to the buyer, he will immediately open the letter of credit or will

send an advance remittance through the banking channels to the seller‘s account.

The letter of credit should be always in the form of irrevocable and sight letter of credit.

Once the lC is opened the seller has to prepare the cargo as per the quality, packing

specifications mentioned in the lC and send the same to the port of loading so that the C&F

(clearing and forwarding) agent will do the rest of forwarding the consignment to the buyer.

Once the shipment is over C&F agent will prepare all the shipping documents called for in the

lC.

Once these original shipping documents are received, seller has to prepare his commercial

invoice, packing list, bills of exchange and submit all the documents along with the original lC

received from the buyer to the bank for negotiation.

The banker will thoroughly scrutinize the documents strictly as per the terms and conditions

of the lC and give credit to the sellers account and send the documents to buyers‘ bankers

for getting the payment. Normally the payment is received within 10-15 days time.

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Import Procedures

Procedures have to be followed by ‗person-in-charge of conveyance‘ as well as the importer.

WHO IS 'PERSON IN CHARGE' - As per section 2(31), 'person in charge' means (a) In case

of vessel – its master (b) In case of aircraft - its commander or pilot-in-charge (c) In case of

train - its conductor or guard and (d) In case of vehicle or other conveyance - its driver or

other person in charge.

The significance of this definition is -

He is responsible for submitting Import Manifest and Export Manifest He is responsible to

ensure that the conveyance comes through approved route and lands at approved place

only. He has to ensure that goods are unloaded after written order, at proper place. Loading

also has to be only after permission.

He has to ensure that conveyance does not leave without written order of Customs

authorities.

He can be penalised for (a) Giving false declaration and statement (b) shortages or non-

accounting of goods in conveyance.

Procedure to be followed by the Carrier

The 'person in charge of conveyance' (carrier of goods) has to follow prescribed procedure.

Arrival at customs port/airport only - Section 29 provides that person-in-charge of a vessel or

an aircraft entering India shall call or land at customs port or customs airport only. It can land

at other place only if compelled by accident, stress of weather or other unavoidable cause. In

such case, he should report to nearest police station or Customs Officer. While arriving by

land route, the vehicle should come by approved route to ‗land customs station‘ only.

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Import Manifest / Report- Person-in-charge of vessel, aircraft or vehicle has to submit Import

Manifest / Report. [also termed as IGM - Import General Manifes.

The import manifest in case of vessel or aircraft is required to be submitted prior to arrival of

a vessel or aircraft. Import report (in case of vehicle) has to be submitted within 12 hours of

arrival at the customs station. If the report / manifest could not be submitted within prescribed

time, person-in-charge or any person specified as responsible by a notification is liable to

penalty upto Rs 50,000. Such penalty will not be imposed if the excise officer is satisfied that

there was sufficient cause for the delay.

IMPORT MANIFEST IS REQUIRED TO BE SUBMITTED BEFORE ARRIVAL OF

AIRCRAFT OR VESSEL

Section 30(1) of Customs Act provides that Import Manifest should be filed before arrival of

ship or aircraft. Normally, the Agents submit the Import Manifest before arrival, so that

maximum possible formalities are completed before vessel or aircraft arrives.

This also enables importers to file ‗Bill of Entry‘ in advance. Grant of Entry Inwards by

Customs Officer - Unloading of cargo can start only after Customs Officer grant ‗Entry

Inwards‘. Such entry inwards can be granted only when berthing accommodation is granted

to a vessel.

If there is heavy congestion at port, shipping berth may not be available and in such case,

‗Entry Inwards‘ cannot be granted. This date is highly relevant for determining rate of

customs duty applicable.

Carrier responsible for shortages during unloading - If the goods are short landed, the carrier

is liable to pay penalty upto twice the amount of duty payable on such short landed goods. .

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Procedure by Importer

The importer importing the goods has to follow prescribed procedures for import by

ship/air/road. (There is separate procedure for goods imported as a baggage or by post.)

Bill of Entry - This is a very vital and important document which every importer has to submit

under section 46.

The Bill of Entry should be in prescribed form. The standard size of Bill of Entry is 16" × 13".

However, for computerisation purposes, 15" × 12" size is permitted.

Bill of Entry should be submitted in quadruplicate – original and duplicate for customs,

triplicate for the importer and fourth copy is meant for bank for making remittances.

Under EDI system, Bill of Entry is actually printed on computer in triplicate only after ‗out of

charge‘ order is given. Duplicate copy is given to importer.

Types of Bill of Entry

Bills of Entry should be of one of three types. Out of these, two types are for clearance

from customs while third is for clearance from warehouse.

BILL OF ENTRY FOR HOME CONSUMPTION

This form, called ‗Bill of Entry for Home Consumption‘, is

used when the imported goods are to be cleared on payment of full duty. Home consumption

means use within India. It is white coloured and hence often called ‗white bill of entry‘.

BILL OF ENTRY FOR WAREHOUSING

If the imported goods are not required immediately, importer may like to store the goods in a

warehouse without payment of duty under a bond and then clear from warehouse when

required on payment of duty. This will enable him to defer payment of customs duty till goods

are actually required by him. This Bill of Entry is printed on yellow paper and often called

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‗Yellow Bill of Entry‘. It is also called ‗Into Bond Bill of Entry‘ as bond is executed for transfer

of goods in warehouse without payment of duty.

BILL OF ENTRY FOR EX-BOND CLEARANCE

The third type is for Ex-Bond clearance. This is used for clearance from the warehouse on

payment of duty and is printed on green paper. The goods are classified and value is

assessed at the time of clearance from customs port. Thus, value and classification is not

required to be determined in this bill of entry. The columns in this bill of entry are similar to

other bills of entry. However, declaration by importer is not required as the goods are already

assessed.

RATE OF DUTY FOR CLEARANCE FROM WAREHOUSE

It may be noted that rate of duty applicable is as prevalent on date of removal from

warehouse. Thus, if rate has changed after goods are cleared from customs port, customs

duty as assessed on yellow bill of entry and as paid on green bill of entry will not be same.

Mention of BIN on Bill of Entry – A BIN (Business Identification Number) is allotted to each

importer and exporter w.e.f. 1.4.2001. It is a 15 digit code based on PAN of Income Tax

(PAN is a 10 digit code). [Earlier an EC (Import Export code) number issued by DGFT was

required to be mentioned on Bill of Entry].

.

Assessment of Duty and Clearance

The documents submitted by importer are checked and assessed by Customs authorities

and then goods are cleared. Section 2(2) defines ‗assessment‘ as follows – ‗Assessment‘

includes provisional assessment, reassessment and any order of assessment in which the

duty assessed is Nil. Thus, ‗assessment‘ includes ‗Nil‘ assessment.

.

Transit Goods - Section 53 provide that any goods imported in any conveyance will be

allowed to remain on the conveyance and to be transited without payment of customs duty,

to any place out of India or any customs station. However, all these goods must be

mentioned in import manifest or import report submitted by person in charge of conveyance.

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Such goods should not be ‗prohibited goods‘ under section 11 of Customs Act. [The

conveyance may be vehicle, ship or aircraft]. After transit, the goods may go to another

customs station. On arrival at customs station, the goods will be liable to customs duty as if it

is first importation in India.

Transhipment of Goods - Goods imported in any customs station can be transhipped

without payment of duty, u/s 54 of Customs Act. Transshipment means transfer from one

conveyance to another. [The conveyance may be vehicle, ship or aircraft]. Such

transhipment may be to any major port or airport in India. The goods can be transhipped to

any other customs station in India if customs officer is satisfied that the goods are bonafide

intended for transhipment to any customs station. The facility is available at all customs ports

and Inland Container Depots (ICDs). [Notification No. 50/95-Cus(NT) dated 6-9-95].

Goods to be transhipped must be specified in Import Manifest or Import report and a ‗Bill of

Transhipment‘ should be submitted to Customs Officer. In case of goods being transhipped

under an international treaty or bilateral agreement between Government of India and

Government of a foreign country, a Declaration of Transhipment shall be submitted instead of

Bill of Transhipment. [section 54(1)]. [India has such bilateral agreement with Nepal].

Such goods should not be ‗prohibited goods‘ under section 11 of Customs Act. The goods

should be sealedduring transhipment by customs officer. A bond has to be executed for the

purpose. After execution of bond, a certificate from customs officer has to be submitted within

one month that goods have been properly transferred. On arrival at customs station, they will

be liable to customs duty as if it is first importation in India. - section 55.

TRANSIT AND TRANSHIP - Distinction between transit and transhipment is that in 'transit'

goods continue to be on same vessel, while in transhipment, goods are transferred to

another vessel / vehicle. Hence, procedures are also different.

Coastal goods - Coastal goods means goods transported from one port in India to another

port in India, but does not include imported goods. Thus coastal goods means goods taken

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by ship from one Indian port to another. No export or import is involved, but control is

necessary to ensure that coastal goods are not diverted illegally for export.

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CHAPTER 12/13

POLICIES AND NORMS OF

IRAN/INDIA FOR JAY CHEMICAL

FOR IMPORT/EXPORT INCLUDING

LICENCING

/PERMISSION/TAXATION

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Licensing policy of Iran

560.501 General and specific licensing procedures.

For provisions relating to licensing procedures, see part 501, subpart E of this

chapter. Licensing actions taken pursuant to part 501 of this chapter with respect to

the prohibitions contained in this part are considered actions taken pursuant to this

part.

560.502 Effect of license or authorization.

(a) No license or other authorization contained in this part, or otherwise issued by the

Office of Foreign Assets Control, authorizes or validates any transaction effected

prior to the issuance of such license or other authorization, unless specifically

provided in such license or authorization.

(b) No regulation, ruling, instruction, or license authorizes any transaction prohibited

under this part unless the regulation, ruling, instruction, or license is issued by the

Office of Foreign Assets Control and specifically refers to this part.

(c) Any regulation, ruling, instruction, or license authorizing any transaction otherwise

prohibited under this part has the effect of removing a prohibition contained in this

part from the transaction, but only to the extent specifically stated by its terms.

Unless the regulation, ruling, instruction, or license otherwise specifies, such an

authorization does not create any right, duty, obligation, claim, or interest in, or with

respect to, any property which would not otherwise exist under ordinary principles of

law.

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(d) Nothing contained in this part shall be construed to supersede the requirements

established under any other provision of law or to relieve a person from any

requirement to obtain a license or other authorization from another department or

agency of the U.S. Government in compliance with applicable laws and regulations

subject to the jurisdiction of that department or agency.

(e) No license or other authorization contained in or issued pursuant to this part

authorizes transfers of or payments from blocked property or debits to blocked

accounts unless the license or other authorization explicitly authorizes the transfer of

or payment from blocked property or the debit to a blocked account.

(f) Any payment relating to a transaction authorized in or pursuant to this part that is

routed through the U.S. financial system should reference the relevant Office of

Foreign Assets Control general or specific license authorizing the payment to avoid

the blocking or rejection of the transfer.

560.503 Exclusion from licenses.

The Office of Foreign Assets Control reserves the right to exclude any person,

property, transaction, or class thereof from the operation of any license or from the

privileges conferred by any license. The Office of Foreign Assets Control also

reserves the right to restrict the applicability of any license to particular persons,

property, transactions, or classes thereof. Such actions are binding upon actual or

constructive notice of the exclusions or restrictions.

560.509 Certain transactions related to patents, trademarks, and copyrights

authorized.

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(a) All of the following transactions in connection with patent, trademark, copyright or

other intellectual property protection in the United States or Iran are authorized,

including importation of or dealing in Iranian-origin services, payment for such

services, and payment to persons in Iran directly connected to such intellectual

property protection:

(1) The filing and prosecution of any application to obtain a patent, trademark,

copyright or other form of intellectual property protection;

(2) The receipt of a patent, trademark, copyright or other form of intellectual property

protection;

(3) The renewal or maintenance of a patent, trademark, copyright or other form of

intellectual property protection; and

(4) The filing and prosecution of opposition or infringement proceedings with respect

to a patent, trademark, copyright or other form of intellectual property protection, or

the entrance of a defense to any such proceedings.

(b) This section authorizes the payment of fees currently due to the United States

Government or the Government of Iran, or of the reasonable and customary fees

and charges currently due to attorneys or representatives within the United States or

Iran, in connection with the transactions authorized in paragraph (a) of this section,

except that payment effected pursuant to the terms of this paragraph may not be

made from a blocked account.

Licensing policy of India

Since the advent of freedom, the import of goods into India and export of

goods from India had all along been under the control of the Government. The

Import Export Control Act 1947 had set the law and procedure for such control. Over

a period of time the licensing of goods for import had been undergoing progressive

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changes. The initial license - control system was gradually relaxed bringing a

number of items of capital goods, raw material

components etc. required by local industries under O.G.L. and prohibiting

restricting import of items locally manufactured and available.

This system underwent a total change in 1992 when the policy itself was titled

"Export-Import Policy" against ―Import-Export Policy". With effect from 1.4.1992 the

restrictions and limitation were all radically reduced and all except a few items were

permitted to be freely imported/exported without any restriction whatsoever. Further,

such imports were not subject to any post

importation conditions such as "actual user" etc. The new Export-Import Policy

1997-2002 has continued the trade liberalization process.

Besides, to encourage exports, a number of schemes have been in force for quite

some time and these also have been progressively improved upon to reduce the

control and ensure freedom of action for the Exporters. The important schemes are:

1. Duty Exemption Scheme;

2. EPZ/EOU Schemes;

Duty exemption scheme:

This enables the prospective Exporter to import required inputs for export production

without payment of basic customs duty but subject to specified export obligation and

value addition. There are different types of advance licences granted under this

scheme.

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(A) Advance License:

Here the exporter can import any of the inputs required, without payment of basic

customs duty. However, he will have to pay the additional customs duty (also called

countervailing duty). This countervailing duty can be claimed back through the

Modvat credit or the drawback route, in case the inputs are used for export goods.

However if the Advance License in given under "actual user" condition, then

the countervailing duty need not be paid by the exporter. The Advance Licenses are

subject to fulfillment of a time bound export obligation and value addition as specified

by the Government at the time of issue of the license.

(B) Advance Intermediate License :

Under this an intermediate manufacturer is granted advance license to import

required inputs for manufacturing intermediate products and supply to the ultimate

Exporter who is an advance license holder for the manufacture and export of finished

product. Such advance intermediate licenses are quantity based.

In respect of quantity based advance licenses if the licensee is accepting actual user

conditions then the imports are exempt from additional duty as well.

(C) Passbook Scheme: :

Under this scheme, the eligible category of exporters i.e. Star Trading House,

Trading House, Export House are issued Pass Books indicating the name and

description of items to be exported by them and the inputs allowed for import based

on standard input/output norms fixed. On export the deemed import contents as per

norms and duty payable on import is calculated and shown in the pass book as

Credit. Against this credit, on actual import of the inputs duty livable is debited.

These pass books are valid for 1 year and may be renewed from time to time.

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EPZ / EOU Scheme:

Both these schemes are more or less of the same type. Export Processing Zone

(EPZ) is a segregated area where a number of units work under the Central and

General Supervision of the Zone Authorities. All machinery equipments, raw

material, inputs, packing material etc. can be imported free of duty subject to the

condition that products manufactured will be exported. A concession of diverting upto

a maximum of 25% production for sale in the country in the Domestic Tariff Area

(DTA) is also provided.

A 100% Export Oriented Unit (EOU) is also given similar concession with the

difference that it can function at its place of choice provided it is a warehousing

station under the Customs Act and it functions under the manufacturing-in-Bond

procedures. This 25% limit allowed for local sale is extensible to 50% in respect of

agriculture, floriculture, pisciculture etc.

Import export policy of Iran

Import policy of Iran:

Goods or services of Iranian origin may not be imported into the United States, either

directly or through third countries, with the following exceptions:

a) Gifts valued at $100 or less;

b) Information and informational materials;

c)Household and personal effects, of persons arriving in the United States, that were

actually used abroad by the importer or by other family members arriving from the

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same foreign household, that are not intended for any other person or for sale, and

that are not otherwise prohibited from importation; and

d) Accompanied baggage for personal use normally incident to travel.

U.S. persons are prohibited from providing financing for prohibited import

transactions. There are restrictions on letter of credit transactions involving the

Government of Iran.

Export policy of Iran:

In general, unless licensed by OFAC (Office of Foreign Assets Control), goods,

technology, or services may not be exported, re-exported, sold or supplied, directly

or indirectly, from the United States or by a U.S. person, wherever located, to Iran or

the Government of Iran. The ban on providing services includes any brokering

function from the United States or by U.S. persons, wherever located. For example,

a U.S. person, wherever located, or any person acting within the United States, may

not broker

offshore transactions that benefit Iran or the Government of Iran, including sales of

foreign goods or arranging for third-country financing or guarantees.

In general, a person may not export from the U.S. any goods, technology or

services, if that person knows or has reason to know such items are intended

specifically for supply, transshipment or re-exportation to Iran. Further, such

exportation is prohibited if the exporter knows or has reason to know the U.S. items

are intended specifically for use in the production of, for commingling with, or for

incorporation into goods, technology or services to be directly or indirectly supplied,

transshipped or re-exported exclusively or predominately to Iran or the Government

of Iran.

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A narrow exception is created for the exportation from the United States or by U.S.

persons wherever located of low-level goods or technology to third countries for

incorporation or substantial transformation into foreign-made end products, provided

the U.S. content is insubstantial, as defined in the regulations, and certain other

conditions are met.

Donations of articles intended to relieve human suffering (such as food, clothing, and

medicine), gifts valued at $100 or less, licensed exports of agricultural commodities,

medicine, and medical devices, and trade in ―information and informational

materials‖ are permitted. ―Information and informational materials‖ are defined to

include publications, films, posters, phonograph records, photographs, microfilms,

microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds,

although certain Commerce Department restrictions still apply to some of those

materials. To be considered informational material, artworks must be classified under

chapter subheadings 9701, 9702, or 9703 of the Harmonized Tariff Schedule of the

United States.

With certain exceptions, foreign persons who are not U.S. persons are prohibited

from re-exporting sensitive U.S.-origin goods, technology or services to Iran or the

Government of Iran. Foreign persons involved in such re-exports may be placed on

the U.S. Commerce Department‘s ―Export Denial Orders‖ list.

U.S. persons may not approve, finance, facilitate or guarantee any transaction by a

foreign person where that transaction by a foreign person would be prohibited if

performed by a U.S. person or from the United States.

Import export policy of India

Import policy of India:

The economic needs of the country, effective use of foreign exchange and industrial

as well as consumer requirements are the basic factors which influence India's

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import policy. On the import side the policy has three objectives: to make necessary

imported goods more easily available, including essential capital goods for

modernizing and upgrading technology; to simplify and streamline procedures for

import licensing; to promote efficient import substitution and self-reliance.

There are only 4 prohibited goods: tallow fat, animal rennet, wild animals and

unprocessed ivory. There is a restricted list, but most of the restrictions are on

grounds of security, health and environmental protection or because the goods are

reserved for production by small and tiny enterprises, which are home-based or

village-based and which require low skills and employ a large number of people. But

the policy of restricting import of consumer goods is changing.

The Indian government's clearly laid down policy is to achieve, through a series of

progressive steps, the average tariff levels prevalent in the ASEAN region. The basic

customs tariff rate now ranges from 0 to 40% plus additional duty of 2%; the average

rate is about 30%.

Imports are allowed free of duty for export production under a duty exemption

scheme. Input-output norms have been specified for more than 4200 items. These

norms specify the amount of duty-free import of inputs allowed for specified products

to be exported.

There are no quantitative restrictions on imports of capital goods and intermediates.

Import of second-hand capital goods is permitted provided they have a minimum

residual life of 5 years. There is an Export Promotion Capital Goods (EPCG)

Scheme under which exporters are allowed to import capital goods (including

computer systems) at concessionary customs duty, subject to fulfilment of specified

export obligations. Service industries enjoy the facility of zero import duty under the

EPCG Scheme. Likewise, hospitals, air cargo, hotels and other tourism-related

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industries. Software units can use data communication network to export their

products.

Export policy of India:

Exports are the major focus of India's trade policy and a thrust area is exports

involving higher value additions. Most items can be freely exported from India. A few

items are subject to export control in order to avoid shortages in the domestic

market, to conserve national resources and to protect the environment. Export

profits are exempt from income tax. Higher royalty payments of 8% (net of taxes) are

permitted on export sales as compared to 5% on domestic sales. Export

commissions up to 10% are also permissible.

Inputs required to be imported for export production are exempted from the basic

customs duty. Export Oriented Units (EOUs) and Export Processing Zones (EPZs)

enjoy special incentives such as duty free import of capital goods and raw materials

for the purpose of export production.

A Brand Equity Fund has been set up to popularize high quality India brands in the

world market. The corpus of the fund of Rs 5 billion (US $156 million) will receive

equal contributions from the government and industry.

Import export as a component for India:

Imports and exports are the two important components of a foreign trade. Foreign

trade is the exchange of goods and services between the two countries, across their

international borders. ‗Imports' imply the physical movement of goods into a country

from another country in a legal manner. It refers to the goods that are produced

abroad by foreign producers and are used in the domestic economy to cater to the

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needs of the domestic consumers.

Similarly, 'exports' imply the physical movement of goods out of a country in a legal

manner. It refers to the goods that are produced domestically in a country and are

used to cater to the needs of the consumers in foreign countries. Thus, the imports

and exports have made the world a local market. The country which is purchasing

the goods is known as the importing country and the country which is selling the

goods is known as the exporting country. The traders involved in such transactions

are importers and exporters respectively.

In India, exports and imports are regulated by the Foreign Trade (Development

and Regulation) Act, 1992, which replaced the Imports and Exports (Control) Act,

1947, and gave the Government of India enormous powers to control it. The salient

features of the Act are as follows:-

It has empowered the Central Government to make provisions for

development and regulation of foreign trade by facilitating imports into, and

augmenting exports from India and for all matters connected therewith or incidental

thereto.

The Central Government can prohibit, restrict and regulate exports and

imports, in all or specified cases as well as subject them to exemptions.

It authorizes the Central Government to formulate and announce an Export

and Import (EXIM) Policy and also amend the same from time to time, by

notification in the Official Gazette.

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It provides for the appointment of a Director General of Foreign Trade by the

Central Government for the purpose of the Act. He shall advise Central Government

in formulating export and import policy and implementing the policy.

Under the Act, every importer and exporter must obtain a 'Importer Exporter

Code Number' (IEC) from Director General of Foreign Trade or from the officer so

authorized.

The Director General or any other officer so authorised can suspend or cancel

a license issued for export or import of goods in accordance with the Act. But he

does it after giving the license holder a reasonable opportunity of being heard.

As per the provisions of the Act, the Government of India formulates and

announces an Export and Import policy (EXIM policy) and amends it from time to

time. EXIM policy refers to the policy measures adopted by a country with reference

to its exports and imports. Such a policy become particularly important in a country

like India, where the import and export of items plays a crucial role not just in

balancing budgetary targets, but also in the over all economic development of the

country.

The principal objectives of the policy are:-

To facilitate sustained growth in exports of the country so as to achieve

larger percentage shares in the global merchandise trade.

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To provide domestic consumers with good quality goods and services at

internationally competitive prices as well as creating a level playing field for the

domestic producers.

To stimulate sustained economic growth by providing access to essential raw

materials, intermediates, components, consumables and capital goods required for

augmenting production and providing services.

To enhance the technological strength and efficiency of Indian agriculture,

industry and services, thereby improving their competitiveness to meet the

requirements of the global markets.

To generate new employment opportunities and to encourage the attainment

of internationally accepted standards of quality.

Besides this Act, there are some other laws which control the export and import of

goods. These include:-

Tea Act,1953

Coffee Act, 1942

The Rubber Act, 1947

The Marine Products Export Development Authority Act, 1972

The Enemy Property Act, 1968

The Export (Quality Control and Inspection) Act, 1963

The Tobacco Board Act, 1975

Ten Autonomous Bodies:-

Coffee Board :- The Coffee Board of India is an autonomous body,

functioning under the Ministry of Commerce and Industry, Government of India. The

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Board serves as a guide of the coffee industry in India. The Board focuses on

research, development, extension, quality up gradation, market information, and the

domestic and external promotion of Indian coffee.

Rubber Board :- The board is engaged in the development of the rubber

industry. This is done by assisting and encouraging scientific ,technical and

economic research; supplying technical advice to rubber growers; and training

growers in improved methods of plantation and cultivation.

Tea Board :- The primary functions of tea board include rendering financial

and technical assistance for cultivation, manufacture, marketing of tea; promoting tea

exports ;aiding research and developmental activities for augmentation of tea

production and improvement of tea quality as well as encouraging and assisting

small growers sector financially and technically.

Tobacco Board:- The Government of India established the Tobacco Board,

in place of Tobacco Export Promotion Council, under the Tobacco Board Act of

1975 to regulate production, promotion of overseas marketing and to control

recurring instances of imbalances in supply and demand, which lead to market

problems. The Tobacco Board Act aims at the planned development of Tobacco

Industry in the country. The activities of the Board includes the regulation of the

production and curing of Virginia Tobacco with regard to the demand in India and

abroad.

Spices Board :- Spices Board was constituted on 26th February 1986 under

the Spices Board Act 1986. It is one of the Commodity Boards functioning under

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the Ministry of Commerce & Industry. It is an autonomous body responsible for the

export promotion of the scheduled spices and production or development of some of

them such as Cardamom and Vanilla.

Export Inspection Council (EIC), New Delhi :- The Export Inspection

Council is responsible for the enforcement of quality control and compulsory

preshipment inspection of various commodities meant for export and notified under

the Export (Quality Control & Inspection) Act, 1963.

Indian Institute of Foreign Trade (IIFT), New Delhi:- is engaged in the

following activities:-

Training of Personnel in modern techniques of international trade;

Organization of Research in problems of foreign trade;

Organization of marketing research, area surveys, commodity surveys,

market surveys;

Dissemination of information arising from its activities relating to research

and market studies.

Indian Institute of Packaging (IIP), Mumbai:- is registered under the

Societies Registration Act. The main aim of this Institute is to undertake research of

raw materials for the packaging industry, to organize training programmes on

packaging technology and to stimulate consciousness of the need for good

packaging etc.

Marine Products Exports Development Authority (MPEDA), Kochi:-

functions under the Ministry of Commerce, Government of India and acts as a

coordinating agency with different Central and State Government establishments

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engaged in fishery production and allied activities. The Authority is responsible for

development of the marine products industry with special focus on marine exports.

The role envisaged for the MPEDA is comprehensive covering fisheries of all kinds,

increasing exports, specifying standards, processing, marketing, extension and

training in various aspects of the marine industry.

Agricultural and Processed Food Products Export Development

Authority (APEDA), New Delhi:- came into existence in 1986 to further develop

agricultural commodities and processed foods, and to promote their exports. The aim

is to maximize foreign exchange earnings through increased agro exports, to provide

better income to the farmers through higher unit value realization and to create

employment opportunities in rural areas by encouraging value added exports of farm

produce.

Export Promotion Councils (EPCs):-

Presently there are twelve EPCs under the administrative control of the Ministry of

Commerce. These councils are registered as non-profit organisations under

the Companies Act. The Councils perform both the advisory and executive

functions. These councils are also the registering authorities under the Import Policy

for Registered Exporters.

Permission policy of Iran

I‘ve often joked that many people in the U.S., particularly within the Iranian-American

community, engage in business with Iran with a lack of knowledge about the

sanctions and in a matter as if they are dealing with a non-sanctioned country like

Switzerland or Japan. Some of this is understandable – U.S. sanctions with Iran are

very complicated and there are many laws one could never assume exist based on

simple common sense.

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For example, who would have thought that a U.S. citizen or Permanent Resident

generally cannot sell his or her own property in Iran without a license from the U.S.

Treasury Department‘s Office of Foreign Assets Control (OFAC), or that he or she

cannot even work in most jobs in Iran without an OFAC license?. Today‘s posting is

about doing business with Iran and what you should know.

Most Business By U.S. Persons with Iran is Prohibited

Before we get into what is permitted and prohibited, let‘s first determine whether you

meet the definition of a ―U.S. person.‖ The Iranian Transactions Regulations, 31

CFR Part 560 (2011) (the ―ITR‖) define ―U.S. Person‖ as any individual with U.S.

citizenship or permanent residency wherever they are (including Iran) and U.S.

companies around the world.

It also includes individuals physically in the United States (such as people here on

work and student visas, or even tourist visas!) and companies formed under U.S.

law. It is irrelevant if you also hold an Iranian passport, a Canadian passport, a

French passport, or any other nationality. If you meet the above criteria, you are a

U.S. person, and this status does not magically disappear when you set foot on

Iranian soil.

What types of activities are U.S. Persons prohibited from engaging in with

Iran? Most business by U.S. persons with Iran is prohibited, including dealings with

non-U.S. goods. But let‘s first start with what is allowed.

What type of business can be done by U.S. persons in Iran?

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As a U.S. person, you generally can:

1. Engage in certain dealings in informational materials, such as exporting

books, movies, music and art from the U.S. to Iran, and importing such products

from Iran to the U.S.;

2. Export certain limited types of free communications software;

3. Export most types of food products to Iran;

4. Obtain a specific license from OFAC to export or deal in medical supplies,

medical equipment, and pharmaceuticals for use in Iran;

5. Obtain a specific license from OFAC to rent out property you may have owned

from before you came to the U.S. (as an example);

6. Engage in certain travel related business with Iran (such as sell plane tickets

to Iran);

7. Provide certain legal services to people in Iran;

Register U.S. intellectual property such as patents and trademarks in Iran (or

Iranian IP here in the United States); and

Apply for a license for most other transactions – although OFAC will review and

accept on a case-by-case basis (note OFAC is not bound by precedent and is

generally not fond of most activities that will promote U.S.-Iran trade ties)

What can you not do with Iran?

As a U.S. person, unless you have a specific license from OFAC,

you cannot, among other things:

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1.Sell most goods to Iran from the U.S. or from any third country jurisdiction,

like Germany or Dubai;

2.Facilitate trade with Iran, such as arrange for a shipment of Chinese

goods from China to Iran, provide credit to enable such a transaction, work for

a Korean company on most deals related to Iran, or work in a Dubai company

on re export transactions with Iran;

3.Invest in Iran, such as building an apartment building, opening a factory,

running a factory, etc. (bear in mind one Iranian American was fined $30,000

in late 2010 for a ―non-egregious‖ investment in a family catering business);

4. Run a business in Iran such as a bookstore, or an engineering firm;

5.Work in Iran or for Iranian companies, whether you are sitting in your

house in the United States and working remotely for a company in Iran, or

whether you move to Iran and work for a company there, or even work for an

Iranian company in London, Istanbul, or Dubai;

6.Deposit and maintain money in banks in Iran, even in non-sanctioned

private banks; or Import most goods from Iran, even through a third country

like Australia or India;

Set up a company overseas to deal with Iran.

One can effectively sum up U.S. policy on this issue as follows: outside the spread of

informational materials which promote the free flow of ideas between the countries

and the sale of humanitarian goods such as most foods, medicines and medical

supplies, the United States generally does not want U.S. persons to do business with

Iran. As such, once you become a U.S. person you effectively have to sever

business ties with Iran.

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It may be very fashionable or convenient to live in the United States but live on

money you make in Iran, but realize this can lead to exceptional civil and criminal

liabilities under U.S. law. Note that you can apply for a specific license from Iran to

sell your commercial interests in Iran (be it a company you owned, shares of stock,

rental property, or inherited interests in a business venture, etc.).

Despite the many economic problems in Iran, the reality is that Iran is a very rich

country with high liquidity and plenty of business opportunities. However, the more

significant reality, arguably, is that Iran is under comprehensive U.S., and

increasingly European Union (EU) sanctions. Given the hostilities between the

United States and Iran, it should be expected that commercial relations are very

limited.

What if You Have Committed a Violation?

It is critical that one evaluate any history of violations, and if you are a business in

the U.S. doing international work, you should seriously consider implementing a

compliance program. I have seen certain U.S. businesses that have a heavy risk

factor with respect to Iran – employees shuttling back and forth (or even

moonlighting on projects in Iran!), or in one case a business where the owner also

owned ongoing businesses in Iran. I even heard of one case where a gentleman in

the U.S. was monitoring his factory in Iran via webcam! These are all exceptionally

prohibited activities and one should take an abundance of caution.

The ITR and related regulations tend to be incredibly nuanced. Therefore, when in

doubt always seek the advice of an expert. Business activities with sanctioned

countries (not just Iran but others such as Cuba and Syria) are not a place for

guesswork.

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Permission policy of India:

It is officially known as the Republic Of India. It is geographically situated in South

Asia, it is the seventh largest country in the world, the second most populated and

the largest democracy in the world. It is surrounded by sea on three sides, the Indian

Ocean in the south, the Arabian Sea in the west and the Bay of Bengal in the east.

Its neighbours are Pakistan in the west, China, Nepal and Bhutan in the north east

and Bangladesh and Myanmar in the east. To its south is Sri Lanka. India is the

birthplace of Indus Valley Civilization and four important religions Hinduism,

Buddhism, Jainism and Sikhism have their roots in India.

Doing business in India after independence:

Doing business in India after independence was difficult. India followed a socialistic

model of economic growth after independence. The industrial policy was for most

part through public sector enterprises and greater emphasis was laid on agricultural

sector. Private sector partnership was negligible and the doors for foreign trade were

for most part closed. But this model of economic growth failed miserably and by the

early 1990's India was faced with serious economic challenges. That is when the

government decided to initiate reforms and encourage business ventures by both

domestic private industries and foreign companies.

Doing Business In India After Liberalization:

The economic reforms initiated in India after 1991, created an environment

conducive for undertaking business in India. The government created a favorable

climate for foreign investors to invest in India by relaxing procedures for entry .A

foreign firm could invest in India either by having a wholly owned subsidiary, by

having a joint venture with

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an Indian company or by having a liaison, project and branch office. FDI investment

up to 100 per cent is allowed in most sectors with or without permission from

government, since India is one of the signatories of WTO. Over a period of time

more and more sectors of the economy have been opened up for the foreign

investment.

The Reserve Bank Of India regulates all foreign exchange transaction and foreign

exchange is governed by the Foreign Exchange Management Act 1999.Brands and

inventions registered in other countries have been given protection through

trademark and patent laws. Usually a trade mark is registered for ten years and a

patent is registered for twenty years. By making certain changes to the Patents Act

1970, product patent governance has been brought in.

India has signed Double Taxation Avoidance Agreement (DTAA) with several

countries to ensure there is no double taxation. Taxes could be on income from

royalty, capital gains, fee for technical services, operational profits accruing from

India. To bring about greater accountability and transparency in sales tax and to

bring in uniformity in tax charged across the country Value Added Tax (VAT) was

introduced from April 1 2005.

Automatic Route:

The government has allowed for FDI investment in certain sectors through the

automatic route, though there could be a cap for the maximum amount of

investment. For instance FDI in airports is allowed up to 100 per cent, but any

percentage above 74 per cent would require government approval. Again for

telecom, FDI allowed is 74 per cent, but for any FDI above 49 per cent government

approval is needed. In recent times the government gave permission for some more

sectors for FDI .FDI up to 51 per cent was allowed for retail trade, subject to prior

permission.

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The other sectors which came under the purview of FDI are manufactures of

industrial explosives, dangerous chemicals, establishing Greenfield airports and

cash and carry wholesale trading and export trading. Investment in certain specified

areas like Export Processing Zones, Electronic Hardware technology Park and

Software Technology Park are also included in the gamut of automatic route.

Taxation policy of Iran

The fiscal year begins on March 21 and ends on March 20 of the next year.

The Ministry of Finance and Economic Affairs is the government agency authorized

to levy and collect taxes. In 2008, about 55% of the government's budget came

from oil and natural gas revenues, the rest from taxes and fees. An estimated 50

percent of Iran‘s GDP was exempt from taxes in FY 2004. There are virtually millions

of people who do not pay taxes in Iran and hence operate outside the formal

economy.

As part of the Iranian Economic Reform Plan, the government has proposed income

tax increases on traders in gold, steel, fabrics and other sectors, prompting several

work stoppages by merchants. In 2011, the government announced that during the

second phase of the economic reform plan, it aims to increase tax revenues, simplify

tax calculation method, introduce double taxation, mechanize tax system, regulate

tax exemptions and prevent tax evasion.

There are five categories of income earned by individuals. Each category is taxed

separately and has its own computational rules.

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Salaries;

Income from professions, trades, and miscellaneous sources;

Incidental or windfall earnings;

Real estate income

Income derived from agriculture

For taxable income consisting of salary and benefits, employers are required

to make the necessary tax deductions from their employees‘ payroll and submit them

to the tax authorities. However, when calculating taxable income, exemptions and

deductions are allowed. As of 2009, only government employees were paying their

fair share of income taxes.

Individuals of Iranian nationality resident in Iran are subject to tax on all their income

whether earned in Iran or abroad. Foreign nationals working in Iran are also subject

to the same income tax based on their salary. Non-resident individuals are liable to

pay tax only on their Iranian-sourced income. Foreign employees cannot obtain

an exit visa from Iran unless they provide proof that they have paid their due taxes,

and since they need to obtain an exit permit when their presence in Iran is based on

a work permit, the government can easily enforce this rule. The government

assumes a certain salary for employees depending on their position and country of

origin. The assumed minimum monthly salaries in 2004 range from US$2,500 for

unskilled European workers to US$7,000 for European managing directors.

Salary Tax Rates:

Annual Income/Profit in IRR Income Tax Rate

Up to 30,000,000 (US$3,230) 15%

30,000,000 to 100,000,000 (US$10,767) 20%

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100,000,000 to 250,000,000 (US$26,917) 25%

250,000,000 to 1,000,000,000 (US$107,666) 30%

In excess of 1,000,000,000 (US$107,666) 35%

Islamic taxes:

In addition to these mandatory taxes, Islamic taxes are collected on

a voluntary basis. These include an individual's income tax (Arabic khums, ―one-

fifth‖); an alms-tax (zakat), which has a variable rate and benefits charitable causes;

and a land tax (kharaj), the rate of which is based on the principle of one-tenth ('ushr)

of the value of crops, unless the land is tax-exemp

Real estate tax:

Rental income is subject to real estate income tax in Iran. A fixed deduction of 25%

of the gross income is extended to all taxpayers to account for income-generating

expenses. The net income, which is 75% of the gross rent, is then subject to the

same rates as in the above table (max. 35%). Rental income is exempted from real

estate tax if the property is a residential property leased as such and measures up to

150 sq. m. if it is located in Tehran (up to 200 sq. m. if it is located in other parts of

the country).

In Iran the transfer of land, not the land itself, is subject to taxation. Transfer of

properties: 5% of the transaction value (15% for new buildings).

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Capital gains tax:

As of 2009, Iran has no capital gains tax on the sale of real estate assets. However,

a capital gain tax will be introduced with the implementation of the 2010 economic

reform plan.

Capital taxes:

Taxes in the Tehran Stock Exchange and Banking and Insurance in Iran :-

As of July 2010, taxes on TSE transactions are as follows:

Cash dividend: none (22.5% at source from Company).

Share transfers: the Tax Amendment has changed the regulations regarding

calculation of tax on transfer of shares and their rights in Iranian corporate entities.

In the case of shares listed on the Tehran Stock Exchange (TSE) the tax on

transfer of such shares and other rights is 0.5 per cent of the sales price.

In the case of transfer of the shares and their rights to other corporate

entities (i.e. those not listed on the TSE) a flat rate of four per cent of value of the

shares and rights transferred applies. No other taxes will be charged. The

Amendment has removed the requirement to value the shares in this category.

Exemptions

Capital gain: no tax (bonds or equities).[11][18]

Interest income: no tax.[18]

Participation papers: Profit and awards accrued are tax exempt.[11]

Listed companies: 10% tax exemption, companies holding 20% free loat

shares are provided 20% tax exemption.[16]

Foreign investors: Foreign investors in TSE are tax-exempt.

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The inheritance tax rates are as follows:

Tax rates on different categories

Tax base, IRR (US$) I II III

Up to 50 million (US$5,383) 5% 15% 35%

50 million – 200 million (US$21,533) 15% 25% 45%

200 million – 500 million (US$53,832) 25% 35% 55%

Over 500 million (US$53,832) 35% 45% 65%

Corporate profit taxes:

A new flat rate corporation tax of 25 per cent payable on the profits of corporate

commercial entities has been introduced. This rate replaces the old corporation tax

of 10 per cent and progressive rates of income tax (12-54 per cent) on reserves and

distributable income. Apart from the 25 per cent corporation tax and the 0.3 per

cent Chamber of Commerce tax no more taxes will be payable by the corporate

entity or the shareholders.

The new rate of corporation tax will also apply to joint venture corporate entities

registered in Iran. The tax incidence will therefore be on the corporate entity and not

on the shareholder. The calculation of the tax has been simplified.

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All contracting work performed by foreign contractors, whether or not the company is

registered in Iran, is taxed. For contracts signed before March 21, 2003, gross

taxable income is calculated as gross contract receipts less the cost of imported

material. Income is then taxed at 12% of gross taxable income less contract

retention. For contracts signed after March 21, 2003, taxable income is the gross

contract receipts less contract expenses. Income is taxed at 25 per cent less 5 per

cent taxes withheld at source.

Taxation of foreign companies

Taxation in Iran generates particular unease among foreign firms because they

appear to be arbitrarily enforced – tax bills are initially based on 'assumed earnings'

calculated by the Finance and Economy Ministry according to the size of the

company and the sector in which it operates. Factors such as the quality and

location of a company's offices are also widely believed to have an impact on tax

assessment.

All foreign investors doing business in Iran or deriving income from sources

in Iran are subject to taxation. Depending on the type of activity the foreign investor

is engaged in, various taxes and exemptions are applicable, including profit

tax, income tax, property tax, etc.

Generally speaking, Iran has two types of laws concerning foreign companies. The

first are laws that address issues concerning foreign companies directly such as

the Foreign Investment Promotion and Protection Act (FIPPA) and the second are

general laws of which certain articles or by-laws address foreign companies, for

instance the Taxation

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Law and the Labor Law. The Tax Act had divided the source of income earned by

foreign companies either direct or through their branches in Iran into three main

categories:

Income earned in Iran by way of contracting operations

Income earned from Iran by way of royalties and licensing fees

Other activities - trading operations, etc.

Foreign legal entities must pay taxes on all taxable income earned through

investments in mainland Iran or from direct or indirect (through agents, branch

offices, etc.) activities in mainland Iran, at the flat rate of 25% as mentioned in Article

47 of the Amendment law.

Income from royalty and licensing fees received from industrial and mining

companies, government ministries and municipalities, and income from film-

screening rights are subject to a deemed taxable coefficient on income of 20 per

cent. All other income from royalties and licenses from foreign companies is subject

to a deemed taxable coefficient on income of 30 per cent. The coefficients are based

on the standard corporate tax rate of 25 per cent, so that the effective tax rate is

either 5 per cent or 7.5 per cent.

Tax advantages & exemptions

Agriculture in Iran, Tourism in Iran, Mining in Iran, Construction in Iran, and Bonyad

Income tax exemptions are available to new factories established in "special

areas", and last from four to eight years, from the first day of operations. In

addition, 80% of the reported profit of all manufacturing, mining, assembly

plant and related engineering companies are exempt from income taxes. Tax

incentives, meanwhile, are available to manufacturing, mining, agricultural

activities, exports and investment in special areas.

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In the agricultural sector, by virtue of Article 81 of[26] the revenues of activities

in the fields of agriculture, animal husbandry and livestock, pisciculture,

apiculture, raising poultry, hunting, fisheries, sericulture, and restoration of

forests, pasturage, orchards, trees and palms of whatever kind are exempted

from taxation.

The income of rural, tribal, and agricultural cooperative societies and those of

fishermen, laborers, employees, students and their unions are 100 percent tax

exempt.

The revenues from hand woven carpets and handicrafts and the related

production cooperative companies and unions are exempt from taxation.

The revenues of inventors or discoverers from their innovations and

discoveries are exempt from taxation. Also revenues of research and

development activities of institutes which have obtained licenses for such

activities from the relevant ministries will be exempt from taxation for 10 years

as of the entry into force of the Amendment, according to the provisions of the

relevant circular of the Council of Ministers.

Profit and awards accrued to participation papers are tax exempt.

All housing production projects for the low-income groups and housing

production in the dilapidated urban fabrics will enjoy a discount of around 50%

on construction tariffs and construction density fees. The remaining amount

can be paid in installments and will not be subject to any commission fees.[13]

Indirect taxes (sales, VAT):

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In 2008, sales tax rate in Iran was 3%.[28] Value Added Tax Act (VATA) was put into

effect since mid-year 1387 (2008).[29] Its implementation was suspended following 10

days of widespread demonstrations across Iran in October 2008. This Act has

substituted all previous laws and regulations dealing with indirect taxes (including

sales tax). According to the VATA, supply of commodities and services, as well as

their imports and exports, shall be subject to the provisions of this Law.

According to article 16 of this Act, the VAT rate is 1.5 percent, but the VAT rates of

certain goods such as "cigarettes and tobacco products" and "gasoline and jet fuel"

are respectively 12 and 20 percent. In addition to the VAT rates just mentioned,

article 38 of VATA levies the following duties on goods and services which are

subject to this Act:

Item Additional duties (2009)[11]

all types of cigarettes and tobacco products 3%

all types of petrol (gasoline) and jet fuel 10%

kerosene and gas oil 10%

on fuel oil 5%

all other goods and services 1.5%

The fifth development plan stipulates that VAT is to be increased by 1% each year,

in order that it reaches 8% by the end of the plan. As of 2010, VAT for goods and

services (except oil and tobacco products) was 3%.[31]

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VAT tax exemption

VAT will not apply to free trade zones in Iran. However, goods and services entering

Iran's customs territory will be subject to payment of VAT according to the

law. Articles 12 and 13 stipulate that supply and importation of some commodities

and services including the following shall be exempt from the VATA:

a) Unprocessed agricultural products;

b) Livestock and live poultry, aquatic products, honey bees and silkworms;

c) All types of fertilizers, pesticides, seeds and saplings;

d) Bakery flour, bread, meat, sugar, rice, cereals and soya, milk, cheese, shortening

and baby formula;

e) Books, press, notebooks and all types of printing papers, writing pads and papers

and press papers;

f) Passenger goods for personal use, as exempted under the Export-Import

Regulations;

g) Immovable property;

h) All types of medicine, medical consumables, medical services (human, animal or

plant) as well as rehabilitation and other supportive services;

i) Services subject to payment of salary taxes envisaged in the Direct Taxation Law;

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j) Banking and credit services rendered by banks, credit institutes and cooperatives,

authorized interest-free loan funds and cooperative funds;

k) Public transportation services and urban and inter-city roads, railway, air and sea

passenger transport services;

l) Hand woven carpets;

m) All types of research and training services, as stipulated in a By-Law to be

approved by the Council of Ministers;

n) Animal and poultry feed;

o) Export of goods and services from official exit points. Any tax paid on account of

such exports shall be reimbursed (as regards commodities) upon submitting a

certification of the customs certifying the export of goods. Value Added Tax (VAT)

does not apply to free trade zones (FTZ) in Iran. However, goods and services

entering Iran's customs territory from FTZs will be subject to payment of VAT

according to the law.

Municipal tax

Municipal tax in Iran is 3%.

Taxation policy of India

This guide provides an overview of the tax structure and current tax rates in India.

The tax regime in India has undergone elaborate reforms over the last couple of

decades in order to enhance rationality, ensure simplicity and improve compliance.

The tax authorities constantly review the system in order to remain relevant. India

has a federal system of Government with clear demarcation of powers between the

Central Government and the State Governments. Like governance, the tax

administration is also based on principle of separation therefore well defined and

demarcated between Central and State Governments and local bodies.

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The tax on incomes, customs duties, central excise and service tax are levied by the

Central Government. The state Government levies agricultural income tax (income

from plantations only), Value Added Tax (VAT)/ Sales Tax, Stamp Duty, State

Excise, Land Revenue, Luxury Tax and Tax On Professions. The local bodies have

the authority to levy tax on properties, octroi/entry tax and tax for utilities like water

supply, drainage etc.

DIRECT TAXES:

Individual Income Tax & Corporate Tax:

The provisions relating to income tax are contained in the Income Tax Act 1961 and

the Income Tax Rules 1962. The Income Tax Department is governed by the Central

Board for Direct Taxes (CBDT) which is part of the Department of Revenue under

the Ministry of Finance. In terms of the Income Tax Act, 1961, a tax on income is

levied on individuals, corporations and body of persons. Tax rates are prescribed by

the government in the Finance Act, popularly known as Budget, every year.

The Government of India has recently taken initiatives to reform and simplify the

language and structure of the direct tax laws into a single legislation – the Direct

Taxes Code (DTC). After public consultation the Direct Taxes Code 2010 was placed

before the Indian Parliament on 30 August 2010, when passed DTC will replace the

Income Tax Act of 1961. The DTC consolidates the provisions for Direct Tax namely

the income tax and wealth tax. When it comes into effect, probably April 2012, it is

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likely to have significant impact on the tax payers especially the business

community.

In the case of Individuals, incomes from salary, house and property, business &

profession, capital gains and other sources are subject to tax. Women and Senior

citizens are extended some special privileges. Individuals‘ incomes are subjected to

a progressive rate system. Tax treatment differs depending on the residence status.

Income of the company is computed and assessed separately in the hands of the

company. Income of company is subjected to a flat rate plus a surcharge. In addition

to these, an education cess is also charged on the tax amount. Dividends distributed

are subjected to special tax and the distributed income is not treated as expenditure

but as appropriation of profits by the company. Tax treatment differs depending on

the residence status.

A company is liable to pay tax on the income computed in accordance with the

provisions of the Income Tax Act. Although many companies have huge profits, and

declare substantial dividends, they are relieved from tax liabilities because their

income when computed as per provisions of the Income Tax Act is either nil or

negative or insignificant. Therefore a provision called Minimum Alternative Tax

(MAT) was introduced by an amendment in 1997. As per the MAT provision such

companies are required to pay a fixed percentage (presently 18% for 2011-2012) of

book profit as minimum alternate tax.

Additionally, by an amendment in 2005 companies are required to pay Fringe Benefit

Tax (FBT) on value of fringe benefits provided or deemed to have been provided to

the employees.

In addition to income tax chargeable in respect of total income, any amount

declared, distributed or paid by a domestic company by way of dividend shall be

subjected to dividend tax. Only a domestic company is liable for the tax.

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Wealth Tax:

Wealth tax, in India, is levied under Wealth-tax Act, 1957. Wealth tax is a tax on the

benefits derived from property ownership. The tax is to be paid year after year on the

same property on its market value, whether or not such property yields any income.

Similar to income tax the liability to pay wealth tax also depends upon the residential

status of the assessee. The assets chargeable to wealth tax are Guest house,

residential house, commercial building, Motor car, Jewelry, bullion, utensils of gold,

silver, Yachts, boats and aircrafts, urban land, cash in hand (in excess of INR 50,000

for Individual & HUF only),etc. But in reality majority of the potential tax payers do

not pay this tax as most of the movable items such as jewelry, bullion etc are

stashed away from accounting. Invariably they just pay tax for the immovable wealth

such as real estate.

Capital Gains Tax:

The central government also charges tax on the capital gains that is derived from the

sale of the assets. The capital gain is the difference between the money received

from selling the asset and the price paid for it. To restrict the misuse of this provision,

the definition of capital asset is being widened to include personal effects such as

archaeological collections, drawings, paintings, sculptures or any work of art.

Capital gain also includes gain that arises on ―transfer‖ (includes sale, exchange) of

a capital asset and is categorized into short-term gains and long-term gains. The

Long-term Capital Gains Tax is charged if the capital assets are kept for more than

three years or 12 months in the case of securities and shares that are listed under

any recognized Indian stock exchange or mutual fund. Short-term Capital Gains Tax

is applicable if the assets are held for less than the aforesaid period.

In case of the long term capital gains, they are taxed at a concession rate.

Normal corporate income tax rates are applicable for short term capital gains. In

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case of the short term and long term capital losses, they are allowed to be carried

forward for 8 consecutive years.

INDIRECT TAXES

Excise Duty

The central government levies excise duty under the Central Excise act of 1944 and

the Central Excise Tariff Act of 1985. Central Excise duty is an indirect tax levied on

goods manufactured in India and meant for domestic consumption. The Central

Board of Excise and Customs under the Ministry of Finance, administers the excise

duty. Central Excise Duty arises as soon as the goods are manufactured. It is paid

by a manufacturer, who passes on its incidence to the customers. Excisable goods

have been defined as those, which have been specified in the Central Excise Tariff

Act as being subjected to the duty of excise.

There are three main types of excise duty -

Basic Excise Duty is charged on all excisable goods other than salt at the

rates mentioned in the said schedule

Additional Duties of Excise is charged on goods of special importance, in

lieu of sales Tax and shared between Central and State Governments

Special Excise Duty is charged on all excisable goods on which there is a

levy of Basic excise Duty. Every year the annual Budget specifies if Special Excise

Duty shall be or shall not be levied and collected during the relevant financial year.

In the recent budget, a number of tax exemptions have been initiated. Specific goods

enjoy concessional duty rates. Exemptions are allowed to tax payers engaged in the

manufacture of certain goods such as, water treatment, bio-diesel, processed food

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etc and certain types of establishments such as small scale industries, cottage

industries that create jobs are also exempted.

Customs Duty

Customs duty in India falls under the Customs Act 1962 and Customs Tariff Act of

1975. Customs duty is the tax levied on goods imported into India as well as on

goods exported from India. Taxable event is import into or export from India.

Additionally educational cess is also charged.

The customs duty is evaluated on the value of the transaction of the goods. The

Central Board of Excise and Customs under the Ministry of Finance manages the

customs duty process in the country. The rate at which customs duty is applicable on

the goods depends on the classification of the goods determined under the Customs

Tariff. The Customs Tariff is generally aligned with the Harmonized System of

Nomenclature (HSL). It should be noted that preferential/concessional rates of duty

are also available under the various Trade Agreements.

Service Tax

Service tax was introduced in India way back in 1994 and started with mere 3 basic

services viz. general insurance, stock broking and telephone. Subsequent Budgets

have expanded the scope of the service tax as well as the rate of service tax. More

than 100 services are subjected to tax under this provision. An education cess is

also charged on the tax amount. The Central Board of Excise and Customs under

the Ministry of Finance manages the administration of service tax.

Every service provider of a taxable service is required to register with the Central

Excise Office in the concerned jurisdiction. Exemptions are available for services that

are exported, small service providers whose revenue fall below the prescribed level,

services provided to UN and International Agencies and supplies to SEZ (Special

Economic Zones). Subject to conditions, service tax is not payable on value of goods

and material supplied while providing services.

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Securities Transaction Tax (STT)

Transactions in equity shares, derivatives and units of equity-oriented funds entered

in a recognized stock exchange attract Securities Transaction Tax. Service Tax,

Surcharge and Education Cess are not applicable on STT. Taxation of profit or loss

from securities transactions depends on whether the activity of purchasing and

selling of shares / derivatives is classified as investment activity or business activity.

Treatment of STT also depends upon whether the income from these securities

transactions are included under the head ―Income from Capital Gains‖ or under the

head ‗Profits and Gains of Business or Profession‘.

STATE TAXES

Apart from the central taxes, the states also levy taxes on various good and services.

Main state taxes consist of:

Value Added Tax (VAT)

Sales tax charged on the sales of movable goods has been replaced with VAT in

most of the Indian states since 2005. This was introduced to counter the rampant

double taxation issues and resultant cascading tax burden that occurred due to the

flaws inherent in the previous sales tax system.

VAT, chargeable only on goods and does not include services, is a multi-stage

system of taxation, whereby tax is levied on value addition at each stage of

transaction in the supply chain. The term ‗value addition‘ implies the increase in

value of goods and services at each stage of production or transfer of goods and

services. VAT is a tax on the final consumption of goods or services and is ultimately

borne by the consumer. VAT comes under the state list. Tax payers can claim credit

for the taxes paid at earlier stages and purchases known as Input Tax Credit, by

producing relevant tax invoices. The credit can be used to setoff any VAT tax liability.

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Different rates of VAT are charged depending on the category to which the goods

belong. Rates vary for essential commodities, bullion and valuable stones, industrial

inputs and capital goods of mass consumption, and others. Petroleum tobacco,

liquor and so on are subjected to higher rate and differ from state to state.

Notably, there is no VAT on imports and export sales are not subjected to VAT.

Therefore VAT charged on inputs purchased and used in the manufacture of export

goods or goods purchased for export, is available as a refund.

Stamp Duty

It is a tax that is levied on the transaction performed by means of a document or

instrument as per the regulations of Indian Stamp Act, 1899. It is collected by the

government of the state where the transaction is carried out. Stamp duty rates vary

between the states.

Stamp duty is paid on instruments, which are essentially a document to create,

transfer, limit, extend, extinguish or record a right or liability. Document acquires

legality once it is stamped properly after the payment of the requisite stamp duty

charges. Stamp duty is payable for transfer of shares, share certificate, partnership

deed, bill of exchange, shares, share transfer, leave and license agreement,

debentures, gift deed, bank guarantee, bonds, demat shares, development

agreement, demerger, power of attorney, home loans, houses & house purchase,

lease deed, loan agreement and lease agreement.

State Excise

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Power to impose excise on alcoholic liquors, opium and narcotics is granted to

States under the Constitution and it is called ‗State Excise‘. The Act, Rules and rates

for excise on liquor are different for each State.

In addition to the above taxes by the Central and State Governments the local

bodies have the authority to levy tax on properties, octroi/entry tax and tax on utilities

and Customs Tariff Act of 1975. Customs duty is the tax levied on goods imported

into India as well as on goods exported from India. Taxable event is import into or

export from India. Additionally educational cess is also charged.

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CHAPTER 14/15

“PRESENT TRADE BARRIERS FOR

IMPORT/EXPORT OF SELECTED

GOODS” POTENTIAL FOR

IMPORT/EXPORT IN INDIA/GUJRAT

317

INTRODUCTION OF TRADE BARRIERS

Policies enacted by the government sector of a domestic economy to discourage

imports from the foreign sector. The three most common trade barriers are tariffs,

import quotas, and non-tariff barriers. Trade barriers are designed to discourage an

import which not only create or increases a country's balance of trade surplus and

thus increase net exports, but also to protect the domestic economy.

Trade barriers are government actions, especially tariffs, import quotas, and

assorted non-tariff regulations and restrictions that are intended to increase net

exports by restricting imports. By increasing net exports (and creating a more

"favorable" balance of trade), the domestic production of a nation increases, which

then increases domestic income and employment.

While trade barriers can be beneficial to the aggregate domestic economy they tend

to be most beneficial, and thus most commonly promoted by, domestic firms facing

competition from foreign imports. Domestic firms benefit with higher sales, greater

profits, and more income to resource owners. However, by increasing domestic

prices and restricting accessing to imports, trade barriers also tend to be harmful to

domestic consumers.

The Why Behind Trade Barriers

Unrestricted trade among nations is theoretically beneficial to both nations

engaged in a particular exchange. An exchange generates a net increase in the

sum of consumer surplus and producer surplus. These are the same gains from

trade that results from any voluntary exchange. Why then is it virtually every nation

in the global economy imposes trade barriers of one form or another? Before

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examining specific trade barriers, a quick look at the five reasons commonly used

to justify trade barriers is in order.

TRADE BARRIERS OF IRAN:

TRADE BARRIERS

Trade barriers are measures that governments or public authorities introduce to

make imported goods or services less competitive than locally produced goods and

services. Not everything that prevents or restricts trade can be characterized as a

trade barrier.

A trade barrier may be linked to the very product or service that is traded, for

example technical requirements. A barrier can also be of an administrative nature,

for example rules and procedures in connection with the transaction. In a number of

areas, special international ground rules have been agreed, which limit the ways in

which countries can regulate trade. It means that some barriers are legal while

others are illegal.

319

Trade barriers within the EU are subject to special rules that apply to the internal

market of the EU.

Sometimes it may also be possible to assist companies that face obstacles to trade

that do not fall under the definition of actual trade barriers.

Trade barriers are measures that governments or public authorities introduce that

prevent or restrict overseas trade and investment. These measures need not

necessarily take the form of legislation or a specific decision. They may also take the

form of current practice. As a result of these measures, domestic companies receive

a competitive advantage relative to their foreign counterparts.

It is accepted that in many cases, products are liable to customs duties when

imported into a market and that imported products ought to be accompanied by the

correct documentation. In some cases, however, customs duties may be

unreasonably high or customs clearance may take an unreasonably long time.

Trade barriers may take the form of, for example:

Customs duties

Customs procedures

Technical regulations, standards, etc. - for example for the purpose of

consumer protection, health protection, protection of the environment, etc

Veterinary and phytosanitary measures - barriers based on health and

safety regulations

Restrictions on access to primary products - for example in the form of

export levies that drive up prices artificially or special export prices that are

320

higher than the price of the same primary products for use in national

processing industries

Insufficient protection of intellectual property rights - both with respect to

the scope of protection and with respect to the possibilities of legal protection.

This includes, for instance, protection of patents, copyrights, trademarks and

geographical indications of origin

Barriers to trade in services - for example in the form of discriminatory

conditions

Restrictions on access to investment - for example through national

participation requirements or restrictions on access to repatriation of profits

Unfair application of state aid and other forms of subsidies

It is also same as in Iran chemical industries.

TARIFF RATE

Indicative listing of import tariff

rates .

Item Tariff rate

chemical products 10%

ordinary metals 10%

measurement instruments 10%

medical equipment 10%

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Import Quotas

The second of three trade barriers designed to restrict imports and promote exports

is quotas on imports. In general, a quota is simply a quantity restriction placed on a

good, service, or activity. For example, employers often face hiring quotas for

different demographic groups and sales representatives often have quotas for sales

activities. Import quotas are then merely legal restrictions on the quantities of imports

that are imposed by the domestic government.

Import quotas can be established as a simple aggregate, presumably satisfied on a

first-come-first-serve basis. Once the total is reached, then no more imports of the

food industry 15%

mining raw production 15%

leather industry 10%

paper and wood fabrics 15%

automotive vehicles 100%

agricultural raw production 25%

electric machinery 25%

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particular good are allowed. Alternatively, the total quota can be divided among

foreign producers, perhaps pro-rated based on past imports.

Import quotas are imposed based on any of the justifications for trade barriers, but it

is particularly important when it comes to national security. If, for example, the

military relies on a particular piece of computer equipment for missile guidance

systems, then reliance on any foreign imports could be problematic. A "zero" import

quota might be the best trade barrier policy.

NON TARIFF BARRIERS

The third of three common trade barriers is assorted non-tariff barriers. These non-

tariff barriers primarily include government regulations applied to specific products.

The regulations might apply to production techniques, product safety, environmental

quality, or ingredients and other inputs. These regulations might reflect the consumer

preferences of the domestic economy or unique production techniques available only

to domestic producers.

If, for example, domestic consumers value environmental quality or product safety,

then government regulations preventing foreign imports that do not meet domestic

standards might be imposed. Alternatively, domestic production relies on a unique

naturally occurring input, then government regulations preventing foreign imports

that do not use this input might be imposed.

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While these non-tariff barriers are often justified to protect domestic consumes, they

are also just as often imposed to prevent competition for domestic producers.

Table 3.1 : India’s Trade with Iran, 2001 - 2010 (US$ mn)

CAGR(%) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001-

2010

Export 253.3 492.2 893.0 1185.0 1073.0 1617.3 1845.3 2335.9 1949.1 2509.3 29.0

Import 266.9 254.2 267.7 355.9 644.2 5918.1 9165.6 13791.5 10591. 7 7999.9 45.9

Total

Trade

520.2 746.3 1160.7 1540.9 1717.2 7535.4 11010.8 16127.4 412540.8 10509.2 39.6

Trade

Balance

-13.7 238.0 625.3 829.1 428.8 -4300.7 -7320.3 -11455.6 -8642.6 -5490.7

_

(Source: www.indian trade economy relation with iran)

India measure export to iran

Trends in India-Iran Bilateral Trade (figures in Million

US$)

324

Year (Apr

– Mar)

India’s

exports

to Iran

India’s

imports

from Iran

Total trade Trade

balance

Total trade

growth rate

(%)

2005-06 1187.71 4822.65 6011.36 3633.94 44.39

2006-07 1490.99 7839.08 9330.07 3633.94 55.20

2007-08 1943.91 10889.57 12833.48 8945.66 37.55

2008-09 2534.01 12376.77 14910.78 9842.76 16.19

2009-2010 1853.17 11540.85 13394.02 -9687.68 10.17

2010-2011 2742.46 10928.21 13670.67 -8185.75 2.07

(Source: www.india exporting goods to iran)

FOREIGN TRADE CONTROL: IRAN

IMPORT REGULATION

IMPORT

Imported Goods, Duties & Evaluation:

All goods & commodities entering the customs areas in Iran are considered as

―entering‖ goods & commodities. Of these entering goods & commodities only those

are subject to customs tax and duties which their entrance to the country is made

definite. Other goods & commodities entering the customs areas in such modes as

internal transit, external transit, temporary entrance, etc. are exempted from customs

tax and duties.

According to customs laws & regulations the value of goods and commodities

entering Iranian customs is calculated on the basis of the CIF value plus registration

fees plus all other expenses and charges applicable to goods and commodities in

question until their arrival to the first port of entry. Furthermore, this calculation is

done on the basis of the documents submitted by the owner of the goods and

commodities and on a floating rate of exchange basis. Some important exemptions

325

and limitations concerning clearance of goods from Iranian customs is mentioned

below.

Support of Domestic Production:

Where domestic production for a particular product dose not meets the market needs

within the country, special permits are granted for limited importation of certain

goods. In fact this permit is a way of putting ration on importation of goods where a

specified ceiling is set on the value, weight and quantity of imported goods and

commodities.

As indicated in the tables annexed to the Import and Export Regulations, the import

of certain goods and materials to the country is permitted on condition that there is

no domestic production for the goods and materials in question. In such cases

obtaining the required certificate of ―No Domestic Production‖ for importation of the

said goods is necessary. The conditions applicable to imported goods are based on

Harmonized System Tariffs.

determined by the Harmonized System of Coding.

Import

Restrictions on the importation of goods and commodities to the country are divided

into three broad categories:

a) Religious restrictions concerning those goods and commodities which are

forbidden by Islamic laws.

b) Legal retractions concerning the importation of guns, ammunition, drugs, non -

standard and unhealthy goods or goods contaminated with radio- active materials.

c) Economic restrictions supporting domestic industries and productions including :

(1) Restrictions on materials and goods for which there is adequate domestic

production.

(2) Restrictions on unnecessary and luxurious goods and commodities

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EXPORT REGULATION

EXPORT:

In line with its policy concerning the promotion of exports and

expandedpresenceofdomesticmanufacturersintheinternationalmarkets,

the government of the Islamic Republic of Iran has prescribed special

incentives and exemptions on the export of goods and commodities.

According to Article 33ofImplementingRegulations (1994) of the Export -

Import Law, the assessment of export tariffs is carried out by the Pricing

Committee. Exporters should fill the relevant customs clearance forms

accordingly. However, it is evident that exporters have the right to

express their views on the pricing of their goods and commodities.

Restrictions(Export):

Restrictions on the export of goods are as follows:

1. Religious restriction on the export of goods which are forbidden

according to Islamic Laws.

2. Legal restrictions which are implemented based on the prevailing

situation.

Other formality & documents

Labeling requirement:

Measures defining the information directly related to food safety, which should be

provided to the consumer: Labeling is any written, electronic, or graphic

communication on the consumer packaging or on a separate but associated label

327

Example: Labels must specify the storage conditions such as ―5 degree C

maximum‖, or ―room temperature for dry foods‖.

Marking requirements:

Measures defining the information directly related to food safety, which

should be carried by the packaging of goods for transportation and/or distribution:

Example: Outside transport container must be marked with instructions such as

handling for perishable goods, refrigeration needs, or protection from direct sunlight,

etc.

Packaging requirements:

Measures regulating the mode in which goods must be or cannot be packed, or

defining the packaging materials to be used, which are directly related to food safety:

Example: Use of PVC films for food packaging is restricted.

TRADE BARRIERS IN INDIA

Trade Barriers:

Any restriction imposed on the free flow of trade is a trade barrier. Trade barriers can

either be tariff barriers (the levy of ordinary negotiated customs duties in accordance

with Article II of the GATT) or non-tariff barriers, which are any trade barriers other

than tariff barriers.

Import Licensing:

One of the most common non-tariff barriers is the prohibition or restrictions on

imports maintained through import licensing requirements. Though India has

eliminated its import licensing requirements for most consumer goods, certain

328

products face licensing related trade barriers. For example, the Indian government

requires a special import license for motorcycles and vehicles that is very restrictive.

Import licenses for motorcycles are provided to only foreign nationals permanently

residing in India, working in India for foreign firms that hold greater than 30 percent

equity or to foreign nations working at embassies and foreign missions. Some

domestic importers are allowed to import vehicles without a license provided the

imports are counterbalanced by exports attributable to the same importer.

Standards, testing, labeling & certification:

The Indian government has identified 109 commodities that must be certified by its

National Standards body, the Bureau of Indian Standards (BIS). The idea behind

these certifications is to ensure the quality of goods seeking access into the market,

but many countries use them as protectionist measures. For more on how this

relates to labeling requirements, please see the section on Labeling and Marking

Requirements in this chapter.

Anti-dumping and countervailing measures:

Anti-dumping and countervailing measures are permitted by the WTO Agreements

in specified situations to protect the domestic industry from serious injury arising

from dumped or subsidized imports. India imposes these from time-to-time to protect

domestic manufacturers from dumping. India's implementation of its antidumping

policy has, in some cases, raised concerns regarding transparency and due process.

In recent years, India seems to have aggressively increased its application of the

antidumping law. In the first half of the calendar year 2006 India topped the list of

countries initiating new anti-dumping investigations with 20 new initiations.

Export subsidies and domestic support:

Several export subsidies and other domestic support is provided to several industries

to make them competitive internationally. Export earnings are exempt from taxes and

329

exporters are not subject to local manufacturing tax. While export subsidies tend to

displace exports from other countries into third country markets, the domestic

support acts as a direct barrier against access to the domestic market.

Procurement:

The Indian government allows a price preference for local suppliers in government

contracts and generally discriminates against foreign suppliers. In international

purchases and International Competitive Bids (ICB's) domestic companies gets a

price preference in government contract and purchases.

Service barriers:

Services in which there are restrictions include: insurance, banking, securities,

motion pictures, accounting, construction, architecture and engineering, retailing,

legal services, express delivery services and telecommunication.

Other barriers:

Equity restrictions and other trade-related investment measures are in

place to give an unfair advantage to domestic companies. The GOI continues to limit

or prohibit FDI in sensitive sectors such as retail trade and agriculture. Additionally

there is an unpublished policy that favors counter trade. Several Indian companies,

both government-owned and private, conduct a small amount of counter trade.

330

NON TARIFF MEASURES OF JAY CHEMICAL

Non tariff measure

Non-tariff measures (NTMs) are of particular concern to exporters and importers in

developing countries, as they are a major impediment to international trade and can

prevent market access. Exporting companies seeking access to foreign markets and

companies importing products need to comply with a wide range of requirements

including technical regulations, product standards and customs procedures

The business sector, particularly in developing countries, often lacks the information,

capabilities and facilities needed. Meeting the complex requirements and

demonstrating compliance with NTMs can also come at a considerable cost

Similarly, national policymakers often lack a clear understanding of what their

business sector perceives as predominant obstacles to trade, which can make it

difficult to develop appropriate trade-related policies. At the same time, while there is

an on-going global effort to increase economic liberalization that seek to eliminate or

reduce tariffs, during the past decade there has also been a steady increase in the

number of non-tariff measures.

UNDERSTANDING NON-TARIFF MEASURES

NTMs can be broadly defined as policy measures, other than ordinary custom tariffs,

that may have an economic effect on international trade in goods. They may also

affect the price of traded goods or in the quantity of trade goods, or both. Although

the use of NTMs is in many cases legitimate - for example to ensure quality or

protect consumers' health - they are also sometimes used as protectionist measures.

It is usually difficult to clearly determine if the purpose of the regulation is for

legitimate or protectionist reasons.

331

332

CHAPTER 16/17

BUSINESS OPPORTUNITIES IN

FUTURE

& CONCLUSIONS AND

SUGGETIONS”

Business Opportunities in future

Economic of Iran:

Growth Prospects and Emerging Opportunities in the Chemical Industry

333

The abundant availability of oil and gas in Iran is the biggest advantage for the

country‘s petrochemicals sector. The Iranian Government has fostered a favourable

investment climate in the emerging chemicals industry by initiating numerous

petrochemical projects. The country‘s fifth five year plan (2010-2015) consists of

ambitious development plans aimed at privatization, which is expected to double

the petrochemical output by 2015. As a part of the privatization programme, the

government had decided to sell 80.0 per cent of its share in the National

Petrochemical Industry (NPC), in the sectors of methanol, ethylene, urea and

ammonia, to private parties by 2014. The government is also creating opportunities

for investors in the production of fertilizers, nitro benzene and polymer alloys.

Apart from the production capacity expansion of methanol, urea, ammonia,

ethylene, polyethylene, propylene and polyvinyl chloride, revenues from

petrochemicals exports will also raise the profile of the industry and make it one of

the pillars of the economy. The sector contributes around 12.6 per cent to the gross

domestic product (GDP) and is a major export revenue earner for the country.

Establishing a special economic zone for the petrochemical sector with

infrastructural facilities, tax concessions and other amenities will further augment

the petrochemical output. Once the industry receives the desired levels of

investment, Iran is likely to become the top producer of petrochemicals in the

Middle East and West Asia. The country is already a leading exporter of

petrochemicals to Southeast Asia and Europe and is currently targeting new

markets in Latin America. B

The following benefits are offered by this research:

Identify New Market Opportunities

Key trends and developments in the Iranian chemicals industry have been analysed

by studying the political, economic, social and regulatory environment, as well as the

government‘s economic and industry development plans. This analysis provides

334

valuable information to industry participants on emerging market opportunities in

different segments of the chemicals industry.

Understand Future Industry Trends

This study is time-sensitive and takes into account developments in the economic,

political and regulatory environments. It is a single-point of reference with a global

perspective on the Iranian chemicals industry, and focuses on the impact of country-

specific factors on different segments of the chemicals industry. This will help in

understanding critical industry-specific trends that are likely to affect industry

performance and growth.

Comprehend the Policy and Economic Environment

A detailed analysis of the policy, economic and regulatory framework of the Iranian

chemicals industry is provided, which helps understand the linkage between industry

performance and the level of economic growth and industry plans. Further

discussions on government initiatives about policies and financial support are

invaluable to industry participants.

Devise Country Entry Strategies

The research service provides valuable information and analysis of the strengths and

weaknesses of the economy of Iran, which are relevant to the chemicals industry. It

offers information to companies seeking to enter new geographic markets and

provides both country and industry trends and forecasts for major variables. These

vital inputs are particularly useful in devising country-specific strategies for

equipment manufacturers and service providers.

Evaluate Industry Segment Potential

This research service includes an analysis of the major segments in the chemicals

industry in Iran, with detailed coverage of economic and industry indicators as well

335

as their impact on the future direction and growth of major chemicals segments. This

will help corporate planners develop accurate business plans and enhance their

ability to optimise company resources.

Petrochemical Industry in the Middle East: Low Cost Feedstock

Providing Competitive advantage

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336

In 2000, the Middle East and Africa accounted for 8% of the global installed

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337

Analysis of the Middle East's feedstock advantage and future forecast of olefin prices

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Major deals in the Middle East in the period 2008-2010.

Understanding the implications of the Middle East's surge in capacity for the global

petrochemical industry.

EDUCATION SECTOR IN IRAN

Education in Iran is highly centralized and is divided to K-12 education and higher.

K-12 education is supervised by the Education and higher education is under

supervision of Ministry of Science and Technology. 82% of the Iranian adult

population is now literate, well ahead of the regional average of 62%. This rate

increases to 97% among young adults (aged between 15 and 24) without any

gender discrepancy. By 2007, Iran had a student to workforce population ratio of

10.2%, standing among the countries with highest ratio in the world.

Primary school (Dabestân) starts at the age of 6 for a duration of 5 years. Middle,

also known as orientation cycle (Râhnamâyi), goes from the sixth to the eighth

grade. High school (Dabirestân), for which the last three years is not mandatory, is

divided between theoretical, vocational/technical and manual, each program with its

own specialties. The requirement to enter into higher education is to have a High

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school diploma, and finally pass the national university entrance examination, Iranian

University Entrance Exam(Konkur), which is the equivalent of the US SAT exams.

Many students do a one (or two-year) pre-university course know

as Peeshdaneshgahe, which is the equivalent of GCE A-levels and International

Baccalaureate. The completion of the pre-university course earns students the Pre-

University Certificate.

The first Western-style public schools were established by Haji-Mirza Hassan

Roshdieh.

There are both free public schools and private schools in Iran at all levels, from

elementary school through university. Education in Iran is highly centralized. The

Ministry of Education is in charge of educational planning, financing, administration,

curriculum, and textbook development. Teacher training, grading, and examinations

are also the responsibility of the Ministry. At the university level, however, every

student attending public schools is required to commit to serve the government for a

number of years typically equivalent to those spent at the university, or pay it off for a

very low price (typically a few hundred dollars). During the early 1970s, efforts were

made to improve the educational system by updating school curriculation,

introducing modern textbooks, and training more efficient teachers.

Tourism Sector in Iran

The landscape of Iran is diverse, providing a range of activities

from hiking and skiing in the Alborzmountains, to beach holidays by the Persian

Gulf and the Caspian Sea. Over the next five years a number of tourism-friendly

infrastructure projects will be undertaken on the Persian Gulf island of Kish, which at

present attracts around 1m visitors per year, the majority of whom are Iranian.

Before the Iranian revolution and the subsequent Iran–Iraq War, tourism was

characterized by significant numbers of visitors traveling to Iran for its diverse

attractions, boasting cultural splendoursand a diverse and beautiful landscape

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suitable for a range of activities.[2] Tourism declined dramatically during the Iran–Iraq

War in the 1980s.

Since the Iranian revolution in 1979, the majority of visitors to Iran have been

religious pilgrims and businesspeople. Official figures do not distinguish between

those travelling to Iran for business and those coming for pleasure, and they also

include a large number of diaspora Iranians returning to visit their families in Iran or

making pilgrimages to holy Shia sites near Mashhad and elsewhere. Domestic

tourism in Iran is one of the largest in the world. Despite the international

tensions, the government continues to project strong rises in visitor numbers and

tourism revenue over the forecast period, and to talk of projects to build an additional

100 hotels, for example, to expand its currently limited stock.

Training sector in Iran

The value of postgraduate business training as a catalyst for progress has long been

recognised the world over. The Iranian Business School, as a postgraduate

management training institution, intends to play a leading role in the transition of the

Iranian economy by providing the education and skills training required for the

success of its future business leaders. It aims to become a leading centre of

management excellence in the region, and a world class educational institution.

Success in this endeavour should not only determine the country‘s position on the

global financial stage, but could also be the key to the development of an economy

that can reduce the risk of the current ‗brain-drain‘ and retain the country‘s best

talent.

The Iranian Business School intends to:

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Deliver management training programmes and courses to transfer the

knowledge and experiences of leading academics and practitioners to Iranian

managers;

Build on existing local management knowledge and best practices;

Focus training and research on commercial areas integral to the economic

development of Iran;

Establish the appropriate platform for the private sector to play a leading role

in the development of the Iranian economy;

Serve as a communication channel for knowledge sharing between Iranian

business leaders and their counterparts worldwide;

Drive the expansion of the knowledge-based economy through training of

senior managers and leaders;

Provide courses tailored to the needs of particular firms and organisations;

Empower Iranian organisations and institutions to develop the capacity to

benefit from world class management practices;

Create a centre of excellence for research and a policy think-tank.

Conclusion

The project titled ―to study on Jay Chemicals in Iran‖ with respect to chemical

industry.

The main objective of the study is to the top of mind awareness or different chemical

industry in Iran.

Jay Chemical Industries Ltd is one of the largest producers of Reactive Dyes in the

world today, with an annual sales turnover of USD 70 Million. With a strong

international presence, the group stands for quality, ethical practices and innovation.

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In this report we have taken a first look, at overview of industries trade and

commerce is includes the economy of Iran, statistics inclusive with the GDP, growth,

capital, GDP by sector, GDP component, inflation, etc . And including external

factors in which import, export, their partners and external debt.

In the next section, we discuss about the view to study the trade and commerce in

Iran with respect to Jay chemical Industries Ltd. A wide variety of information through

various sources like primary surveys, internet, and literature was gathered. The

sanctions are therefore primarily focused on restricting dealings in the energy sector,

particularly in the oil, gas and nuclear industries, while also restricting investment

and financing of certain enterprises in Iran. Ir Over the years, we have emerged as

Reactive Dyestuff Company with self-manufactured range which is available in more

than 250 different reactive dyes.

Iran has a mixed economy that is heavily dependent on export which is mainly

depends on the earnings from the country of the Iran extensively petroleum reserves

country. Oil exports from the Iran country account for nearly 79% of foreign

exchange earnings.

In light of the requirements of Section 219, SEC-registered issuers should implement

policies and procedures to ensure that business activities worldwide are evaluated

for a determination as to whether such activity is reportable.

The UN, U.S., EU, UK, Japan, South Korea, Canada, Australia and Israel have all

separately imposed financial and trade sanctions that target Iran‘s energy, banking,

and shipping sectors, the airline industry, as well as Islamic Revolutionary Guard

Corps (IRGC)-controlled entities and other entities involved in proliferation activities.

The emigration of young skilled and educated people continues to pose a problem

for Iran. The International Monetary Fund (IMF) reports that Iran has the highest―

brain drain‖ rate in the world. Oil and gas exports dominate Iran‘s export revenues,

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constituting about 80% of total export sand are the most important source of foreign

exchange earnings for the country. Other major export commodities are

petrochemicals, carpets, and fresh and dried fruits. Top destinations for Iran‘s non-oil

exports, including natural gas liquids, are the United Arab Emirates (UAE), Iraq,

China, Japan, and India. Demographics of Iran country population increased

dramatically during the latter half of the 20th century which is reaching about 75

million by 2011.In recent years, however, Iran‘s birth rate has dropped significantly.

80 percent of married women in Iran use contraception the highest rate among all

the countries in the Middle East.

Economic Sectors of Iran‘s economy is dominated by its industrial sector, which

represents about 45% of the country‘s GDP and includes oil and gas,

petrochemicals, steel, textile, and Auto motive manufacturing. The oil and gas

sectors‘ susceptibility to international sanctions is debatable. U.N. and some U.S.

sanctions are targeted toward obstructing Iran‘s development of its oil and gas

sectors in order to constrain Iran‘s resources for uranium enrichment and alleged

terrorist financing. Iran‘s agriculture sector is substantial. Iran is a major source of

caviar and pistachio nuts, which constitute significant non-oil exports for Iran. The oil

exporters, Iran‘s inflation level was second only to Iraq (30.8%)in 2007.Because of

inflation, Iran‘s currency, the rial, has been appreciating in real terms against the

U.S. dollar. National Iranian Oil Company (NIOC) is considered as one of the world's

giant oil companies. For the time being the in place oil and gas of the company are

estimated over 137 billion barrels of crude oil and 28 trillion cubic meters of gas.

Gating factors include poor infrastructure, legal barriers, exploration difficulties and

government control over all resources. Although the petroleum industry provides the

majority of revenue, about 75% of all mining sector employees work in mines

producing minerals other than oil and natural gas.

In Export policy of Iran , unless licensed by OFAC (Office of Foreign Assets

Control), goods, technology, or services may not be exported, re-exported, sold or

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supplied, directly or indirectly, from the United States or by a U.S. person, wherever

located, to Iran or the Government of Iran.

The basic customs tariff rate now ranges from 0 to 40% plus additional duty of 2%;

the average rate is about 30%. Imports are allowed free of duty for export production

under a duty exemption scheme.

In 2011, the government announced that during the second phase of the economic

reform plan, it aims to increase tax revenues, simplify tax calculation method,

introduce double taxation, mechanize tax system, regulate tax exemptions and

prevent tax evasion.

In addition, 80% of the reported profit of all manufacturing, mining, assembly plant

and related engineering companies are exempt from income taxes. Tax incentives,

meanwhile, are available to manufacturing, mining, agricultural activities, exports and

investment in special areas.

In India, the tax on incomes, customs duties, central excise and service tax are

levied by the Central Government. Jay Products are exported to over 40 countries

around the globe and are available in most of the dyes-consuming centres around

the world with the help of good number of trusted and skilful marketing associates.

Jay Products are exported to over 40 countries around the globe and are available in

most of the dyes-consuming centres around the world with the help of good number

of trusted and skilful marketing associates.JCIL exports 60 to 70 percent of its

products to international markets in more than 40 countries across the globe. The

annual sales of the company is close to U.S.$ 70 million (INR 320 corer).

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JCIL envisions being a Market Leader in the field of reactive dyes by increasing

production capacity by 30% in the next one year. The revenue generated, shall in

turn be diverted to Research & Development, the core of JCIL‘s success.

It is dominated by oil and gas production; although over 40 industries are directly

involved in the Tehran Stock Exchange. It is the world's seventeenth largest by

purchasing power parity (PPP) and twenty-fifth by nominal product. The country is a

member of Next Eleven. Mineral production contributed 0.6% of the country‘s GDP in

2011, a figure that increases to 4% when mining-related industries are included.

Oil export revenues enabled Iran to amass well over $100 billion in foreign exchange

reserves as of 2010. In 2010, Iran, which exports around 2.6 million barrels of crude

oil a day, was the second-largest exporter among the Organization of Petroleum

Exporting Countries.

Mineral production contributed 0.6% of the country‘s GDP in 2011, a figure that

increases to 4% when mining-related industries are included. In 2010 Iran completed

its first nuclear power plant at Brusher with Russian assistance. JCIL , the Top-10

reactive dye producers in the world. JCIL is a success story that boasts of a number

of landmark firsts.

Our study at chemical industry in Iran is learning experience for our career. It

provides us ample opportunities to gather knowledge about chemical & petroleum

industries of Iran industries. We could cultivate and improve various soft skills like

man management, organizing ability, communication skills as well as creativity

during this report.

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Findings

According to the central bank of iranin 2012, in 22.5 per cent of Iranian families, all

family members were unemployed Families earn some 11.4 million rials(around

$930) per month on the average (2012). infectious diseases represent risks to US

government personnel travelling to the specified country for a period of less than

three years.

Iran has a mixed economy that is heavily dependent on export which is mainly

depends on the earnings from the country of the Iran extensively petroleum reserves

country. Oil exports from the Iran country account for nearly 79% of foreign

exchange earnings. The constitution mandates that all large scale industries

including petroleum, minerals, banking, foreign exchange, insurance, power

generation, communications, aviation, and road and rail transport, be owned publicly

and administered by the state.

Social security applies to self employed workers who voluntarily contribute between

11 percent and 19 percent of income depending on the protection sought Civil

servants, the regular military law enforcement agencies and IRGC have their own

pension sectors or the government sector.

346

It provides us ample opportunities to gather knowledge about chemical & petroleum

industries of Iran industries.

Mineral products, notably petroleum, account for 70 percent of Iran‘s export

revenues and even though mining employs less than 2 percent of the labor force. In

2011 Iran's Department of Statistics announced that 11 million Iranians live under the

absolute poverty line and 31 million live under the relative poverty line live the people

of Iran of the country.

The majority of Iran's oilfields are concentrated in the southwest of the country,

where 80 percent of Iran's total production of crude oil is produced.

Foreign investors have concentrated most on Iran's copper extraction industry which

has taken the lead in moves towards privatization.

Iran has traditionally been famous food processing, and pharmaceuticals.

The high degree of Iran's dependency on imports for raw materials, along with the

economic sanctions imposed against the Islamic Republic, further increased the

vulnerability of the manufacturing sector.

Iran has become the world's third largest steel producer, with an output of 7.7 million

tons in 1987-88.

Iranian petrochemical production has more than doubled in the last 5 years, making

it the second largest producer in the region, after Saudi Arabia.

The services sector is the largest in the Iranian economy and contributed

approximately 70 percent to the GDP during 1989-2010.

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National Iranian Oil Company (NIOC) is considered as one of the world's giant oil

companies. For the time being the in place oil and gas of the company are estimated

over 137 billion barrels of crude oil and 28 trillion cubic meters of gas According to

the ranking proposed by Energy Intelligence, NIOC ranks second among 100 oil and

gas companies in the world

NIOC activates are exploration, drilling, production, research and development,

refining, distribution and export of oil, gas, petroleum products.

Iran Chemical Industries Investment Company manufactures linear alkylbenzene,

normal paraffin, and heavy alkylate. It also offers low aromatics n-paraffin, special n-

paraffin, and raffinate. Iran Chemical Industries Investment Company is based in

Tehran, Iran.

Iran is among the top five countries which have shown a growth rate above 20% and

high level development in telecommunications.

Iran‘s economy is dominated by its industrial sector, which represents about 45% of

the country‘s GDP and includes oil and gas, petrochemicals, steel, textile, and Auto

motive manufacturing.

Iran is the world‘s second largest gasoline importer after the United States. Iranian

gasoline imports in 2006 totaled about $5 billion. About 40% of Iran‘s domestic

consumption of gasoline is met by import.

Iran is the 15th largest motor vehicle producer in the world and the largest Auto

maker among the Middle Eastern countries. Motor vehicle production ramped up by

10.3% to 997,240 units in 2007.

Iran is the largest producer of steel in the Middle East.73 In 2006, Iran ranked as the

20th largest producer of crude steel globally, with an output of 9.8 million metric tons.

In October 2009, the UK Financial Restrictions (Iran) Order 2009 came into effect.

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This Order prohibits UK financial and credit institutions from dealing with Bank Mellat

and with IRISL and their subsidiaries.

Iran is a major supplier of crude oil to China, the world‘s second largest consumer of

oil after the US. In the first half of 2010,Iran was China‘s biggest supplier of crude oil,

with shipments of nine million tonnes.

The disclosure requirements under Section 219 of the Threat Reduction Act are not

applicable to non-registered issuers, such as issuers of securities under Securities

Act of 1933 Rule 144a.

India imports about 80% of its crude oil and Iran has been an especially attractive

source because of good prices and its geographic proximity, resulting in affordable

freight costs.

India‘s exports to Iran include rice, machinery & instruments, metals, primary and

semi finished iron & steel, drugs/pharmaceuticals & fine chemicals, processed

minerals, manmade yarn & fabrics, tea, organic/inorganic/agro chemicals, rubber

manufactured products, etc

India and Iran hold regular bilateral talks on economic and trade issues at the India-

Iran Joint Commission Meeting (JCM). The 16th JCM was held in New Delhi on July

8-9, 2010.

The Office of Foreign Assets Control also reserves the right to restrict the

applicability of any license to particular persons, property, transactions, or classes

thereof.

Export policy of Iran ,unless licensed by OFAC (Office of Foreign Assets Control),

goods, technology, or services may not be exported, re-exported, sold or supplied,

directly or indirectly, from the United States or by a U.S. person, wherever located, to

Iran or the Government of Iran.

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The basic customs tariff rate now ranges from 0 to 40% plus additional duty of 2%;

the average rate is about 30%.

The Export Inspection Council is responsible for the enforcement of quality control

and compulsory preshipment inspection of various commodities meant for export

and notified under the Export (Quality Control & Inspection) Act, 1963.

The many economic problems in Iran, the reality is that Iran is a very rich country

with high liquidity and plenty of business opportunities.

In 2011, the government announced that during the second phase of the economic

reform plan, it aims to increase tax revenues, simplify tax calculation method,

introduce double taxation, mechanize tax system, regulate tax exemptions and

prevent tax evasion.

All other income from royalties and licences from foreign companies is subject to a

deemed taxable coefficient on income of 30 per cent.

In addition, 80% of the reported profit of all manufacturing, mining, assembly plant

and related engineering companies are exempt from income taxes.

In India, the tax on incomes, customs duties, central excise and service tax are

levied by the Central Government.

Jay Products are exported to over 40 countries around the globe and are available in

most of the dyes-consuming centers around the world with the help of good number

of trusted and skilful marketing associates.

350

JCIL exports 60 to 70 percent of its products to international markets in more than 40

countries across the globe. The annual sales of the company is close to U.S.$ 70

million (INR 320 crore).

JCIL, in comparison to its worldwide contemporaries, stands tall with a production of

18000 mt. which is estimated to be 5% of the total world‘s production.

In 4 decades, the company has grown into India‘s leading producer of reactive dyes,

accounting for 15% of the Indian market share.

JCIL , the Top-10 reactive dye producers in the world. JCIL is a success story that

boasts of a number of landmark firsts.

K2 products are manufactured at JCIL's plant at Sanand, Gujarat using an array of

advanced equipments and systems.

JCIL is the world's seventeenth largest by purchasing power parity (PPP) and

twenty-fifth by nominal product. The country is a member of Next Eleven.

Oil export revenues enabled Iran to amass well over $100 billion in foreign

exchange reserves as of 2010. In 2010, Iran, which exports around 2.6 million

barrels of crude oil a day, was the second-largest exporter among the Organization

of Petroleum Exporting Countries.

Mineral production contributed 0.6% of the country‘s GDP in 2011, a figure that

increases to 4% when mining-related industries are included. In 2010 Iran completed

its first nuclear power plant at Brusher with Russian assistance.

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Suggestion

For Growing Chemical business, Jay chemical has created new ideas and

innovations have always been the hallmark of progress made by mankind. At every

stage of development, there have been two core factors that drive man to ideas and

innovation. These are increasing returns and reducing risk, in all facets of life.

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The relationship is very good between India and Iran which is helpful to both

countries to increase economic growth and it is used to develop the country. Strong

brand equity of Jay Chemical in global market, is grateful for continuous growth of

the Jay chemicals.

Developing an efficient export marketing network to optimize the production and

exports and Setting up of more quality control laboratories for testing the quality of

Chemical products.

Adoption of international standards for production and processing of Chemical

Product

Increasing production through application of advanced technologies in the

processing of Chemical products.

Non-tariff measures (NTMs) are of particular concern to exporters and importers in

developing countries, as they are a major barrier to international trade and can

prevent market access. Exporting companies seeking access to foreign markets and

companies importing products need to comply with a wide range of requirements

including technical regulations, product standards and customs procedures.

For Increasing Product safety to the customer, Labelling requirement Measures

defining the information directly related to food safety ,which should be provided to

the consumer like Labels must specify the storage conditions such as ―5 degree C

maximum‖, or ―room temperature for dry foods ―which can help to the customer.

In chemical Industry, to ensure the quality standards, we conduct various quality

control tests. These quality tests are in compliance with industry set standards.

Moreover, trained quality auditors carry out these checks to ensure proper

composing, hygiene and concentration.

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BIBLIOGRAPHY

http://en.wikipedia.erg/wiki/Environmental_issues_in_iran#cite_note

http://en.wikipedia.org/wiki/File:Iran_gov_power_structure.svg

http://www.treasury.gov/resourcecenter/sanctions/Programs/Documents/statement_

of_pol_hr_10222012.pdf

http://www.lexology.com/library/detail.aspx?g=20591961-829c-43fd-8e99-

ef70c32ac741

http://dipp.gov.in/English/Archive/statannual/2009-10/chapter1.2.pdf

http://exim.indiamart.com/ssi-policies/licensing-policy.html

http://economictimes.indiatimes.com/news/economy/foreign-trade

http://en.wikipedia.org/wiki/Taxation_in_Iran

http://www.eximbankindia.com/wp18.pdf

http://www.exim-policy.com/

http://www.dgft.org/export_import_exim_policy_india.html

http://www.tax4india.com/tax-structure-in-india.html

http://www.indianembassy.org.cn/TaxationSystemInIndia.aspx

http://www.importers-directory.net/companies/Jay_Chemical_Industries_Ltd.html

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Thank You