Iran Nuclear Deal: What It Means for India
Iran reached a historic nuclear deal that is likely to result in easing of sanctions in exchange for curbs on Tehran's nuclear programme. Global oil prices tumbled more than a dollar after the news broke.
The Iran nuclear deal has significant implications for India, analysts say.
1) India imports nearly 80 per cent of its energy requirements, so falling oil prices will benefit oil marketing companies such as HPCL, Indian Oil and BPCL. These stocks traded 2-3 per cent higher.
2) Falling oil prices are negative for upstream (exploration) companies, which weighed on shares in Cairn India and ONGC.
3) The Iran deal is likely to be "neutral" for Reliance Industries, which operates the world's largest refinery in Jamnagar.
4) Aban Offshore - India's largest offshore drilling services provider - gets 35 per cent of its revenues from Iran. Shares in the company jumped 15 per cent higher today. Easing of sanctions in Iran will help Aban's working capital situation, analysts say.
5) The oil ministry fears that Iran could award the right to develop its giant Farzad B gas field to Europeans who can deploy the latest technology and commit billions of dollars to modernising the country's oil-and-gas infrastructure. ONGC is currently in contention to get development rights of Farzad B field.
6) Indian refiners are unlikely to get cheaper oil from Iran as Tehran will be able to do business with any country when sanctions are lifted. Indian refiners will also have to settle past dues of $6.5 billion (over Rs 40,000 crore) in hard currency that they have not been able to pay due to the sanctions.
7) The lifting of sanctions in Iran is likely to benefit domesticpharmaceutical, IT and commodity firms, according to trade ministry officials. These companies will now be able to compete for contracts in Iran.
8) Iran is a big buyer of basmati rice, soyameal, sugar, barley and meat. Under sanctions, Iran paid a premium of up to 20 per cent over global prices to buy from India, analysts say. Food companies such as McLeod Russel (tea) and Kohinoor Foods (rice) that have business in Iran gained.
9) Thousands of exporters in India have enjoyed a three-year run because India did not back sanctions against Tehran. India's exports to Iran doubled to $5 billion in 2013-14, helping to halve its bilateral trade deficit. Now, they will face more competition at a time when exports have dropped 20 per cent because of global slowdown in trade, analysts say.
10) Indian companies will have to compete for consumer products ranging from clothing to cars, and big-ticket contracts like the Tehran metro with global firms.