India has allocated ₹100 crore ($12.16 million) for Iran’s Chabahar port in the 2023-24 budget presented on Wednesday, signaling the importance of the facility in regional connectivity efforts, Hindustan Times reported.
The outlay for Chabahar port, where a terminal is being operated by state-run India Ports Global Limited, has been maintained at ₹100 crores, the same level as the current and previous fiscal years, the report said, adding that this reflects the focus on connectivity projects, including the International North-South Transport Corridor.
India has committed grant aid of $85 million and a credit facility of $150 million for developing Shahid Beheshti terminal at Chabahar Port, for which the US granted a special waiver from sanctions imposed on Iran.
India and Iran are close to striking a long-term agreement for operations at the strategic Chabahar port, with the matter held up only by differences on a clause related to arbitration, Hindustan Times reported in September citing people familiar with the matter.
The long-term agreement, valid for a period of 10 years and to be extended automatically, is meant to replace an initial pact which covered India’s operations at Shahid Beheshti terminal in Chabahar port and has been renewed on an annual basis.
Chinese Competition
The move comes at a time when China has been showing growing interest in investments in ports and other coastal infrastructure in Iran, and the Iranian side has been pressing New Delhi to step up development of Shahid Beheshti terminal, which is operated by state-run India Ports Global Limited.
The long-term agreement figured in discussions during shipping and waterways minister Sarbananda Sonowal’s visit to Iran last year.
The issue holding up the long-term agreement is not major and relates only to jurisdiction for arbitration of differences on any matters, the people said. Under Iran’s Constitution, such arbitration cannot be referred to foreign courts, and a proposal under the agreement would require a constitutional amendment, which would be difficult, they pointed out.
Both sides, however, are hopeful of the speedy resolution of this matter as legal and technical experts are working on it, the people said.
At the same time, the Iranian side has been pushing India to speed up development of its operations at Chabahar port, including the completion of the 700-km Chabahar-Zahedan railway line.
Less than 200km of this crucial rail link remain to be completed and in the face of hesitation to deal with a construction company with links to the US-sanctioned Islamic Revolutionary Guard Corps, Tehran has suggested a contract can be finalized by the Indian side with some other body, the people said.
Since IPGL began operations at Shahid Beheshti terminal in late 2018, it has handled more than 4.8 million tons of bulk cargo, including trans-shipments from Australia, Bangladesh, Brazil, Germany, Russia and the UAE, and experts said this figure could be significantly enhanced if the port is linked to the rail network.
India took up the development of Shahid Beheshti terminal under a tripartite agreement on Chabahar signed with Iran and Afghanistan in May 2016. Afghanistan is effectively no longer part of the arrangements since the takeover of the country by the Taliban last year, though the port has benefited from a US waiver on sanctions imposed on Iran.
India pledged it would invest $85 million in the terminal and has so far supplied cranes and other equipment worth some $24 million. The people pointed out there is a need to expedite the supply of more equipment such as heavy gantry cranes for transferring cargo from ships to land.
During Sonowal’s visit, the two countries decided to form a joint technical committee for the smooth functioning of the port. India remains “fully committed to develop the Chabahar port to realize the vision” outlined during Prime Minister Narendra Modi’s visit to Iran in 2016, Sonowal said at the time.
India is set to organize a meeting of a joint working group on Chabahar with Central Asian states in October to promote the use of the port, the people said. Steps are also being taken to integrate the port with the International North-South Transport Corridor.
According to an article published by The Diplomat, with India and China competing to invest in Chabahar, Iran is trying to play the two rivals off each other to boost its own international standing while not becoming dominated by either one of these powers. Chabahar port is thus a key case study in both international collaboration and competition: It could offer a trade revolution in the area, but it could also exacerbate regional rivalries.
Chabahar-China Direct Shipping Launched
A direct shipping route from China to Chabahar Port located in Iran’s southern Sistan-Baluchestan Province has been established, a local official said recently.
“The new route reduces the cargo shipping time from 45 days to two weeks,” Qasem Askarinasab, director general of Sistan-Baluchestan Ports and Maritime Organization was quoted by the news portal of the Ministry of Roads and Urban Development as saying.
He noted that the reduced shipping time comes with significant decline in shipping costs.
“Previously, the containers sent from China went to Shahid Rajaee Port before they were transported to Chabahar by smaller vessels. This process took about 45 days.”
Shahid Rajaee, located in the southern Hormozgan Province, is Iran’s biggest commercial port.
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