Domestic Economy

India Will Invest $195m to Develop Chabahar Port

India Will Invest $195m  to Develop Chabahar Port
India Will Invest $195m  to Develop Chabahar Port

India has signed a memorandum of understanding (MoU) with Iran to invest in development of the Port of Chabahar in southeastern province of Sistan and Baluchestan.

The agreement was reached following comprehensive talks between visiting Indian Minister of Road Transport, Highways and Shipping Nitin Gadkari and Iran's Minister of Roads and Urban Development Abbas Ahmad Akhundi, IRNA reported.

“With the signing of this MOU, Indian and Iranian commercial entities would now be in a position to commence negotiations towards finalization of a commercial contract under which Indian firms will lease two existing berths at the port and operationalize them as container and multi-purpose cargo terminals,” an Indian Ministry of External Affairs said in a statement.

According to Akhundi, the Indians have agreed to invest $85 million for developing the first phase of Chabahar port's construction and committed another $110 million for development of the remaining phases.

Chabahar Port lies off the border of the Indian Ocean and the Sea of Oman and is the only Iranian port with direct access to the ocean. The port currently has the capacity to handle more than 2.5 million metric tons of cargo per year and can accommodate ships with capacity of more than 60,000 tons.

The first phase of Chabahar port's construction has so far progressed more than 50 percent, said Akhundi, adding that the development plans by India would add 6 million tons to the port's capacity.

"We intend to increase Chabahar port's capacity to handle 80 million tons per year and accommodate ocean-going-ships with capacity of 100,000-300,000 tons," Akhundi added.

> Strategic Significance

Located 72 kilometers west of Pakistan’s Gwadar Port, Chabahar holds immense strategic and economic significance for India. Once completed, the port would enable India to send its goods from Chabahar to Central Asia and Afghanistan in particular, without passing through its rival Pakistan or the disputed territory of Kashmir.

Iran also plans to link the port to the national railway by establishing a 600 kilometer rail line from Chabahar to Zahedan. According to Akhundi, a 300-kilometer stretch of the rail line is currently under construction. He invited Indian firms to also participate in development of the railway project.

Once completed, the rail line would link Chabahar Port to the North-South Transport Corridor, which would in turn facilitate trade between India and the Commonwealth of Independent States north of Iran.

> US Voices Concern

India and Iran agreed in 2003 to develop the port, but the venture made little progress because of western sanctions over Tehran's nuclear energy program.

Encouraged by the framework agreement reached on April 2 between Iran and the P5+1 (the five permanent members of UN Security Council, plus Germany), India has signed the deal with Iran, despite US pressure not to rush into any such trade agreements before world powers clinch a final nuclear accord with Tehran.

Reuters in New Delhi wrote on Thursday: "The United States has expressed concern that India is moving too fast and could undermine a sanctions regime imposed on Iran."

> Trilateral Transit Agreement

There has also been speculation that India is competing with another geopolitical rival, China, for influence over Central Asia. China has recently signed energy and infrastructure agreements worth $46 billion with Pakistan and has funded Pakistan's Gwadar Port.

Iran has also proposed a trilateral transit agreement with India and Afghanistan to facilitate transit of goods via Chabahar Port.

"The draft of Chabahar trilateral transit agreement involving India, Iran and Afghanistan has been submitted to India and is expected to be finalized soon," Akhundi said in the meeting with the Indian minister.