India signs Chabahar port deal to expand trade with Central Asia

New Delhi/Tehran: India on Monday signed a 10-year contract to operate the strategic Iranian port of Chabahar that will help it expand trade with Central Asia. The Chabahar port on the Gulf of Oman - which New Delhi had proposed to develop way back in 2003 - will provide Indian goods a gateway to reach landlocked Afghanistan and Central Asia using a road and rail project called International North-South Transport Corridor, bypassing Pakistan.

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US sanctions on Iran over its suspected nuclear programme had slowed the development of the port. The long-term agreement was signed by Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran, an official statement said. IPGL will invest about USD 120 million while another USD 250 million will be raised as debt.

The pact was signed in a ceremony attended by India's Ports, Shipping and Waterways Minister Sarbananda Sonowal and Iranian Transport and Urban Development Minister Mehrdad Bazrpash in Tehran.

It replaces an initial 2016 pact, which covered India's operations at Shahid Beheshti terminal in Chabahar port and had been renewed on an annual basis. Chabahar port was last year used by India to send 20,000 tonnes of wheat aid to Afghanistan. In 2021, the same was used to supply environmentally-friendly pesticides to Iran.

This is the first time India will take over the management of an overseas port that will also have a multiplier effect on trade among India, Iran and Afghanistan as efforts continue to directly tap the potential in Central Asia, bypassing neighbouring Pakistan.

According to an official statement, the contract was signed by India Ports Global Ltd (IPGL) and Iran's Port & Maritime Organisation (PMO), in the presence of Ports, Shipping and Waterways Minister Sarbananda Sonowal.

"The long-term bilateral contract on Chabahar Port Operation was signed between Indian Ports Global Limited (IPGL) of India and the Port & Maritime Organisation (PMO) of Iran, enabling operation of Shahid-Beheshti in Chabahar Port Development Project for a period of 10 years," the statement said.

"This agreement aims to enhance regional connectivity and facilitate trade, particularly between India, Iran and Afghanistan," the statement said.

The Indian Embassy in Iran in a post on X said: “@sarbanandsonwal handed over the letter from EAM @DrSJaishankar to Iran’s FM @Amirabdolahian offering a INR credit window equivalent of USD 250 million for Chabahar-related development. Reiterated India’s commitment to cooperate with Iran in developing the Chabahar Port."

The Ministry of External Affairs (MEA) had allocated Rs 100 crore for Chabahar Port for 2024-25, underlining India's focus on connectivity projects with Iran. The India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, facilitated the first consignment of exports from Afghanistan to India in 2019.

The statement said the operations continued through short-term contracts while negotiations on the long-term agreement picked pace with the visit of Sonowal to Chabahar in August 2022.

"This 10 years long term lease agreement further strengthens the bilateral ties between the two countries while bolstering confidence and boosting trust of trading communities from the region," the statement said.

As part of the agreement, the statement said India will procure MHCs, RMQCs, RTGCs, Reach Stackers, Forklifts, Pneumatic Unloaders etc at Chabahar Port. "The agreement paves the way for enhanced trade and investment opportunities which will potentially boost India’s economic development," it added.

Speaking at the occasion, Sonowal said, "With the signature of this contract, we have laid the foundations of India's long-term involvement at Chabahar." Sonowal added that the signing of this contract will have a multiplier effect on the viability and visibility of Chabahar port.

According to him, Chabahar is not only the closest Iranian port to India but it is also an excellent port from nautical point of view. Sonowal also held a meeting with Iranian Minister of Roads & Urban Development Mehrdad Bazrpash.

Located in Sistan-Balochistan province on the energy-rich Iran's southern coast, the Chabahar port is being developed by India and Iran to boost connectivity and trade ties.

India has been pushing for the Chabahar port project to boost regional trade, especially for its connectivity to Afghanistan. India and Iran have projected the port as a key hub for the INSTC project. The INSTC is a 7,200-km-long multi-mode transport project for moving freight among India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia and Europe.

India has been developing a part of Chabahar Port and discussions on the development of the port date back to 2003 during Iranian President Muhammad Khatami's visit to India.

In 2013, India committed to investing USD 100 million towards the development of Chabahar Port.

Earlier, a memorandum of understanding (MoU) for development of Chabahar Port by India was signed in May 2015. Thereafter, the contract was executed on May 23, 2016, at Tehran (Iran) during the visit of Prime Minister Narendra Modi to Iran.

Chabahar is an oceanic port. By leveraging Chabahar Port, India aims to bypass Pakistan and establish direct access to Afghanistan and beyond, into Central Asia. Kandla port in Gujarat is the closest to the Chabahar port at 550 Nautical Miles while the distance between Chabahar and Mumbai is 786 Nautical Miles.

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