India and Iran are expected to sign a long-term deal for the development of Iran’s Chabahar Port by September before the Global Maritime India Summit 2023 scheduled in New Delhi in October, two people familiar with the matter said.
After years of negotiations, Delhi and Tehran are expected to sign a multi-year deal, allowing India to develop the Shahid Beheshti Terminal in the Chabahar port. In 2016, India Ports Global Ltd (IPGL) and Arya Banader of Iran had signed a contract to develop the port.
Spokespeople for India’s ministries of external affairs, ports, shipping, and waterways, and the Iranian embassy in New Delhi did not respond to a query.
However, an official of the ports ministry said the contours of the long-term deal will be finalized next month, and an agreement will likely be signed in September.
Currently, India and Iran sign one-year contract extensions for developing and running the terminal at Chabahar Port. However, India has been urging Tehran to commit to a longer-term pact, providing certainty for investment and development plans for the port designed by India. A long-term contract for 10 years may also provide for automatic renewal.
Negotiations on the long-term contract were earlier held up due to disagreements over the arbitration clause in the deal. Iran was earlier uncomfortable with clauses on international arbitration, given constitutional restrictions on taking disputes to foreign courts. However, Mint has learnt that both sides are set to reach a compromise solution allowing cases to be taken to international arbitration courts in neutral locations such as Singapore and Dubai. India had earlier suggested arbitration matters be taken up either in Dubai or Mumbai.
Differences of opinion over other clauses, such as a guarantee of minimum traffic sought by Iran, will also be resolved, paving the way for fast-tracking infrastructure development at the port to ensure bringing shipping traffic to this strategic location.
In 2016, India committed $85 million for the development of the port, along with a $150 million line of credit. As of 2023, India has supplied six gantry cranes to the tune of $25 million for the development of the port. However, Iran has voiced dissatisfaction with India’s efforts in the past. The country’s former ambassador to India, Ali Chegeni, termed the development work on Chabahar “very slow” and chided the Indian side for dragging its feet.
Chabahar, located in southeastern Iran, was envisioned as a gateway for India to access Central Asian markets. The project’s roots date back to 2003, when both nations agreed to its development during then-President Mohammad Khatami’s visit to India. However, the initiative faced obstacles due to Western sanctions on Iran’s nuclear programme. In 2013, India pledged $100 million to develop the port, but matters progressed after the 2015 nuclear deal was struck between Iran and the Permanent Members of the UN Security Council, Germany and the European Union.
In 2016, during Prime Minister Narendra Modi’s visit to Tehran, India, Iran, and Afghanistan signed an agreement to develop Chabahar as a trade and transport corridor to bind their economies together. The resumption of US sanctions in 2019 and the fall of Afghanistan in 2021 have complicated matters and slowed work on the port. But last year, a team from India’s ports ministry, including minister Sarbananda Sonowal visited Iran, and negotiations for the development of Chabahar have gained pace again.
State-run IPGL operates the Shahid Beheshti Terminal at Chabahar port, and since IPGL began operations at the terminal in 2018 (till May 2023), it has handled more than 6.56 million tonnes of bulk cargo, including trans-shipments from Australia, Bangladesh, Brazil, Germany, Russia, and the United Arab Emirates, according to government data. For 2023, India is targeting a cargo handling of 13,282 TEUs at the Shahid Beheshti terminal. As against this, cargo handling in 2022 was 3,096 TEUs. This level of cargo traffic has made operations viable at the port.
Experts said the quantity of cargo handling may increase significantly if the port is linked to the rail network. India is also involved in constructing the 700-km-long Chabahar-Zahedan railway line. An agreement was signed between Indian Railways’ IRCON unit and Iranian Railways’ Construction and Development of Transportation Infrastructures Co. in 2016 to construct the Chabahar-Zahedan Railway project. In the Union budget for FY22, the finance ministry allocated ₹100 crore to develop the Chabahar Port.