Sonowal's Iran visit could see extension of lease for Chabahar Port

Recent geopolitical developments have speeded up the Centre’s pursuit to leverage Iran’s Chabahar Port for trade, and with Union Shipping and Ports Minister Sarbananda Sonowal’s visit to Iran, India may extend the short-term lease agreement for the port by another 18 months, Business Standard has learnt.

The Ports and Maritime Organisation (PMO) of Iran has proposed the extension by one and a half years, and the proposal is being examined by the Centre and is likely to be taken up during Sonowal’s Iran visit, shipping ministry officials in the know of the matter told Business Standard.

“Our vision is to make Chabahar Port a transit hub and link it to the INSTC (International North South Transport Corridor) to reach out to Central Asian countries,” Sonowal told the media in the run-up to his visit.

The short-term lease agreement for using the Shaheed Behesti terminal typically sees a renewal tenure of one year on a rolling basis.

An official said the attempt was to increase the tenure of the agreement as an in-principle commitment to continue cooperation in developing the port.

However, sources indicated India had raised the issue of the lack of a long-term investment commitment becoming a hurdle in the way of trade, and is looking to make progress on a long-run agreement to instil confidence in all stakeholder countries.

Long-term supply chains can be established only when industries are assured of the longevity of a project.

“The development of the Chabahar Port Project is a prestigious project of national importance,” the ministry said on Thursday. This is after a period of dormancy in the development of the port, which is operated by India Ports Global.

The ministry has been pushing for higher trade engagement through the port, and is seeking a trans-Caspian multi-modal transit corridor between Central Asia and South Asian nations.

The route was identified as an alternative to the European one via the Suez Canal, which takes significantly longer.

The INSTC is a 7,200-km corridor, conceptualised to optimise trade between India, Russia, and Eurasian and Central Asian economies, and it reportedly has an eight-fold increase potential.

Sonowal is likely to sign a memorandum of understanding concerning mutual recognition of seafarers’ certificates of competency in unlimited voyages between India and Iran.

Ministry officials said the signing could also result in training exercises of Iranian seafarers in India, as a show of mutual cooperation.

Five years ago, Chabahar Port was a symbol of the promise of flourishing multilateral trade between Central Asian countries, India, Russia, and Europe through the INSTC.

Today, Iranian sanctions, lack of shipping lines, and a strong supply chain have made traders wary of leveraging the route, and they are still using alternative, much longer routes to conduct trade with Russia and Europe.

Last year, the Centre told Parliament international sanctions on Iran had no impact on Chabahar Port. However, shipping sector insiders and officials say the hesitation it causes in traders to engage in transactions with Iran and the reluctance of banks to get involved in such transactions have been an impediment to the port’s development.

The Centre has been trying to address the issue of supply chains. Recently, India and Uzbekistan inked an agreement to conduct a pilot container cargo shipment with the larger aim to explore regular trade opportunities between Tashkent and New Delhi.

Similar negotiations are happening with other nations, and, barring Turkmenistan, deliberations with all other countries are progressing well, an official said.

The key focus of these is to ensure there is a regular supply of both inbound and outbound cargo, because the lack of either would cause delays and cost escalation.

Russia’s invasion of Ukraine has opened a new window of opportunity for India’s trade through the INSTC. According to reports, India’s imports of Russian oil increased after it recently offered the commodity at heavy discounts following international sanctions led by the US. 

Sonowal’s visit comes after delegations from countries of the Commonwealth of Independent States (CIS) recently joined India’s Chabahar Day celebrations, where Indian industry showed willingness to increase trade in the region.