After long wait, India inks Chabahar port's 10-year deal with Iran

India and Iran on Monday signed a 10-year long-term bilateral contract for the operation of Chabahar Port, a vital cog in India’s trade plans with central Asia and parts of Europe, the union ministry of ports, shipping, and waterways announced.

Under the agreement – signed between India Port Global Limited (IPGL) and the Ports and Maritime Organization (PMO) of Iran – India will develop the strategic port for 10 years.

“The Chabahar Port, located on Iran's southwestern coast, has easy access to India's west coast. It also forms a crucial link in the International North-South Transport Corridor (INSTC). The long-term contract will give a significant boost to economic activities and establish our growing role in developing global trade & commerce,” Union Shipping Minister Sarbananda Sonowal wrote on social media.

 

While a formal 10-year agreement had been signed in 2016, sanctions against Iran had hindered developments on that front, and India had been operating the port through short-term agreements, which were periodically renewed.

The short-term agreement and the geopolitical nature of the country have kept investors and shippers reticent from investing there, citing the lack of the government’s own long-term agreement so far.

“So far, there were concerns that when the government itself doesn't have a long-term agreement with Iran for the port, how can the industry be expected to move its long-term supply chain plans through it. This should get streamlined now,” a government official said.

India’s plans with the port go beyond commercial interests, according to the Centre.

“India's sustained engagement in Chabahar underscores its role as an anchor for Indian trade in the region while enhancing its role in the Global Supply Chain. India will use the port for humanitarian aid shipments, reaffirming its commitment to support regional development beyond commercial interests, showcasing its commitment to fostering goodwill and stability in the region,” Sonowal said in a statement issued by his office.

The 10-member delegation consisting of officials from the Ministry of Ports, Shipping and Waterways, and Ministry of External Affairs, headed by Sonowal, reached Tehran on Monday to execute the agreement. The Centre had sought an exemption from the model code of conduct for the ongoing Lok Sabha elections to make the visit to Iran, which was accorded by the Election Commission late last week, officials aware of the developments said.

“The port hasn't been able to grow due to the lack of a long-term agreement and the part of the port with India will now see bigger investments and connectivity linkages," External Affairs Minister S Jaishankar said at an NSE event on Monday in Mumbai.

"We've been running it on an ad-hoc arrangement. This is not due to any problems on the Indian side. There were a lot of problems with regards to who the combination of partners would be. We believe a long-term arrangement would clear the pathway to bigger investments to be made in the port," Jaishankar said.

"Chabahar will connect us through the International North-South Transport Corridor to Russia and Central Asia," he stressed.

Chabahar is envisaged as a crucial link in the eastern route of the International North-South Transport Corridor (INSTC), facilitating the movement of goods between India and Central Asian countries. This collaboration between India and Iran on developing infrastructure and logistics along the 7,200 km INSTC aims to reduce transportation costs and time, thereby promoting trade between these regions.

Experts say that the port will be a gateway to new opportunities.

“The Chabahar Port provides strategic advantages to the Indian oil and gas sector through diversification of import routes, access to new markets in Central Asia, infrastructure development opportunities, enhanced energy security via diversified sources, and increased geopolitical influence in the region. This strategic positioning enables India to mitigate risks associated with traditional import routes, expand its energy footprint, bolster infrastructure capabilities, ensure a stable energy supply, and assert its presence in regional geopolitics," said Raju Kumar, Tax Partner, EY India.

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