India to develop Iran’s Chabahar Port in Iran

Last week, the cabinet led by Prime Minister Narendra Modi approved the framework for India’s participation in developing Iran’s Chabahar port with an investment of $85.21 million, clearing the decks for two of the country’s biggest state-owned ports to venture overseas for the first time.

According to plans, Jawaharlal Nehru Port Trust and Kandla Port Trust will form a joint venture (JV) or an appropriate special purpose vehicle to lease two fully constructed berths in the first phase of the Chabahar port project for 10 years, which could be renewed by “mutual agreement”. The JV will invest the money for equipping the two berths within 12 months, one as a container terminal and the second as a multi-purpose cargo terminal.

The Indian side will transfer ownership of the equipment to be provided through the investment to Iran’s Ports and Maritime Organisation (P&MO) without any payment at the end of the 10th year. The Indian and Iranian sides could enter into subsequent negotiations for participation in the construction, equipping and operating of terminals in phase-II development of Chabahar port on a build, operate and transfer (BOT) basis, subject to the Indian side’s satisfactory performance in phase I. The Iranian side will make efforts to provide free trade zone conditions and facilities at the port. India has decided to invest in developing Chabahar port, which is considered strategically and economically important for the country’s exports to landlocked Afghanistan.

"We are setting up a port in Chabahar, Iran. We will complete the port in about one-and-a-half years," Road Transport and Shipping Minister Nitin Gadkari said here. The port will be used to ship crude oil and urea, saving the country in transportation cost. "If we produce urea there then we can get urea at 50 per cent lesser cost and would not need to provide subsidy on it," he said. The port of Chabahar in southeast Iran is central to India's efforts to open up a route to landlocked Afghanistan circumventing Pakistan.

Chabahar is also closer to India than the existing Iranian port at Bandar Abbas, which is about 380 nautical miles away from Chabahar. India’s presence at the Chabahar port—which lies outside the Persian Gulf and is easily accessed from India’s western coast—would give it a sea-land access route into Afghanistan through Iran’s eastern borders.

Though the opportunity to develop Chabahar port has come through a government-to-government agreement between the two nations, it is a foundation that has the potential to propel India’s state-owned ports to look for a larger footprint globally.