In a landmark development, the long-term bilateral contract concerning operations of Chabahar Port was signed between India and Iran on Monday.

India’s IPGL (Indian Ports Global Ltd) will invest $120 million in Chabahar port, while a credit window of $250 million equivalent has been offered for mutually identified projects aimed at improving Chabahar-related infrastructure, the Embassy of India in Iran said on social media platform X.

The 10-year agreement was signed between IPGL and Iran’s Port & Maritime Organisation. Union Shipping Minister Sarbananda Sonowal and his Iranian counterpart, Mehrdad Bazrpash, attended the ceremony.

This deal allows for operation of the Shahid-Behesti terminal in the Chabahar Port Development Project, a statement from the Shipping Ministry said. Previously, operations continued through short-term contracts (of one-year duration).

Earlier in the day, the Minister of External Affairs, S Jaishankar, said a long-term arrangement will “clear the pathway for bigger investments and more linkages coming out of the seaport”.

“Right now, the port has not grown because without a long-term agreement it is very difficult to invest. The clear expectation is that the part of the Chabahar port that we are involved in, will witness more investments, more connectivity linkages coming out of that,” he said during a media interaction in Mumbai.

Enhanced Trade

As part of the agreement, India will procure equipment and machinery for Chabahar Port. The lease agreement marks a substantial strengthening of bilateral ties between the two countries.

India has so far supplied six mobile harbour cranes (two 140 tonnes and four 100 tonnes capacity) and other equipment worth $25 million.

“India’s continued investment in Chabahar Port underscores its commitment to regional economic development,” Minister for Ports, Shipping and Waterways, Sarbananda Sonowal said.

Chabahar will also play a crucial role in the eastern route of the International North-South Transport Corridor (INSTC).

Situated in Iran’s Sistan-Baluchistan province on the south-western coast, Chabahar Port serves as a crucial point on the Arabian Sea, with easy access from India’s west coast.

Bolster Regional Connectivity

According to Sonowal, the strategic location of the port provides an alternative transit route from the Strait of Hormuz (for cargo traffic) to the Central Asian countries and Afghanistan. This enhances India’s strategic position.

“Moreover, Chabahar’s integration with a special free zone, coupled with India’s incentives, such as concessions on vessel-related charges and cargo charges, will bolster trade flows through the port,” he added.

The India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, facilitated the first consignment of exports from Afghanistan (to India) in 2019.

“Beyond commercial interests, India stands ready to utilise the port for humanitarian aid shipments,” the Minister said.