Challenges linked to US sanctions forced India to go slow on Chabahar rail line

Iran’s move to start construction by itself on a key rail line linking India-funded Chabahar port with Zahedan, along the border with Afghanistan, was aimed at ‘shaking up” India which has been “dragging its feet” in the face of challenges related to sanctions on delivering on its commitments to the railway project.

More than four years after state-run Ircon International Ltd signed a memorandum of understanding with the Iranian Railway Ministry in May 2016 to build the 628 km Chabahar-Zahedan line, and with no tangible progress, an Iranian company carried out the sub-structure work on the project.

“Iran wanted India to pay money to that company. But, India said it can’t pay money to that company because it is a sanctioned entity,” a person briefed on the developments said, asking not to be named because of the sensitivity surrounding the issue.

Hence, it was decided that India will only fund the super structure work, which also faced issues.

India had to supply steel rails for tracks as part of the super structure work. “Steel strictly is a sanctioned item,” the person mentioned above said. Besides, Ircon was also responsible for the telecommunications and signalling systems for the rail line.

“India has to source all these gears from a third party and the third parties approached by India were not willing to supply for Iran,” he said.

“So, there are challenges related to sanctions. Because of these challenges or under the guise of challenges, India is dragging its feet on the railway project. Because, India don’t want to antagonise the United States,” the person said, defending India’s compulsion to “go slow” on the railway project, despite the sanctions waiver given by the US for the port and the rail line.

“In the present scenario, I’m very sure India knows which side of the bread is butter. To counter China, we have to have the United States on our side,” he said.

India Ports Global shareholding

In fact, to avoid complications, the government had re-worked the shareholding of India Ports Global Ltd (IPGL), the entity originally set up with 60 per cent equity from state-run Jawaharlal Nehru Port Trust (JNPT) and 40 per cent from Deendayal Port Trust (formerly Kandla Port Trust) to develop and run Chabahar port.

“In order to insulate JNPT and DPT from possible impact of United States sanctions after the US withdrew from the Joint Comprehensive Plan of Action, 100 per cent equity shares of JNPT and DPT in IPGL have been purchased by Sagarmala Development Company Ltd (SDCL), a company under the administrative control of the Shipping Ministry, according to a document seen by BusinessLine.

Iran has started the track-laying process a few days ago just to “give a shake-up to India,” he said adding that “earlier the rail line is laid, the better it is for the port connectivity”.

Currently, Chabahar port is totally dependent on road for evacuation of cargo.

The person also said that the developments on the railway project “will not have any impact on the first phase of Chabahar port project or on Phase 2 of the port because India was never there in the second phase”.