India to ink 10-year Chabahar Port management pact; shipping minister Sonowal on his way to Iran

Union Minister of Ports, Shipping & Waterways Sarbananda Sonowal boarded a special IAF flight for Iran this morning

India will sign an agreement on May 13 to manage Iran's Chabahar Port for the next 10 years, a shipping ministry spokesperson told Moneycontrol.

"Union minister of ports, shipping and waterways Sarbananda Sonowal boarded a special IAF flight for Iran this morning," the spokesperson said, adding that the minister will witness the signing of the contract.

India has been developing a part of the port in Chabahar, located on Iran's southeastern coast along the Gulf of Oman, as a way to transport goods to Iran, Afghanistan and central Asian countries. The new deal with Iran will open up a trade route between South Asia and Central Asia via Iran, bypassing Karachi and Gwadar port in Pakistan, the spokesperson said.

This is the first time that India will take over the management of a port overseas. Chabahar is seen as India's key connectivity link to Afghanistan, Central Asia and the larger Eurasian space, will help counterbalance Pakistan's Gwadar port as well as China's Belt and Road Initiative.

There are plans to link Chabahar with the International North South Transport Corridor (INSTC) that connects India with Russia via Iran.

Neutralising China

"This is a strategic masterstroke as this will open up a new trade route between South Asia and Central Asia via Iran, bypassing Karachi as well as Gwadar port in Pakistan," the ministry spokesperson said.

The contract to manage Chabahar port is a major achievement of India’ s growing maritime reach in the region after the launch of Sittwe port in Myanmar, both aimed at neutralising the growing presence of China, the spokesperson added. Sonowal inaugurated Sittwe port in Myanmar exactly a year ago.

A pact on Chahbahar had been signed in 2016 during Prime Minister Narendra Modi's visit to Iran. In 2018, when Hassan Rouhani, the then Iranian president, visited India, the issue of expanding India's role at the port figured prominently. It also came up when foreign minister S Jaishankar visited Tehran in January 2024.

The new long-term agreement is intended to replace the original contract. It will be valid for 10 years and will be renewed automatically.

The original pact covers only the operations at Shahid Beheshti terminal of Chabahar Port and is renewed every year. India signed a tripartite agreement with Iran and Afghanistan to develop the terminal in May 2016.

Resource-rich but landlocked Central Asian states such as Kazakhstan and Uzbekistan have been keen to utilise Chabahar to access the Indian Ocean Region and the Indian market. The port will also be handy for Indian traders and investors interested in Central Asia.

Last year, Sonowal said India is actively exploring additional investments in Shahid Beheshti Terminal as part of the phase 2 expansion. The minister expressed optimism that existing operations at the port would become profitable by the end of the fiscal year.

“Numbers are significantly up over comparative period last year. Operations are commercially viable and if there is no black swan event, operations there should be profitable by the end of this year,” Sonowal said last year.

Shahid Beheshti Terminal handled 25,788 TEUs (twenty-foot equivalent units) of container cargo and 1.5 million tonnes of bulk cargo during April-September 2023. This significantly exceeded the 2023 target of 13,282 TEUs, especially considering that only 3,096 TEUs were handled in 2022.

The port of Chabahar is located in southeastern Iranian province of Sistan-Baluchestan in the Gulf of Oman.  It is the only Iranian port with direct access to the ocean. It has two port complexes - Shahid Kalantari and Shahid Beheshti.

In 2016, India committed $85 million for the development of Shahid Beheshti port, along with a $150 million line of credit. As of 2023, India has supplied six gantry cranes to the tune of $25 million for the development of the port.