Cut in Chabahar funding, US sanctions and Pakistan airspace restriction hit Indo-Afghan trade: Report

A general view of an oil dock. Representative image

The government's decision to slash funds for the development of Chabahar port in Union Budget 2019-20, coupled with the sanctions imposed by the United States on Iran, will affect the trade between India and Afghanistan, The Hindu has reported.

This is in addition to the effect that Pakistan's decision to close its airspace for flights to and from India is having on trade between the two countries, according to the report.

The report states that while the government has been allocating Rs 150 crore for the port for the past couple of years, this time around, the funds allocated have been reduced to Rs 45 crore.

Sources in the Ministry of External Affairs (MEA) told the newspaper that the readjustment in funds is "based on realistic assessment of likely expenditure to be incurred this financial year", indicating that India does not anticipate developing Chabahar port at the same pace as earlier.

"During the last months (February-May), Chabahar had flourished for transportation of goods and commodities to Afghanistan and central Asia with the volume of loading and unloading twice as much as before," Iran’s Ambassador to Delhi Ali Chegeni told the newspaper. He, however, added that hostile statements by US officials on Iran's sanctions "naturally and indirectly has negative impacts and led to worry among companies about working with Iranian ports, including Chabahar".

While the US has stated that Trump's decision not to grant sanctions exemptions to any oil customers of Iran would not have any effect on the port, the report states that the sanctions have slowed business down.

This is because the banks in Afghanistan are not willing to open credit lines for shipment, while cargo handlers and shippers are not servicing the Chabahar port, according to the report.

Chabahar is the only seaport Iran has in its energy-rich Sistan-Balochistan province by the Gulf of Oman and consists of two ports with five berths each. The port is a counter to Pakistan's Gwadar port, which is being developed with Chinese investment.

The port, inaugurated in December 2017, has opened a new strategic route connecting Iran with India and Afghanistan, bypassing Pakistan.

In December 2017, India took over the operations of port and commissioned the second port this January, marking the country's maritime entry into a foreign land.

The report states that the trade with Afghanistan through the air route has also been stalled due to Pakistan's airspace restrictions, with officials stating that a flight from Delhi to Kabul, the Afghanistan capital, taking five hours where it would have taken one-and-a-half hours normally.