PM Modi's visit to Iran must see Chabahar port project take off

After making successful trips to Sunni kingdoms of Saudi Arabia and UAE, Prime Minister Narendra Modi will travel to Iran, their traditional Shia rival in the region and the new destination for all eager investors after 36 years of economic sanctions were lifted by the US and European countries.

The success of the visit would be measured by Modi’s ability to get the much delayed and much discussed Chabahar Port Project agreement finalized and signed during his official visit. Modi’s grand vision of India as a regional power requires him to once again wear the hat of a statesman and launch Chabahar project without delay.

Chabahar project is not like any other infrastructure proposal between two countries. It is a project that was conceived 13 years ago and today holds the key to changing the dynamics of India’s relations with Iran, India’s engagement with Afghanistan and Central Asia by bypassing Pakistan.

Chabahar Free Trade Zone, located on the coast of Gulf of Oman is close to India’s western ports with Kandla 550 nautical miles away and Mumbai, 790 nautical miles. It is Iran’s closest point to the Indian Ocean and the Iranian regime is seriously working towards getting major global investments and to get the Chabahar FTZ operational.

Iran has had historic ties with India whose leadership and people have immense respect and admiration for the country. This writer has personally witnessed Iranians admiration for India when my father was posted as Iran correspondent of All India Radio during the Islamic Revolution. Contrary to perception of some in India Iran is a Shia-majority state which sees Sunni Saudi Arabia as a rival and has mostly sided with India over Pakistan.

Narendra Modi. File photo. Getty images

Narendra Modi. File photo. Getty images

Therefore, Iran’s desire to develop Chabahar with Indian partnership assumes greater urgency and Modi needs to get this project off the ground.

In the run-up to Modi’s Iran visit the Pakistani media has reported concern expressed by their experts and security analysts about the reason behind India’s eagerness to build Chabahar. On May 16 The News International reported that naval experts believe that India was unnerved by the China-built Gwadar port project and they “smell a rat” in Modi’s keenness to operationalize it.

At a time when Iran was treated as a pariah State by US and other western countries India showed keenness to partner in the development of the port project. Decided in 2003 it got delayed due to western sanctions on Iran. But, in the last two years when negotiations between Iran and western countries plus China and Russia progressed on putting a stop on Tehran’s nuclear ambitions, the government of the Islamic Republic started pressuring India to stitch up the loose ends. But, the legendary Indian red tape treated this agreement like any other and dragged its feet causing Iran to threaten walk out and it started wooing China.

Beijing was quick to grab the opportunity and announced the setting up of a Chinese industrial project in Chabahar. An Iranian official at the Chabahar Free Trade Zone recently told Iranian news agency IRNA that the Chinese side had already signed an MOU on the construction of an industrial town in a phased manner.

It is the closest point of Iran to the Indian Ocean and Iran has devised serious plans to turn it into a transit hub for immediate access to markets in the northern parts of the Indian Ocean and Central Asia.

A McKinsey study done for India’s shipping ministry has stated that Chabahar could plug demand and production gaps for several commodities such as petrochem intermediaries and urea due to its closeness to Kandla and Mumbai ports.

In recent months three Indian companies have joined forces with an Iranian bank to construct a urea plant in Chabahar. Rashtriya Chemicals and Fertilizers (RCF), Gujarat Narmada Valley Fertilizers and Chemicals (GNFC) and Gujarat State Fertilizers Corporation (GSFC) have selected Bank Pasargad as the Iranian investor for the construction of Chabahar’s planned fertilizer plant, according to official IRNA news agency.

The plant, which will feed on natural gas, is expected to produce an annual volume of 1.3 million tons of urea.

Chabahar’s launch will also give a greater impetus to India’s engagement with Afghanistan which currently hinges on Pakistan which has refused to allow overland trade between New Delhi and Kabul. Pakistan’s generals will never allow India to get access to Afghanistan through their country, notwithstanding commitments to help the war-torn country made at international conferences like ‘Heart of Asia’.

At the last meeting in Islamabad foreign minister Sushma Swaraj’s plea to include India in the Afghanistan-Pakistan Transit and Trade Agreement were met with silence.

Chabahar provides India a historic opportunity as the proposal to link the port through a road link from Iran to Afghanistan. Reports state that the condition of the road built by India from Zaranj to Delaram in 2009 has been impacted by Taliban-Afghan forces fighting. However, the plan to connect Chabahar port to Afghanistan and beyond to Central Asia holds immense possibilities for India and Afghanistan to trade and access natural gas reserves in the region.

After Iran pressured India to push the project the Union Cabinet cleared setting up of a joint venture between Jawahalal Nehru Port Trust and the Kandla Port Trust. Approval was given for an annual revenue expenditure of $22.95 million to support operational activities of the Indian JV. The Cabinet has also cleared a credit of $150 million from EXIM Bank.

The proposed plan involves setting up of a JV for equipping two fully-constructed berths at Chabahar port. The Indian JV would lease these two berths for a period of 10 years which will be renewed by “mutual agreement”. The port will be developed through a SPV which will invest $85.21 million to convert these berths into a container terminal and a multi-purpose cargo terminal.

At the end of 10 years India would transfer ownership of the equipment to be provided through the investment to Iran’s Port and Maritime Organisation (P&MO) without any payment.

Iran sees Chabahar free trade area becoming an international trade hub.

If India gets the Chabahar port project going then it will gain greater confidence of Iran which has tremendous influence over the Shia Muslim community and has taken on Sunni ISIS fighters in Iraq and Syria.


Published Date: May 18, 2016 03:39 pm | Updated Date: May 18, 2016 03:39 pm


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