Context

  • Two major Indian multinationals are bidding for supplying key equipment for the strategic Chabahar Port in Iran.

The present development

  • The Chabahar port gets bidders for the construction to set in motion.
  • The bidding process is on to expand financial eligibility criteria to attract more bidders.
  • Two major Indian conglomerates are bidding for supplying four key mounted quay cranes at Shahid Beheshti Port, Chabahar.
  • Bids were invited on behalf of India Ports Global Limited (IPGL).
  • Nitin Gadkari, Shipping, Road Transport and Highways minister earlier said the government was hopeful of completing the work on the first phase of the project in 2018.
  • The Cabinet has already approved funds for development of the project.
  • The site is located in the Sistan-Baluchistan province on the energy-rich Persian Gulf nation’s southern coast that can be easily accessed from India’s West coast, bypassing Pakistan.

The Exim credit for the construction

  • A $150 million credit from Exim Bank has been cleared from the cabinet for greater trade and investment flow with Iran and neighbouring countries.
  • It also authorized the Shipping Ministry to form a company in Iran for implementing the Chabahar Port Development Project and related activities.
  • As per the Memorandum of Understanding (MoU) signed between the two nations in May last year, India is to train and operate two berths in Chabahar Port Phase-I.
  • The berths have go capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.
  • Proprietorship of equipment will be transferred to the Iranian side on completion of 10 years or for an extended period as per mutual agreement.
  • The Iranian side had requested for endowment of credit of $150 million in accordance with the MoU.
  • Operation of two berths is to commence within a period of maximum 18 months after the signing of the agreement.

Where is Chabahar?

  • It is located in southeastern Iran in the Gulf of Oman.
  • It is the only Iranian port with direct access to the ocean.

Chabahar Port Agreement

  • It is a commercial contract for the development and operations of Chabahar Port, signed between Indian Joint Venture India Ports Global Pvt Ltd (a Consortium of Jawaharlal Nehru Port Trust and Kandla Port Trust) and Iran’s Arya Banader on 23 May 2016 in Tehran during the visit of the Prime Minister to Iran.
  • Government of India and Port and Maritime Organization (PMO) of Iran signed the contract as authorizing Parties.
  • The contract is for the period of 10 years.
  • As per the contract, India will construct two terminals (five berths) at Chabahar Port.
  • The MoU envisages construction of a multipurpose cargo terminal (600 mtrs length) and a container terminal (640 mtrs length).

Benefits to India There are several benefits associated with the development of the Chabahar Port for India, some of them are following:

  • Partaking in the Chabahar Port development will offer India an alternative and reliable access route into Afghanistan.
  • It will aid to employ India’s earlier investment in Zaranj-Delaram road built in Afghanistan.
  • It is also a consistent and more direct sea-road access route into Central Asian Region.
  • Chabahar Port’s location at the Arabian Sea means that it would be able to skirt any challenges posed by developments in the Persian Gulf and Strait of Hormuz.
  • Close proximity to the Strait of Hormuz which facilitates about 40 per cent of the world’s oil trade.
  • It will provide an access route to land-locked Afghanistan, that would be free of Pakistan’s control.
  • It would give India access to markets and mineral resources in Afghanistan and central Asia.
  • Provide access to Hajigak iron ore mine developed by Steel Authority of India.
  • It will provide boost to the development of International North South Transport Corridor (INSTC).
  • Delaram access will provide India with a base to position itself after international troops withdraw from Afghanistan in 2014.
  • It will provide Market for farm products from Afghanistan.
  • It will help in combating drug trafficking.

Limitations of the project The port also has few limitations as well, which are following:

  • There will be disputes over tariffs and transit regulations.
  • There will be massive burden from US on India which is seeking isolation of Iran after involvement of Iran in development of nuclear bomb.
  • Chinese competition for port development offering an $75 million credit line for ongoing work on the port.

Can India use it to counter China?

  • India won’t need to depend on China sponsored Road and Belt projects to connect with Central Asia.
  • At present,
  • central Asia is getting lot of connectivity projects sponsored under the China sponsored Road and Belt Policy.

  • India is not a part of the endeavor and in this context, an own initiative will help India to avoid dependence on China sponsored Central Asian connectivity.
  • It will undermine importance of Gwadar port in Pakistan developed by China.
  • India can use the facility to monitor Pakistani & Chinese activities in the Indian Ocean Region as well as Gulf. It could be convenient location for India to monitor activities of Pakistani Navy.

Gateway to West Asia , South Asia and Central Asia.

  • The port will familiarize India towards the markets of West Asia, the Middle East, Central Asia and Europe, projecting Indian economic and political influence towards those regions.
  • Strengthening of relationships between India, Iran and Afghanistan, will provide a basis for future diplomatic overtures between all three countries.
  • Economic integration is a cornerstone for achieving regional political cooperation and stability.
  • Striking a balance between India’s good relationships with Israel, Saudi Arabia, the UAE and Iran, signaling to Iran.
  • As the West forced ban on Iran has ended, there will be more growth of Iran bound trade.
  • India has amplified its crude purchase from Iran ever since the end of the ban.
  • With reducing remittance attraction and reciprocal commitment with Arab countries, Iran may get a higher role in India’s economic engagement.
  • Hence,
  • in future, there is higher scope and benefit for mutual trade between the two countries and the new port deal is very important as a trade facilitator.

  • Underscores India’s leadership in South Asia, serves India’s objective of becoming the primary lender of credit for infrastructure projects across South and West Asia,
  • It will help stave off Chinese influence in the region and therefore strengthens India‘s desire to be viewed as, and become, the regional leader of South Asia.
  • It signals India’s desire to increase trade with the Central Asian states (Uzbekisan, Tajikistan, Turkmenistan, Kazakhstan, Kyrgyzstan), who,
  • despite their historical tilt towards Russia and recent tilt towards China, have long courted India to increase its influence in their region, and balance Russian, China and Islamist influences.

Conclusion

  • The port would link South Asia with Central Asia,
  • Gulf, Europe and the Caucasus, and considerably cut conveyance costs and time, thereby proving to be a win-win situation for all the participants.

  • Besides India solidifying its energy security by investing in Iran’s oil and gas projects and gaining access to Central Asian energy reserves.
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