New Delhi: India’s ambitious plan to develop Chabahar port in Iran has hit yet another snag—over what is being seen as an inordinate delay on the part of Iran to seek a $150 million loan from India.
Eight months have passed since the loan agreement was signed for the port’s development, but the Export-Import Bank of India (Exim Bank) is still awaiting completion of an application from the Port and Maritime Organization of Iran with instructions to disburse the amount. According to the agreement, the contract will be activated from the day that the loan has been disbursed.
This comes in the backdrop of strains developing in US-Iran relations after the recent imposition of US sanctions on the West Asian country over its missile programme.
Chabahar port is located on the Gulf of Oman, near Iran’s border with Pakistan. It is less than 100km from Pakistan’s Chinese-constructed port of Gwadar, part of a project to open up an energy and trade corridor from the Gulf to western China.
“Till now, the Port and Maritime Organization of Iran has not submitted the completed application form for sourcing the loan. Reminders are being sent from the Exim Bank almost every month for the last eight months. The last reminder was sent in the first week of February," said a person aware of the development requesting anonymity.
The Chabahar port will allow India access to landlocked Afghanistan and energy-rich Central Asia through Jawaharlal Nehru and Kandla ports on India’s west coast. India has also built a 218km-road link connecting Delaram with Zaranj in Afghanistan, which is adjacent to Iran’s border. Also, the port will promote Indian strategic interests in the Gulf and Strait of Hormuz.
“The delays from Iranian side is because they don’t have any interesting project proposals," said an Indian government official requesting anonymity.
A 10-year commercial contract for the development and operations of Chabahar port was signed between India Ports Global Pvt. Ltd and Iran’s Arya Banader on 23 May 2016 in Tehran during the visit of Prime Minister Narendra Modi. India Ports Global is a consortium of Jawaharlal Nehru Port Trust and Kandla Port Trust. The agreement commits India to equipping and operating the terminal for 10 years.
The first person quoted above added that the loan disbursement is not possible until the application is completed by the state-owned Port and Maritime Organization.
According to the terms of agreement, India has to make $150 million credit available for the development of phase one of Chabahar port within four months of receiving the application. India also has to equip the cargo and container terminals with $85 million worth of equipment within one-and-a-half years of funding.
Experts believe that port’s development should be expedited.
“India did make a strategic move to turn the Iranian port into a transit hub bypassing Pakistan…However, at this point, the ground operationalization looks far from reality. A delay in operationalization of the credit has implications for India in terms of connectivity and heart of Asia policy, with Afghanistan at the centre. Also, as a pressure point for Pakistan, given the volume of trade through Chabahar, would impact trade between Pakistan and Afghanistan," said Shweta Singh, an assistant professor at South Asian University in New Delhi.
The delay comes in the backdrop of India nearly finalizing the equipment purchase tender for Chabahar port, located in Sistan-Balochistan province on Iran’s south-eastern coast.
India’s ministry of shipping has floated global tenders for seven packages to buy equipment, the bids for which are being evaluated.
“The equipment specifications were finalized last year in November after consultations with the Iranian government and by February-end, we are hopeful of giving purchase orders. We are going to go for the best quality and cost effective equipment," said a second Indian government official requesting anonymity.
Queries emailed to the spokespersons of the Iranian Embassy in New Delhi, Port and Maritime Organization of Iran, Exim Bank and India’s ministry of shipping last week remained unanswered. An external affairs ministry spokesperson also didn’t respond to the specific queries on Chabahar emailed by Mint.