India, Iran sign pact on developing Chabahar port; will give sea-land access route to Afghanistan

The pact was signed after comprehensive talks between visiting Road Transport and Highways Minister Gadkari with the Iranian leadership.

By PTI | Updated: May 07, 2015, 02.13 AM IST

TEHRAN: Notwithstanding US objections, India today went ahead with the signing of an agreement with Iran for the development of the strategically important Chabahar port which will give India sea-land access route to Afghanistan bypassing Pakistan.

The pact was signed after comprehensive talks between visiting Road Transport and Highways Minister Nitin Gadkari with the Iranian leadership here.

"The MoU (Memorandum of Understanding) was signed after the talks between the two sides," a source said.

Iranian President Hassan Rouhani, in his meeting with Gadkari, said, "Resumption of Iran-India cooperation in the southeastern Iranian port city of Chabahar would lead to a new chapter in relations of two countries."

Chabahar port is located in Sistan-Balochistan Province on Iran's southeastern coast and is of great strategic utility for India which will get sea-land access route to Afghanistan bypassing Pakistan.

The US has been asking India and other countries not to "rush" into doing business with Iran as Washington was yet to work out a deal with Tehran on the latter's contentious nuclear programme.

The port will be used to ship crude oil and urea, saving India transportation costs.

India intends to lease two berths at Chabahar for 10 years. The port will be developed through a special purpose vehicle (SPV) which will invest USD 85.21 million to convert the berths into a container terminal and a multi-purpose cargo terminal.

The agreement was signed by Gadkari and Iran's Minister for Transport and Urban Development Dr Abbas Ahmad Akhoundi.

"With the signing of this MoU, Indian and Iranian commercial entities would now be in a position to commence negotiations towards finalisation of a commercial contract under which Indian firms will lease two existing berths at the Port and operationalise them as container and multi-purpose cargo terminals," a Ministry of External Affairs statement said.

"The availability of a functional container and multi-purpose cargo terminal at Chabahar Port would provide Afghanistan's garland road network system alternate access to a sea port, significantly enhancing Afghanistan's overall connectivity to regional and global markets, and providing a fillip to the ongoing reconstruction and humanitarian efforts in the country," it said.

Touching upon Iran and India's ancient and historical relations, Rouhani, in his meeting with Gadkari, underscored that undoubtedly the level of mutual cooperation could be expanded day by day.

Pointing to Iran's transit position for connecting east to west and north to south, he stressed that the Islamic Republic could play a pivotal role in connecting India to Central Asia, the Caucasus and Eastern Europe via railway.

President Rouhani reiterated that Iran is fully ready to lure foreign investors.

Noting the importance of North-South Transport Corridor and development of Iranian ports, Rouhani stressed that Iran fully welcomes the Indian investors to make investment in construction of roads, railways and development of Chabahar port and other southern ports in Iran.

Referring to the cordial relations between the two countries, Gadkari said New Delhi is fully ready to cooperate with Tehran on development of Chabahar port.

Last year in October, India had approved the framework of an inter-governmental Memorandum of Understanding (MoU) for setting up an USD 85.21 million joint venture firm for equipping two fully-constructed berths at Chahbahar port.

As per the framework, approved in the Cabinet last year, an Indian joint venture company would lease two fully constructed berths in Chahbahar port's Phase-I project for a period of ten years, which could be renewed by "mutual agreement".

The Indian side will transfer ownership of the equipment to be provided through the investment to Iran's port and Maritime Organisation (P&MO) without any payment at the end of the tenth year.

The Cabinet had given nod for constituting a Joint Venture or other appropriate Special Purpose Vehicle comprising the Jawaharlal Nehru Port Trust and the Kandla Port Trust.

Approval was also given for incurring annual revenue expenditure of USD 22.95 million to support operational activities of the Indian Joint Venture.

From Chahbahar port using the existing Iranian road network, a link up to Zaranj in Afghanistan and then using the Zaranj-Delaram road constructed by India in 2009, access to Afghanistan's Garland Highway can be made.

This would establish road access to four of the major cities of Afghanistan -- Herat, Kandahar, Kabul and Mazar-e-Sharif.

The port would cut transport costs and freight time for India to Central Asia and the Gulf by about a third.

Last week, Prime Minister Narendra Modi had assured Afghan President Ashraf Ghani of India's commitment to building the port.

Earlier in 2003, the NDA government under Atal Bihari Vajpayee had signed an agreement with Iran for the Chabahar Port, but it could not be materialised.

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Why Iran's Chabahar port is important for India

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An India-operated port in Iran's Chabahar would open a gateway for the country to Afghanistan and Central Asia. A look into why the port is of strategic importance.