India and Iran will sign the Chabahar contract after 2024 elections

India and Iran have signed a long-term deal to develop Chabahar Port after two decades of painfully slow negotiations with the oil-rich Gulf state, periodically hampered by geopolitical tensions, according to three people familiar with the matter.

A high-level delegation led by India’s Shipping Minister will visit Iran after India’s general elections. The visit, which will take place in the second half of 2024, will be accompanied by the signing of the contract that will pave the way for the full operation of this strategic port in south-eastern Iran, developed with Indian assistance.

Iran’s embassy in New Delhi confirmed the development. “This contract is in the final phase. We are waiting for the Indian delegation to go to Iran,” an Iranian embassy spokesperson said in response to a query.

“This is a very good and useful agreement for both parties,” spokesman Mahdi Esfandiari added, but declined to give details of the contract.

India and Iran are now set to sign a long-term contract, which may be valid for 10 years, after the general elections in order to speed up the development of the port. Thus far, the two sides have signed shorter, one-year contracts.

State-run India Ports Global Limited (IPGL) operates the Shahid Behestti terminal at Chabahar port. Since IPGL began operations at the terminal in 2018 (till May 2023), it has handled more than 6.56 million tonnes of bulk cargo, including shipments from Australia, Bangladesh, Brazil, Germany, Russia and the UAE, according to government data.

For 2023, India is targeting a cargo handling of 13,282 TEUs at the Shahid Beheshti terminal. As against this, cargo handling in 2022 was 3,096 TEUs. This level of cargo traffic has made the operations viable at the port.

Experts say cargo quantity may increase significantly if the port is linked to rail networks. India is involved in building the 700-km long Chabahar-Zahedan railway line. An MoU was signed between Indian Railways’ IRCON and Iranian Railways’ Construction and Development of Transportation Infrastructures Company (CDTIC) in 2016 for the construction of the Chabahar-Zahedan Railway project.

India has major investment plans in Iran, largely centered around the Chabahar port as it gives India a strategic advantage over both China and Pakistan. Chabahar Port is at a distance of about 170 km from Pakistan’s Gwadar port. In Union budget for FY22, the finance ministry allocated ₹100 crore for the development of Chabahar.