India, Iran may restart rail connectivity project between Chabahar and Zahedan

India and Iran plan to fastrack the development of a new rail connectivity route between the Chabahar port and Zahedan city to leverage the strategically located Iranian port as the gateway to the International North–South Transport Corridor (INSTC), two officials aware of the development said.

The INSTC project aims to provide the main trade channel for Central Asian and Eurasian countries located on the eastern side of the Caspian Sea and Afghanistan

They said accelerated progress of the new rail link is being considered now as port operations have now become viable with a pickup in the movement of both container and dry bulk cargo and Chabahar becoming a major trading channel for India.

This year, the port is expected to handle a substantial volume of cargo, reaching up to 80,000 TEUs (Twenty-foot Equivalent Units) and 3 million tonnes in bulk cargo.

The Shahid Beheshti terminal at the port, whose operations have been taken over by IPGL (India Ports Global Ltd), under the ports ministry has seen a 600% rise in container traffic in FY24 at 64,245 TEUs from just 9,126 TEUs in the previous fiscal.

The container traffic at Chabahar in the first two months of FY25 has already reached 9,973 TEUs. Besides, the port handled 2.12 million tonnes (mt) of bulk cargo in FY24 and 2.08 mt in FY23.

‘Gateway for INSTC corridor’

“With its strategic geographical location, Chabahar port can be positioned as a gateway for INSTC corridor. The port is presently connected to the hinterland through road network. Feasibility of connecting Chabahar to Zahedan and further to the existing railway network of Iran was examined by Iran, in consultation with other stakeholders. With the likely increase in traffic, as projected by various global agencies, seamless road and rail connectivity from Chabahar port to facilitate transportation of cargo will become very important. Focus of the INSTC member states, including Iran and India, is therefore on strengthening the connectivity of the Port with the hinterland,” said the first of the two officials quoted earlier.

Work on the 700-km Chabahar-Zahedan railway line has not moved forward even though an MoU was signed between Indian Railways’ IRCON and Iranian Railways’ Construction and Development of Transportation Infrastructures Company (CDTIC) in 2016.

When contacted, shipping secretary T K Ramachandran said that the long-term contract between India and Iran signed in May this year provides for mechanization and operation of the terminals at the port and that India is committed to providing facilities as per the agreement.

The second official quoted above said that with its geographical advantage, being located just outside the Strait of Hormuz, the Chabahar port offers financial and operational benefits to the Central Asian and Eurasian Countries located on the eastern side of the Caspian sea and Afghanistan. Therefore, efforts for improving rail connectivity for Chabahar port towards the eastern side are on to make the port the preferred link among traders.

This official added that India may again get involved in construction of this railway line that would provide Chabahar with all forms of transportation links including road and rail.

Queries sent to the ministry of ports, shipping and waterway, ministry of external affairs, and the Iranian embassy in New Delhi remained unanswered till press time.

India and Iran in May signed a long-term contract for the development of Chabahar port after years of protracted negotiations. IPGL has taken over operations of Shahid Beheshti terminals at Chabahar. The facility comprises container terminal and a multi cargo berth.

The facility is operational and is already providing services for bulk and container cargoes, both for gateway and transshipment, and a number of concessions are being offered by IPGL to promote use of Chabahar port including discounts, longer free storage times for cargo etc.

The port has a deep draft that can handle larger vessels and those calling at Chabahar avoid traffic congestion and waiting time at anchorage, being outside the Strait of Hormuz. The road to Zahedan and onwards to Zaranj in Afghanistan provides seamless connectivity for movement of humanitarian aid from India to Afghanistan through Chabahar port.

The port handles a diverse range of products such as automobile spare parts, agricultural products, iron ore, clinkers etc. and efforts are on to increase the product basket handling at the port.

Located in the Sistan-Baluchistan province on Iran’s south western coast, the Chabahar port is an important point on Arabian Sea with easy access from India’s west coast. Kandla port in Gujarat is the closest to the Chabahar port at 550 Nautical Miles while the distance between Chabahar and Mumbai is 786 Nautical Miles. Since 2019, it has handled container traffic of more than 80,000 TEUs and Bulk and General Cargo of more than 8 million tonne.

The port’s integration with a special free zone augments its appeal, while India’s incentives, such as concessions on vessel-related charges and cargo charges, bolster trade flows through Chabahar, fostering economic growth and cooperation.

Chabahar is envisaged as a crucial link in the eastern route of the INSTC corridor, facilitating the movement of goods between India and Central Asian countries. This collaboration between India and Iran on developing infrastructure and logistics along the 7,200=km INSTC aims to reduce transportation costs and time, thereby promoting trade between these regions.

In 2003, India agreed to help Iran develop the port as well as accompanying infrastructure links during Iranian President Khatami’s visit to India. New Delhi’s interest in Chabahar came from the port’s value as a gateway for Indian goods to reach markets in Afghanistan and Central Asia.

However, matters progressed slowly thereafter. In 2013, India committed to providing $100 million for the development of Chabahar. A Memorandum of Understanding (MoU) for development of Chabahar Port by India was signed in May 2015. Thereafter, the contract was executed on 23rd May, 2016 at Tehran (Iran) during the visit of Prime Minister of India to Iran for the development of an international trade corridor, which included Chabahar as a central transit point. India agreed to invest $ 85 million in the development of Chabahar’s Shahid Behesti terminal. However, the reimposition of sanctions on Iran for its nuclear program hampered India’s ability to develop the port.

This present agreement aims to enhance regional connectivity and facilitate trade, particularly between India, Iran and Afghanistan. The India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, facilitated the first consignment of exports from Afghanistan to India in 2019. The operations continued through short-term contracts while negotiations on the long-term agreement peaked with the visit of Sonowal to Chabahar in August, 2022.

Negotiations on the long-term contract were held up over disagreements on arbitration clauses. Mint had earlier reported that the two sides have reached an accommodation which will allow arbitration under rules framed by the UN Commission on International Trade Law (UNCITRAL).

The deal is also significant as it comes at a time of geopolitical disruption in West Asia. This year, Iran and Israel have clashed militarily after Tehran accused Tel Aviv of launching an air strike against an Iranian diplomatic building in Syria earlier in April. Iran also launched a barrage of missile and drone attacks on Israel.

India has expressed concern as tensions rise in the region. It has also maintained a diplomatic dialogue with Iran on issues of concern, such as attacks on India-linked ships by Yemen’s Houthi rebels, who are believed to have links with Iran.

Investment in the Iranian port facility is a first by India in such an infrastructure overseas. The capacity of the port for cargo handling is currently 8mt and India proposes to expand it to 18 mt in the next phase of its expansion and additional investment.

India is looking to strengthen its presence in key infrastructure along the route passing through the Persian Guld region. India’s Adani Group is already operating Haifa post in Israel and more port deals are expected in the region by Indian entities that will strengthen country’s presence on this strategic route that is the main gateway for shipments moving from the Indian subcontinent to Europe.

India has major investment plans in the country, 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 kilometers from Pakistan’s Gwadar port. In union budget for FY22, the finance ministry allocated ₹100 crore for the development of the Chabahar Port.