Modi govt slashes funding for Iran’s Chabahar Port but is open to spending more if needed

The fund allocation for Chabahar Port in Iran, which India is developing, was slashed by more than half to Rs 45 crore from Rs 150 crore in this Union Budget.

Chabahar port | Photo: Commons

New Delhi: The Narendra Modi government has slashed the budget allocation for the development of Chabahar Port in Iran by more than half in 2019-20 amid tension between Washington and Tehran over the latter’s nuclear programme.

But New Delhi will sanction more funds for the project if required, ThePrint has learned.

While Finance Minister Nirmala Sitharaman has diverted a substantial amount of funds mainly towards enhancing India’s aid to Nepal, Maldives and Mauritius, allocation of funds for Chabahar Port, which New Delhi is developing, was reduced to Rs 45 crore in the financial year 2019-20 from Rs 150 crore in the last fiscal.

“The allocation is based on anticipated expenditure at Chabahar, which includes the operational cost and cost envisaged for the purchase of equipment. There is no drop…If more is required, it may be adjusted at the revised estimate stage,” an official source told ThePrint.

According to another source, most of the funds that were originally allocated for the project have already been utilised. The allocations are made on a “case to case” basis, the source added.

Iran is disturbed by India’s slow progress of the project

In 2016, the Modi government had issued a credit line of $150 million through Exim Bank for developing the strategically-located Chabahar Port.

The first phase of the port was inaugurated in December 2017. The port began commercial operations in January this year when India took over operations of a part of the Shahid Beheshti Port, Chabahar.

The Chabahar Port on the Gulf of Oman acts as a gateway for India to access the markets of Central Asia and Eurasia while it can also connect New Delhi with Kabul bypassing Pakistan. The Chabahar Port is also India’s answer to Pakistan’s Gwadar Port.

However, the issue that has been disturbing Iran is the slow progress of the project by India.

New Delhi also has plans to build a 500-km rail link from the Chabahar Port to Zahedan, the provincial capital of Sistan-Baluchestan, at a cost of $1.6 billion. After the connection with Zahedan, the next phase of the project will link Zaranj in Afghanistan, boosting trade between India, Iran and Afghanistan.

All these are a part of a trilateral agreement to develop Chabahar in Tehran. The pact was signed by Tehran, New Delhi and Kabul when Prime Minister Modi and his Afghani counterpart Ashraf Ghani visited Iran in 2016.

US sanctions on Iran

While the US has withdrawn the so-called waiver it had granted to India, forcing New Delhi to halt its crude oil imports from Tehran, the Donald Trump administration has made an exception in the case of Chabahar Port as it is related to the development of Afghanistan.

In fact, during the visit of US Secretary of State Mike Pompeo to India last month, America has told New Delhi to not slacken its pace in developing the Chabahar Port.