Twist and turn in Chabahar-Zahedan rail project

New Delhi, IndiaEdited By: Palki SharmaUpdated: Jul 17, 2020, 07:23 AM IST
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The two-day meet to discuss the Chabahar port began on Wednesday Photograph:(DNA)

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Last year’s estimates say that once Chabahar is operationalised, India’s trade with Eurasia could touch 170 billion dollars.

Beijing and Tehran are yet to sign a deal, but some details have leaked. Iran gets Chinese investments for 25 years and China gets cheap Iranian oil.

Within hours, it emerged that Iran was dropping India from the Chabahar rail project — the Chabahar-Zahedan line which will connect the Chabahar port to Afghanistan. It was part of a trilateral agreement between India, Iran and Afghanistan.

A report claimed that Iran has decided to ditch India and complete the project on its own. Iran cited funding delays as a reason.

On Wednesday, the government of India refuted these reports. Sources told WION that both India and Iran "remain committed to the Chabahar-Aahedan railway project" and that India is "very much in the game but progress is slow due to the current political environment."

Then came a report from Al Jazeera and another twist in the tale. The report said that India was never really part of the railway project so there's no question of it being dropped. The source of this claim is Farhad Montaser, an Iranian official with Iran’s ports and maritime organisation.

He said that the story that India has been dropped is “totally false because Iran has not inked any deal with India regarding the Chabahar-Zahedan” railway project.

In a press release of MEA from 2016 the list of agreements signed during the visit of Prime Minister Modi to Iran there is mention of an MoU. It was signed between India’s state-owned transport infrastructure company(IRCON), and Iran’s Construction and Development of Transportation Infrastructures Company(CDTIC).


The description of the MoU is pretty clear. The Indian side was to provide “requisite services for construction of the Chabahar-Zahedan railway line” with around $1.6 billion committed as financing.

A statement from India's Ministry of External Affairs confirmed today that the MoU was signed. It's been four years and Iran is yet to take things forward.

Iran is yet to respond. No word yet on whether India is still on board. It is important because Chabahar is very important to India. It is an essential component of India’s central Asian strategy.

The port opened a new strategic transit route between India, Iran and Afghanistan, a route that bypassed Pakistan because Islamabad had blocked Indian shipments.

India plans to invest $500 million into the project because its value goes well beyond a trade link with Afghanistan. It has immense strategic value too.

The point of contention right now is a railway line from Chabahar to Zahedan, a town close to the Afghanistan border. The same line is supposed to be later extended to Zaranj in Afghanistan. Chabahar is supposed to be India’s gateway to Eurasia.

Last year’s estimates say that once Chabahar is operationalised, India’s trade with Eurasia could touch $170 billion.

There are cost benefits too. A report from 2018 gives some insights. The Chabahar route could lead to a 60 per cent reduction in shipment costs and a 50 per cent reduction in shipment time from India to central Asia. The problem is that India has not been consistent with its funding for Chabahar.

In 2019, the funds allocated for the port dropped from 150 crores — that is almost $2 billion dollars — to 45 crores, or around $600 million.

However, India had hiked allocation to 100 crores in this year's budget almost $1.5 billion was set aside for Chabahar.