India to Start Interim Development Operations at Chabahar Next Week

EghtesadOnline: Notwithstanding the plans by the United States to impose fresh sanctions on Iran nuclear deal, India is all set to begin interim operations in the strategically important Chabahar Port project next week, Indian shipping ministry officials familiar with the development said.

News ID: ۷۴۵۴۳۰

10 June 2018

India has selected an Iranian company, Kaveh Port and Marine Services, for running the operations for 18 months until it selects a firm to manage and maintain the facility for the long term.

As per a memorandum of understanding signed between India and Iran in May 2016, India would equip and operate two terminals in Chabahar Port's Phase I with a capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease, Hindustan Times reported on Friday.

“We have been able to enter Chabahar Port for interim operations, which will start from June 13,” said shipping secretary, Gopal Krishna.

> Bidding Process

According to Financial Tribune, the shipping ministry has also started the process to invite fresh bids to select an Indian partner to manage, operate and maintain the port for the next 10 years.

None of the three companies—Adani, JSW and International Cargo Terminal & Infrastructure Private Limited shortlisted in the technical bid earlier—participated in the financial bid owing to stringent conditions. One of the clauses required the successful bidder to pay an upfront payment of $8.52 million as premium.

Following complaints from the shortlisted companies over the bid norms, the ministry referred the matter to an inter-ministerial panel.

“The group of ministers last month decided to ease the bid conditions, including removing the clause to pay premium,” said an official of India Ports Global Private Limited who didn’t want to be named.

IPGPL is a joint venture between Jawaharlal Nehru Port Trust and Kandla Port Trust set up to implement the project.

One of the officials said, “We were charging a premium from the successful bidder to meet our preliminary expenses. But the shortlisted bidders said the project is of strategic importance and is not commercially viable.”

> International Gateway

Chabahar Port located in the Sistan-Baluchistan Province of Iran on the southeastern coast is of strategic importance to India. It will provide India an alternative and reliable access route into Afghanistan, bypassing Pakistan. This would also give India access to resource-rich Central Asia.

Iran’s only oceanic port, Chabahar, dubbed "international gateway" by Iranian officials, consists of two separate ports named Shahid Kalantari and Shahid Beheshti.

President Hassan Rouhani inaugurated the first phase of Shahid Beheshti Port in the presence of some 70 visiting dignitaries from 17 countries in December 2017.

“The project is specifically important given that it connects the trade corridors that pass through Iran to the ocean,” the president was quoted as saying at the opening ceremony.

The opening of the first phase (out of five phases defined for the project) has tripled its capacity to 8.5 million tons (equal to that of all the northern ports of the country), and will allow the docking of super-large container ships (between 100,000 DWT and 120,000 DWT) and increase India’s connectivity with Afghanistan.

The High Council of Free Zones recently approved the annexation of Shahid Beheshti and Shahid Kalantari in Chabahar to Chabahar Free Trade-Industrial Zone in Iran’s southeast.

India, Iran and Afghanistan have signed an agreement to give Indian goods, heading toward Central Asia and Afghanistan, preferential treatment and tariff reductions at Chabahar.

Upon the completion of the five phases of Shahid Beheshti development project, which also includes a railroad (Chabahar-Zahedan) to connect to the International North-South Transportation Corridor, the capacity of the port will reach 85 million tons. This would improve Iran’s transit services and facilities, and ultimately ease trade between Europe and Central Asia through Iran.

India has an agreement with Iran to build a 500-km railroad from Chabahar to Zahedan, the provincial capital of Sistan-Baluchestan, close to the Afghan border. India’s state-owned IRCON has agreed to build a rail route at a cost of $1.6 billion as part of the transit corridor to Afghanistan. After connecting Chabahar to Zahedan, the railroad will be linked to Zaranj in Afghanistan. Hence, when the Afghan cargo arrives in Zahedan, it can be transported by a 1,380-km railroad to Chabahar and then shipped to India.

According to Iran's Minister of Roads and Urban Development Abbas Akhoundi, investment to the tune of 40 trillion rials ($1 billion) is needed to connect Chabahar to Iran's national railroad.

> Cost Advantages

Transit via Chabahar’s Shahid Beheshti Port is $1,000 cheaper than through the ports of Pakistan and even 15 million rials ($375) cheaper than Shahid Rajaee Port, Iran’s biggest container port at the mouth of the Strait of Hormuz, according to the director general of Ports and Maritime Organization of Sistan-Baluchestan Province, Behrouz Aqaei.

With new moderated prices for services offered at Shahid Beheshti Port, this southeastern Iranian port has turned into the cheapest option for doing business in the Persian Gulf and Oman Sea, the deputy head of Ports and Maritime Organization of Iran said.

“Foreign ships that belong to international liners are entitled to a 90% discount on Terminal Handling Charges for a three-month period, followed by a 70% discount for the second three months and then a 30% discount for the next six months. PMO will grant a 30% discount to international ship liners in their second year of operation in Chabahar. On top of that, more discounts will be offered on ports’ duties,” Mohammad Ali Hassanzadeh was also quoted as saying by the Ministry of Roads and Urban Development's news outlet.