Published On:May 14 2024
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Chabahar Port Growth Supported by $120 Million Investments and $250 Million Credit Line

India's decade-long bilateral contract with Iran for the operation of Chabahar Port is expected to usher in approximately $370 million in investments. This includes a direct investment of $120 million from India earmarked for infrastructure development, along with a $250 million line of credit extended to Iran, as reported by Business Standard.

The $120 million allocation for port development will facilitate the procurement of advanced equipment such as rail-mounted quay cranes, rubber-tyred gantry cranes (transtainers), reach stackers, and forklifts. Additionally, funds will be allocated towards enhancing related infrastructure.

The agreement, signed for a decade, with the possibility of extension through mutual consent, represents a medium-term objective for India as it transitions into operational phases, according to multiple officials familiar with the developments.

Addressing significant concerns, including the absence of consensus on an arbitral framework, has been a crucial aspect of the negotiations. Previously, negotiations stalled over Iran's reluctance to agree to an international arbitration framework, citing the necessity for a constitutional amendment. India, however, insisted on including an arbitration clause to ensure transparency in dispute resolution.

Under the agreement signed on Monday, arbitration matters will be referred to the Singapore International Arbitration Centre, stated officials.

Another issue that emerged during the negotiation process was related to cargo movement. Iran advocated for a minimum guaranteed traffic (MGT) provision, a common feature in concession-based port agreements. Failure to meet the stipulated cargo requirement could result in penalties for the concessionaire.

The signed Chabahar agreement includes provisions on cargo targets; however, no penalties will be imposed if the targeted traffic volumes are not achieved, according to an official. Non-binding cargo targets aim to safeguard commercial interests and minimize the potential for future disputes, he added.

In the initial year, India Ports Global Limited (IPGL) is anticipated to handle 30,000 twenty-foot equivalent units (TEUs) or containers worth of traffic. This volume is expected to escalate to 140,000 containers in the fifth year and 300,000 TEUs in the tenth year of the bilateral agreement.

These targets will undergo revisions after five years, contingent upon market conditions and other relevant factors.

Regarding revenue sharing, for exports from the Shahid Behesti Terminal, IPGL and Iran will each retain 50% of the revenue share. However, for imports, Iran's maritime organization will receive 60% of the revenue.


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