Unlocking Global Trade Potential: Chabahar Port Impact on India’s Expansion

India has finally secured the rights to operate Iran’s Chabahar port, marking a significant diplomatic victory and paving the way for expanding its global trade footprint. After over two decades of proposing to run the port on Iran’s southeastern coastline, New Delhi has sealed a 10-year contract with Iranian authorities.

The agreement was signed between Indian Ports Global Ltd (IPGL) and the Port & Maritime Organisation of Iran. As per the pact, IPGL will invest $120 million, while an additional $250 million will be raised through debt financing.

Strategically located 170 km from Pakistan’s Gwadar port, Chabahar offers India a crucial alternative trade route, allowing it to bypass its arch-rival neighbor while enhancing economic ties with landlocked countries in Central and Western Asia.

The operationalization of Chabahar port will connect India to the International North-South Transport Corridor (INSTC), a 7,200 km transportation network linking South Asian economies with Eurasia and Europe. This corridor is seen as a promising alternative to the Suez Canal, which remains vulnerable to geopolitical tensions and conflicts.

Recent attacks by Yemen’s Houthi militants against Western vessels in the Suez Canal region, in protest against the US and its allies’ support for Israel’s offensive in Gaza, have led to a surge in insurance charges for trade through the traditional maritime route.

The INSTC offers a viable solution, promising to reduce freight costs and transportation time for Indian exports to Europe. According to the Federation of Indian Export Organisations (FIEO), this alternative route could bring down freight charges by 30% and transportation time by 40%, ensuring quicker turnaround at competitive costs.

The process involves shipping Indian goods to Iran’s Chabahar port, from where they will be transported by vehicles to another Iranian port on the Caspian Sea. The cargo will then be sent by sea to Russia and subsequently distributed across Europe via Russian railways.

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Ajay Sahai, FIEO’s Director General, explained that cargo movement through this route is expected to save costs by 30% and transportation time by 40%, ensuring quick turnaround at competitive costs.

Furthermore, industry estimates from the Global Trade Research Initiative (GTRI) suggest that the INSTC could reduce the time to transport goods to Europe from around 45 days through the Suez Canal to just 25 days, while also lowering freight costs by approximately 30%.

With the Chabahar port deal, India has secured a strategic trade gateway, diversifying its routes and gaining enhanced access to markets in Russia, Eurasia, Europe, Iran, and Afghanistan. The move underscores India’s ambitions to expand its global economic footprint and strengthen its position as a key player in international trade.

Source By:- https://upstox.com/