New Delhi, 18 October 2014

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi, today gave its approval for the framework inter-Governmental Memorandum of Understanding (MoU) that is to be finalised by the Government of India with the Government of Iran. This inter-Governmental MoU will have the following main elements:-

i.An Indian Joint Venture (JV) company will lease two fully constructed berths in Chahbahar port’s Phase-I project for a period of ten years, which could be renewed by “mutual agreement”.

ii.The JV company will invest US $ 85.21 million for equipping the two berths within 12 months as a container terminal and the second as a multi-purpose cargo terminal.

iii.The Indian side will transfer ownership of the equipment to be provided through the investment to Iran’s port and Maritime Organisation (P&MO) without any payment at the end of the tenth year.

iv.The Indian side can form a JV that could include one or more Iranian companies subject to the approval of the P&MO.

v.The Indian and Iranian sides could enter into subsequent negotiations for participation in the construction, equipping and operating of terminals in Phase-II on BOT basis, subject to the Indian side’s satisfactory performance in Phase-I.

vi.The Iranian side will make efforts to provide Free Trade Zone conditions and facilities at the port.

The Cabinet also approved to constitute a JV or other appropriate Special Purpose Vehicle (SPV) comprising the Jawaharlal Nehru Port Trust (JNPT) and the Kandla Port Trust (KPT) and if required a local Iranian partner and/or an Indian private sector partner to serve as the vehicle for India’s participation in the development of the port. Approval was also given for incurring annual revenue expenditure of US$ 22.95 million to support operational activities of the Indian JV.

India’s presence at the Chahbahar port would give it a sea-land access route into Afghanistan through Iran’s eastern borders.

Background

Iran`s Chahbahar port located in the Sistan-Baluchistan Province on Iran`s south-eastern coast is a port of great strategic utility for India. It lies outside the Persian Gulf and is easily accessed from India`s western coast.

From Chahbahar port using the existing Iranian road network, one can link up to Zaranj in Afghanistan which is at a distance of 883 km from the port and then using the Zaranj-Delaram road constructed by India in 2009, one can access Afghanistan`s garland highway thereby establishing road access to four of the major cities of Afghanistan; Herat, Kandahar, Kabul and Mazar-e-Sharif.