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The government led by Prime Minister Narendra Modi has hastened the process, and decided to use the books of Jawaharlal Nehru Port Trust and Kandla Port Trust to fund the development of the port.
The Indian government also decided to ignore warnings from the US. In fact, at a public function in New Delhi on Wednesday, the US Ambassador to India, Richard Verma, reiterated that countries engaging with Iran must wait for the outcome of Iran's discussions with the P5+1 group - including the United States, Russia, China, France, Britain, and Germany.
The next round of discussion will start on May 12 at Geneva with the European Union, and the rest of the partners will join on May 15. The aim is to finish talks on June 30. Most observers expect a positive outcome.
New Delhi believes that the development of the port does not violate UN sanctions, and India is not obliged to follow what US and EU sanctions say.
This port will give Iran an opportunity to open up to the western world once the sanctions are lifted. PM Modi is hurrying things up before Tehran gets time to rethink on this deal. This sort of co-operation will help both Iran and India, as the Persian country will get a boost up during the negotiations, which will help Modi during his forthcoming China visit.
In fact, India also wanted to sign another pact to seize development rights of Farzad B block, but Iran is not keen to allow gas marketing rights.
The earlier NDA government led by Atal Behari Vajpayee had envisaged this project in 2003, but it was delayed because of several issues. During the UPA government, India not only reduced oil imports from Iran, but also ran into rough weather with Tehran.
Last year, Iran increased import duty on Indian Basmati rice from 10 per cent to 45 per cent. This put rice traders and farmers from Punjab, Haryana and western UP in a precarious situation. The area under basmati increased during the kharif season of 2014 to 8.16 lakh hectares (20.40 lakh acres), up from 5.50 lakh hectares in 2013, largely on the possibilities of the Iran market. After the import duty increase, prices had crashed. But now when the farmers are ready to sow this crop again, a revival of good relations with Tehran will boost their confidence.
What is more important is that this port can increase New Delhi's position in regional diplomacy. The Modi government is pushing its weight behind this. In fact, last week a senior US diplomat suggested that India could help bring Syria's President Bashar al-Assad and the rebels on to the talking table to end Syria's crisis. This was a big shift from India's continuous stance of staying away, and the foreign office here distanced itself from this, by calling the statement a misunderstanding.
India under Modi is looking at a larger role in West Asia. Iran could be an opening window. This allows India to sit at the mouth of Gulf of Hurmuz and cut freight paid by traders - who are keen on West and Central Asian markets - by 30 per cent. Tehran also wants New Delhi to assist in developing a free trade zone near Chabahar. This port is a few miles away from Gwadar (a port in Pakistan being developed with China's help), and makes more sense for India to sit there. This is strategically important as well.
Chinese premier Xi Jinping agreed to invest $46 billion in Pakistan to develop road infrastructure, energy and improve connectivity with all important cities including the strategically important Gwadar port. Chinese Overseas Ports Holding Company has taken over the responsibility to develop this port, and agreed to help Pakistan in developing a free economic zone there, including setting up of a refinery there. Recently, the Pakistani government informed its Senate about acquiring 2,281 acres of land to develop this region. China is also helping Pakistan in completing the $2-billion Iran-Pakistan pipeline, along with laying another pipeline from Gwadar to Kashgar in Xingjian.
The problem for India is, this gives their bte noire Pakistan an edge, especially on how to deal with Afghanistan. Despite this, India is engaging with Afghanistan economically and strategically. Pakistan is not showing any interest in India's proposal of having a SAARC multilateral treaty on motor-vehicles. To reach Afghanistan, the easiest way is to go via Wagah. India and Afghanistan have already finalised a bilateral agreement on allowing vehicles from respective countries, but a defiant Islamabad can spoil the party.
India has also agreed to spend $100 million to lay railway lines connecting land-locked Afghanistan. India has already developed a highway in the western part of the country.
Till things don't happen on the ground, we will keep our fingers crossed.
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