India-Iran Current Affairs

India, Iran call for early operationalisation of Chabahar Port

India and Iran have expressed commitment for early completion and operationalisation of Chabahar Port besides strengthening bilateral ties.

Both countries in a series of meetings held during the Union Road Transport, Highways and Shipping Minister Nitin Gadkari two-day visit to Iran to attend the inauguration of Hassan Rouhani second tenure as President.

Key Facts

Both countries reviewed and assessed the progress in implementation of the decisions taken during Prime Minister Narendra Modi’s visit to Iran in 2016, including the progress in the development of Chabahar Port. India also has conveyed its readiness to aid Iran in taking up operations in Chabahar Port during the interim period between the actual activation of contract.

Background

India had requested Iran for an early submission of loan application for Chabahar Port Development to Exim Bank of India so that the contract agreement can be activated.  The Iranian side earlier had requested India to provide up to $150 million credit and had made it a condition for activation of the Chabahar Port contract. The application for loan to Exim Bank of India is still awaited.

Chabahar Port

Chabahar port is strategically located in the southeastern Sistan-Balochistan province, on the Gulf of Oman, near Iran’s border with Pakistan. In May 2016, India and Iran had signed a bilateral agreement, under which India agreed to refurbish one of the berths at Shahid Beheshti port, and reconstruct a 600-metre long container handling facility at the port.

Significance of Chabahar Port

Alternative route to Afghanistan: The Chabahar port, intended to provide an alternative route for trade between India and Afghanistan, by bypassing Pakistan. It will also ensure in the establishment of a politically sustainable connectivity between India and Afghanistan which will lead to better economic ties between them. It will also ease connectivity to Zaranj-Delaram road constructed by India in 2009 which give access to Afghanistan’s Garland Highway. From a diplomatic perspective, Chabahar port can also be used for humanitarian operations in Afghanistan. 

INSTC: It will boost India’s access to Iran, the key gateway to the International North-South Transport Corridor (INSTC) that has sea, rail and road routes between India, Russia, Iran, Europe and Central Asia. It can significantly boost import of iron ore, sugar and rice to India from Afghanistan. It can also help to reduce import cost of oil to India.

Countering Chinese presence: It will be beneficial to India in countering Chinese presence in the Arabian Sea as China with help of Pakistan is developing the Gwadar port which is less than 400 km from Chabahar by road and 100 km by sea.

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India receives first Iranian oil parcel for emergency reserves

India has received the first parcel of crude oil from Iran to partly fill the strategic storage in southern India as part of the Strategic Petroleum Reserves (SPRs) storage.

The first parcel of 2 million barrels of Iranian oil was imported by Mangalore Refinery and Petrochemicals Ltd (MRPL) with the help of very large crude carrier (VLCC) Dino.

India is planning to fill half of the storage with 6 million barrels of Iranian oil while continuing talks with United Arab Emirates and Saudi Arabia for the remainder. The second parcel of such reserve will be procured by Bharat Petroleum Corp.

Why it is important for India to have strategic storage?

  • India imports around 80% of its crude oil requirement from the international market. Most of these imports come from Middle East which is unstable region.
  • Any price aberrations in crude oil prices have a direct impact on the Indian economy especially upon the current account and inflation amounting to strategic risks.
  • Thus, it is necessary for India to have SPRs which will act as a valuable buffer against short term oil supply disruptions and global price shocks.

Government Proposals

  • Since 2003, the Central Government has commissioned the strategic oil reserves to maintain nation’s energy as well as economic security.
  • The erstwhile Planning Commission in its Integrated Energy Policy, 2006 also had recommended to maintain a reserve equivalent to 90 days of oil imports for strategic-cum-buffer stock purposes.
  • The recommendation was based on identification that any supply, market and technical risks in global supply chain of oil may become major threat to India’s energy security.

Present Status

India is building emergency SPR storages in vast underground caverns at three locations in southern India to store about 5.33 million tonnes of crude oil enough crude to cover almost two weeks of demand. They are located are in Visakhapatnam, Mangalore and Padur.

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