Budget 2026: Nirmala Sitharaman Delivers Big Blow To Chabahar Port Project; Will India, Iran Ties Decline?

New Delhi: The Union Budget 2026 has dealt a major blow to expectations for Iran's Chabahar Port project. After many years, the central government has not allocated a single penny to this ambitious project. This comes at a time when Iran is facing threats from US President Donald Trump, and India is counting down the days until the expiry of the US sanctions waiver granted for this port. Even setting aside Iran, the Chabahar Port project is not only crucial for India's commercial interests but has also become strategically very sensitive.

What is the Budget 2026 allocation for Chabahar Port?

India and Iran are jointly developing the Chabahar port. For this work, India has been allocating ₹100 crore annually for the past several years. However, this time, no amount has been allocated in the Union Budget. The US has imposed sanctions on the Chabahar port project, but it has granted India a waiver from these sanctions until April 2026.  Initially, the waiver was set to expire in October last year, but the US extended it for six months in September. Last month, the Ministry of External Affairs stated that it was in continuous discussions with the US on this matter.

What has the US said?

Meanwhile, the US has also threatened to impose an additional 25% tariff on countries trading with Iran. India is already facing the consequences of Trump's stance in the case of Russia (50% tariff). The way India has stopped funding the Chabahar port suggests that it is not currently planning to move forward with this project openly. However, officially, India remains a part of the project.

What is India-Iran agreement on Chabahar Port?

According to a Reuters report, India is currently managing the project with the help of local Iranian staff to avoid getting entangled in US regulations. However, these claims have not been officially confirmed by India. India had signed a 10-year agreement in 2024 for the operation of this project, which involved continuous investment. India and Iran are developing the Chabahar Port to further strengthen connectivity and trade relations between the two countries.

Will Chabahar Port be made a part of INSTC?

India and Iran are also strongly emphasizing the inclusion of Chabahar Port as part of the International North-South Transport Corridor (INSTC). INSTC is a 7,200-kilometer-long multi-modal transport project aimed at ensuring the smooth movement of goods between India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, and Europe.

Are other countries interested in Chabahar Port?

Chabahar Port facilitates India's access to Afghanistan and Central Asia, and in recent years, it has helped in delivering various types of humanitarian aid, including food grains and medical supplies. Countries like Uzbekistan have also shown considerable interest in this project, as landlocked countries that are wary of China's Belt and Road Initiative see significant benefits for themselves in this project. Similarly, Russia is also very interested in this project, as it wants to open up another avenue of opportunities with India through this route.