The government’s decision to slash its allocation for Iran’s Chabahar port by two-thirds, as announced by Indian Finance Minister Nirmala Sitharaman in the latest Budget will be a further blow to India-Afghan trade, already hit by Pakistan’s decision to ban airspace rights to most flights to and from India, and U.S. sanctions on Iran, officials and diplomats in Delhi and Kabul said.

India, which had been allocating ₹150 crore for the port each year for the past few years, has slashed its allocation to just ₹45 crore in the Budget for 2019-2020. When asked for reasons, Ministry of External Affairs (MEA) sources said the figure reflected a “readjustment in the budgetary allocation based on a realistic assessment of likely expenditure to be incurred this financial year,” in comments indicating that India does not anticipate developing Chabahar port at the same pace as earlier.
Waiver of little help
Technically, the U.S. has issued India a waiver to develop Chabahar port, to promote trade with Afghanistan as a part of its “South Asia” strategy. In practice, however, the cancellation of all waivers for oil and crippling economic sanctions imposed by the Trump administration, have all but frozen deals. Afghan banks are hesitant to open credit lines for shipments, and shippers and cargo handlers are staying away from servicing the Iranian port.
“During the last months (February-May), Chabahar had flourished for transportation of goods and commodities to Afghanistan and central Asia with the volume of loading and unloading twice as much as before,” Iran’s Ambassador to Delhi Ali Chegeni said. “But the U.S. officials’ hostile statements on Iran’s sanctions naturally and indirectly has negative impacts and led to worry amongst companies about working with Iranian ports including Chabahar,” he told The Hindu.
Speaking to journalists last week, Afghanistan’s new head of mission Tahir Qadiry said they hoped Pakistan’s airspace ban, which had been extended until July 12, would be lifted shortly. Aside from trade, urgent travel for Afghan medical patients, students and businessmen has become virtually impossible, with most direct flights cancelled.
“A flight from Delhi to Kabul that used to take one-and-a-half hours now takes five hours,” Mr. Qadiry explained. Ariana Afghan, SpiceJet and Air India suspended their operations to Kabul after Pakistan imposed its airspace curb in the wake of the Balakot Strikes on February 26th. Afghan-owned Kam Air operates only three times a week from New Delhi, taking a detour via Surat and southern Pakistan to enter Afghanistan. As a result of the ban, Afghan fruit and agricultural products that had made up a bulk of the cargo on flights between Kabul and Delhi are being shipped to other international markets.
“The original cargo corridor is not operational as of now,” Barun Birla of Aero Trek International, the cargo company that operated the inaugural cargo charter on the corridor, confirmed to The Hindu. However, Afghan officials said 221 flights, including commercial passenger airlines had carried cargo between the two countries since June 2017, according to an arrangement where the Afghan government subsidises about 80% of the transport costs to promote India-Afghan trade.The downturn in trade, for which figures are yet to be released, will dampen hopes that had been raised by the introduction of the “air corridor” service between the two countries in June 2017, as well trade through Chabahar port that began in February 2019. Since then Afghanistan had exported goods worth more than $150 million to India through the air corridor and goods worth $2 million through Chabahar, a spokesperson for the Afghan Embassy in Delhi said. In July last year, the former Afghan Ambassador to India had projected trade of “$2 billion between both countries by 2020”. However,
Officials say that with trade through both air and sea routes restricted, as well as Pakistan’s refusal to give Afghan trucks passage to the Wagah land route, trade may come to a standstill for now.