Currently, Russian coking coal comes to India through the Red Sea route. The plan to use Chabahar port comes at a time when India’s imports of coking coal from Russia are steadily rising, and trade through Chabahar would be more economical than through the current route.

The development, which comes about a month after India and Iran signed a contract for the former to invest $120 million in the port on Iran’s southeastern coast and operate it for 10 years besides offering $250 million credit for improving the port’s infrastructure, will establish India’s presence on a strategic route considered to be the main gateway for shipments from the Indian subcontinent to Europe.

“The use of the International North-South Corridor (INSTC) and the Chabahar port would be quite beneficial, and coking coal is among the key mineral resources along with few others from central Asia being looked at for sourcing by India via this route,” one of the persons cited above said on condition of anonymity. The INSTC is a 7,200-km network of ship, rail, and road routes being developed to move freight between India, Iran, Azerbaijan, Russia, Central Asia and Europe. 

Apart from Russia, Chabahar port is also being considered as a gateway to trade with resource rich Central Asian republics, for which plans for separate railway connections with Chabahar port are being worked out.

“Both Bandar Abbas (also in Iran) and Chabahar ports would be beneficial as using that route through the INSTC reduces the time of the voyage by 40% and freight by one-third,” said Ajay Sahai, director general and CEO of Federation of Indian Export Organisations. “Further, at a time when the Red Sea route is still in a crisis situation, the Chabahar port would be a better option.” Bandar Abbas is Iran’s main port, but is congested. It lies about 650 km west of Chabahar in the Persian Gulf region and is a port of call for INSTC.

Queries sent to the ministry of port, shipping and waterways remained unanswered till press time.

The Chabahar advantage

Located in the Sistan-Baluchistan province on Iran’s southeastern coast, Chabahar Port can be easily accessed from India’s west coast. Kandla port in Gujarat is the closest port at 550 nautical miles, while the distance between Chabahar and Mumbai is 786 nautical miles.

Recently, at the BRICS transport ministers’ meeting at the 27th St. Petersburg International Economic Forum (SPIEF), Igor Levitin, Russia’s presidential aide, announced plans to export coal to India using Iran’s railways. Russia will use INSTC to send coal to India. After the rail journey, the coal shipment would travel to India through the Bandar Abbas port, he had said. 

Anil Devli, CEO of Indian National Shipowners’ Association (INSA), said using this new route and the Chabahar port for supply of coking coal would be economically more beneficial for Russia as it exports the mineral on the basis of delivered cost. Under delivered pricing, a seller agrees to deliver merchandise to a purchaser at a designated place, which usually includes the free on board (FoB) price at the shipping point plus transportation charges.

“If Russia uses INSTC, then it would incur lesser expense on transportation. Otherwise the Red Sea crisis has not been an issue for Russian cargoes so far. For India, it would help in the long run as the usage of the port and trade gains momentum. In this situation, India will also be able to send cargo and we would see freight movement from both sides, rather than containers going empty from one end. This eventually would help strengthen trade,” Devli said.

“Dry cargo movement through the port is likely to see a pick up from this year as infrastructure is available to handle such goods,” said an official of ministry of port, shipping and waterway on condition of anonymity. “Wet cargo may take some time but infrastructure to handle such cargo would be pursued so that Chabahar emerges as a major point for energy trade for India.” 

Once Chabahar port develops facilities for handling wet cargo, some of the oil supplies from Russia, which are currently coming through the Red Sea route, may be supplied through this new route.

The first person quoted above said that Chabahar would also provide an alternative to the much delayed TAPI (Turkmenistan, Afghanistan, Pakistan, India) energy pipeline as gas and other resources could be routed through Iran to Chabahar SEZ for onward shipping to India. However, there are no immediate plans for use of the port for transport of energy resources such as oil and gas, the person added.

Coking coal imports

Coking coal imports from Russia increased 17.31% to 5.2 million tonnes in FY24, from 4.48 million tonnes in FY23. This rise in imports came in the backdrop of lower prices. Although imports rose in volume terms, the import bill for the Russian mineral declined. The value of coking coal imports from Russia in FY24 was $1.04 billion, about 9% lower than $1.15 billion in the previous financial year (FY23).

Due lower prices, quicker deliveries, and in a bid to diversify supplies, Indian steel companies have increased their intake of Russian coking coal.

About 90% of India’s coking coal requirement of 60 mt is currently imported, with more than 70% coming from Australia. India has been looking to diversify its imports of steelmaking coal and identified a few markets. Russia has now emerged as a preferred source due to its pricing and ability to deliver quickly.

In terms of crude oil, Russia has already surpassed other traditional suppliers to become the largest oil exporter to India with deep discounts since the outbreak of the Ukraine war. According to data from the ministry of commerce, India imported crude worth $46.48 billion from Russia in the previous fiscal (FY24), about 50% higher from $31.02 from FY23. The share of imports from Russia was one-third of the total oil import bill in value terms.