India is planning to transport coking coal, a vital import for steel production, and other natural resources from Russia and several Central Asian countries through the strategically significant Chabahar port in Iran. Two individuals familiar with the matter confirmed the development, stating that the movement is likely to commence later in fiscal year 2025. Currently, Russian coking coal is shipped to India via the Red Sea route. The decision to utilize the Chabahar port comes at a time when India’s imports of coking coal from Russia are steadily increasing. This move presents a more economical alternative to the current route.
The development, which follows a recent agreement between India and Iran for India to invest $120 million in the port and operate it for a decade, along with a $250 million credit commitment for port infrastructure improvements, will solidify India’s presence on a strategic route considered the primary gateway for shipments from the Indian subcontinent to Europe.
One of the sources, speaking on the condition of anonymity, highlighted the benefits of utilizing the International North-South Transport Corridor (INSTC) and the Chabahar port. The INSTC, a 7,200-kilometer network of ship, rail, and road routes under development, facilitates freight movement between India, Iran, Azerbaijan, Russia, Central Asia, and Europe. Coking coal, along with other key mineral resources from Central Asia, are being considered for sourcing by India through this route.
Apart from Russia, the Chabahar port is also being explored as a gateway for trade with resource-rich Central Asian republics. Plans for dedicated railway connections to the Chabahar port are currently being finalized. Ajay Sahai, Director General and CEO of the Federation of Indian Export Organisations, emphasizes the advantages of both Bandar Abbas and Chabahar ports. He notes that utilizing this route via the INSTC reduces voyage time by 40% and freight costs by one-third. He also points out the strategic advantage of the Chabahar port in the current context of the Red Sea route experiencing a crisis. Bandar Abbas, Iran’s primary port, while congested, is located about 650 kilometers west of Chabahar in the Persian Gulf region and serves as a port of call for the INSTC. Queries directed to the Ministry of Ports, Shipping, and Waterways remained unanswered at press time.
The Chabahar port, located in the Sistan-Baluchistan province on Iran’s southeastern coast, is easily accessible 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. At the recent BRICS transport ministers’ meeting held during the 27th St. Petersburg International Economic Forum (SPIEF), Igor Levitin, Russia’s presidential aide, announced plans to export coal to India utilizing Iran’s railway network. Russia plans to leverage the INSTC for coal transportation to India. Following the rail journey, the coal shipment will be transported to India via the Bandar Abbas port.
Anil Devli, CEO of the Indian National Shipowners’ Association (INSA), asserts that using this new route and the Chabahar port for coking coal supply would be economically more advantageous for Russia as it exports the mineral based on a delivered cost model. Under this model, the seller agrees to deliver the merchandise to the purchaser at a designated location, encompassing the free on board (FOB) price at the shipping point plus transportation charges. Devli elaborates, stating that if Russia utilizes the INSTC, it will incur lower transportation costs. He emphasizes that while the Red Sea crisis has not significantly impacted Russian cargo movement so far, the new route would be beneficial for India in the long run as the port’s usage and trade volume gain momentum. This development would enable India to send cargo through the route, resulting in two-way freight movement rather than empty containers from one end. Ultimately, this will strengthen trade ties.
An anonymous official from the Ministry of Ports, Shipping, and Waterways indicated that dry cargo movement through the port is anticipated to increase this year, as the necessary infrastructure to handle such goods is already available. Wet cargo handling may take some time, but the ministry will pursue the development of infrastructure for handling such cargo to establish Chabahar as a significant hub for India’s energy trade.
Once the Chabahar port develops facilities for handling wet cargo, some of the oil supplies from Russia, currently transported through the Red Sea route, could potentially be shipped through this new route. The first source also highlighted that Chabahar could serve as an alternative to the long-delayed TAPI (Turkmenistan, Afghanistan, Pakistan, India) energy pipeline, enabling gas and other resources to be transported through Iran to the Chabahar Special Economic Zone for onward shipment to India. However, the source also clarified that there are no immediate plans for using the port for the transport of energy resources such as oil and gas.
India’s coking coal imports from Russia experienced a 17.31% increase to 5.2 million tonnes in fiscal year 2024, compared to 4.48 million tonnes in the previous fiscal year. This surge in imports was driven by lower prices. Despite the volume increase, the import bill for Russian coking coal decreased. The value of coking coal imports from Russia in fiscal year 2024 reached $1.04 billion, about 9% lower than the $1.15 billion recorded in fiscal year 2023. The combination of lower prices, faster deliveries, and the desire to diversify supply sources has led Indian steel companies to increase their intake of Russian coking coal.
Currently, about 90% of India’s coking coal requirement of 60 million tonnes is met through imports, with over 70% originating from Australia. India has been actively pursuing diversification of its steelmaking coal imports and has identified several potential markets. Russia has emerged as a preferred source due to its competitive pricing and its ability to deliver quickly.
In terms of crude oil, Russia has already overtaken traditional suppliers to become India’s largest oil exporter, offering significant discounts since the outbreak of the Ukraine war. According to data from the Ministry of Commerce, India imported crude oil worth $46.48 billion from Russia in fiscal year 2024, representing a 50% increase from the $31.02 billion imported in fiscal year 2023. Russian imports accounted for one-third of India’s total oil import bill in value terms.
