India’s decision to skip fresh funding for the Chabahar port project in the Union Budget 2026–27 has triggered debate in strategic and diplomatic circles, coming at a time when Washington has stepped up pressure on New Delhi over its engagement with Iran.
Strategic affairs expert Brahma Chellaney suggested the move may not signal a withdrawal, but a pause shaped by geopolitical realities. In a post, Chellaney wrote, “Chabahar Port is India’s only viable route to Afghanistan and Central Asia that bypasses Pakistan. An Indian exit would almost certainly leave a vacuum for China to fill. The absence of funding for Chabahar in India’s 2026–27 Budget may therefore reflect a tactical freeze rather than a strategic retreat, given Washington’s April 26 deadline for India to wind down operations or face sanctions.”
He added that India has already fulfilled a major part of its commitment to the project. “India has already transferred its principal commitment of $120 million toward the development of Chabahar’s Shahid Beheshti terminal. Because these funds are already ‘in the system,’ a fresh budgetary allocation may not have been technically necessary at this stage. New Delhi is reportedly exploring a ‘middle path’ with Washington on Chabahar.”
Budget silence amid US pressure
For several years, India had been allocating around ₹100 crore annually for the Chabahar port, located in Iran’s Sistan-Balochistan province. The absence of a new allocation this year marks a clear break from that pattern and comes against the backdrop of renewed US sanctions on Tehran.
The Trump administration had last September withdrawn the Chabahar-specific sanctions exemption that India received in 2018, intensifying pressure on New Delhi. “Stepping up its wanton pressure on New Delhi, the Trump administration last September gratuitously withdrew the Chabahar-specific sanctions exemption granted to India in 2018. It subsequently issued a temporary six-month waiver to let India wind down its operations by April 2026,” Chellaney noted.
That temporary waiver is set to expire on April 26, raising uncertainty over the future of India’s involvement in the project.
Strategic stakes remain high
The Ministry of External Affairs has indicated that discussions with Washington are ongoing. Last month, MEA spokesperson Randhir Jaiswal said India was engaged with the US on issues related to Chabahar. Sources suggest New Delhi has been weighing multiple options, particularly after the US administration threatened an additional 25 per cent tariff on countries continuing business ties with Iran.
India and Iran have long pitched Chabahar as a key connectivity hub, not only to facilitate trade with Afghanistan and Central Asia but also as a crucial link in the International North-South Transport Corridor (INSTC). The 7,200-km multi-modal corridor is envisioned to connect India with Iran, Russia, Central Asia and Europe, reducing transit time and costs.