The Union Budget for the fiscal year 2026-27, presented on Sunday, has notably excluded any allocation for the strategically vital Chabahar port in Iran under the 'aid to countries and projects abroad' category. This omission comes at a critical juncture, as the project faces looming threats of renewed US sanctions, potentially jeopardizing India's key gateway to landlocked Afghanistan and Central Asia.
Strategic Silence on Chabahar Amid Geopolitical Tensions
The absence of budgetary provisions for Chabahar is particularly significant given the port's role as India's primary access point to Afghanistan and Central Asia, circumventing Pakistan. This development unfolds against the backdrop of the United States revoking the 2018 sanctions waiver last year, which previously permitted Indian involvement in the Iranian port. Although the US has extended the revocation deadline to April 26, expectations for a further extension remain dim due to Washington's ongoing campaign to isolate Tehran.
Financial Commitments and Government Clarifications
Government sources have clarified that India has already fulfilled its immediate financial obligations to the Chabahar project. The nation transferred the promised $120 million, with the final tranche completed in August 2025. According to official statements, there are no further funding requirements from the Indian side at this stage.
However, India's commitment under the 10-year agreement signed with Iran in 2024 remains intact. This pact involves equipping and developing the Shahid Beheshti terminal at Chabahar and includes a $250 million line of credit for the project. Importantly, this credit line is not time-bound as per the agreement, providing some flexibility amidst the sanctions uncertainty.
Diplomatic Engagements and Regional Implications
Despite reports suggesting India's potential withdrawal from Chabahar, the Indian government has affirmed its continued engagement with American authorities to negotiate a sanctions waiver arrangement. The port's strategic importance is underscored by India's diplomatic stance, including its vote against a UN Human Rights Council resolution censuring Iran, partly influenced by the need to maintain access to this crucial maritime hub.
Contrasting Allocations in Foreign Aid
The Budget 2026-27 reveals a mixed picture in foreign aid allocations. While the total fund allocation for the Ministry of External Affairs increased to Rs 22,118 crore from Rs 20,516 crore last year, and overall aid to countries rose from Rs 5,483 crore to Rs 5,685 crore, specific allocations show notable shifts.
Neighbouring countries such as Bhutan, Afghanistan, Nepal, and Sri Lanka saw increased allocations, reflecting India's continued focus on regional partnerships. In contrast, aid to Bangladesh was halved to Rs 60 crore from Rs 120 crore earmarked last year, coinciding with the country's elections this month under a hostile interim government.
Broader Budget Context and Public Reaction
The Chabahar port issue emerges within a broader budgetary framework that has sparked diverse reactions. West Bengal Chief Minister Mamata Banerjee criticized the Centre's budget as a 'Humpty Dumpty' budget with 'nothing for the common man,' highlighting political discontent. Meanwhile, public attention is also focused on changes in income tax slabs for FY 2026-27 and adjustments in prices for various goods and services, as detailed in the Budget documents.
As India navigates the complex interplay of strategic interests, diplomatic pressures, and domestic fiscal priorities, the silence on Chabahar in Budget 2026 underscores the delicate balancing act required in foreign policy and economic planning amidst global uncertainties.
