It is learnt that India was mulling various options relating to the project after Trump administration threatened a 25 per cent additional tariff on countries doing business with Tehran.
Key Points
- This decision comes as the US has imposed fresh sanctions on Iran.
- India had been making an annual outlay of Rs 100 crore to the project in recent years.
- The US granted India a six-month exemption from sanctions on the Chabahar port project, which expires on April 26.
- India and Iran are strongly advocating for the Chabahar port to be an integral part of the International North-South Transport Corridor (INSTC).
India has not allocated funds for the Chabahar port project in Iran in the Union Budget for 2026-27 and has halved the development assistance for Bangladesh to Rs 60 crore in reflection of frosty bilateral ties.
Bhutan has been allocated the largest share -- Rs 2,288 crore -- as development aid, followed by Rs 800 crore to Nepal and Rs 550 crore each to the Maldives and Mauritius.
The Ministry of External Affairs (MEA) has been given a total of Rs 22,118 crore as against the current fiscal's budget estimate of Rs 20,516 crore and revised estimate of Rs 21,742 crore.
For the next fiscal, the allocation for Bangladesh has been pegged at Rs 60 crore. While the budget allocation to Bangladesh for 2025-26 was Rs 120 crore, the revised estimate put the amount at Rs 34.48 crore.
In a departure from the last few years, no allocation has been made for the Chabahar port project.
In the budget last year, an amount of Rs 100 crore was set aside for the port project in Iran and the amount increased to Rs 400 crore in the revised estimate.
US imposed sanctions on Iran
India has been making an annual outlay of Rs 100 crore to the mega connectivity project in the Sistan-Balochistan province on Iran's southern coast in the last several years.
In September last year, the US imposed crippling economic sanctions on Iran but had granted India a six-month exemption from the punitive measures on the Chabahar port project.
The waiver will come to an end on April 26.
The Chabahar port is being developed by India and Iran to boost connectivity and trade ties.
Both countries are also strongly pitching for making the port an integral part of the International North-South Transport Corridor (INSTC).
The total overseas development partnership portfolio for 2025-26 under the MEA's allocation has been pegged at Rs 6,997 crore, which is a little over 31 per cent of the allocation made to the MEA.
Interestingly, out of the total allocation under the overseas development partnership portfolio, Rs 4,548 crore has been earmarked for immediate neighbours.
The amount is expected to be spent towards implementation of a variety of initiatives ranging from large infrastructure projects such as hydroelectric plants, power transmission lines, housing, roads, bridges to small-scale grass-roots level community development projects, according to officials.
According to revised estimates for 2025-26, Bhutan was allocated an amount of 1950 crore.
In continuation with India's special relationship with the people of Afghanistan, an allocation of Rs 150 crore has been made to that country.
The allocation to Afghanistan for 2025-26 was Rs 100 crore.
While Sri Lanka has been allocated Rs 400 crore, an amount of Rs 300 crore has been set aside for Myanmar.
The total assistance for Latin American countries in the budget for 2026-27 has been pegged at Rs 120 crore.
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