Chinese port crane-maker Shanghai Zhenhua Heavy Industries Co (ZPMC) is yet to start constructing the four, so-called rail-mounted quay cranes (RMQCs) ordered by a government entity some three years ago for India-funded Chabahar port, further delaying the official start to the 10-year deal India signed with Iran.

The construction of the quay cranes has been delayed because foreign banks are wary of opening a letter of credit (LC) that assures payment to the supplier despite a sanctions-waiver given by the US to the port project.

India Ports Global, the entity formed to develop and run Chabahar port, had ordered the four RMQCs for a combined $29.8 million from ZPMC, the world’s largest port crane-maker, in September 2017.

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It had also ordered 14 rubber-tyred gantry cranes (RTGCs) for about $18 million from Finnish crane-maker Cargotec Oyj and two mobile-harbour cranes (MHCs) of 140 tonnes and four MHCs of 100 tonnes from Italy’s Italgru S.r.l.

Quay cranes or ship-to-shore cranes play a vital role in loading and unloading containers to and from a ship.

The main issue is the banks, said an official. The crane-makers will not accept money in rials or rupees; they want it in dollars or euros. Indian banks are convinced, but foreign banks are “still not convinced by the sanctions-waiver to the port project.”

“For opening LCs, we have to hit a foreign bank. But the moment foreign banks hear that it is for Iran, they say ‘nothing doing’. As a result, no payment has been made to ZPMC. Unless the payment is assured to the supplier in stages through the opening of an LC, it will not start construction,” said a government official briefed on the development.

India-China relations

The fallout of the recent border conflict with China on Chinese-made products and services has added a new “tricky” dimension to the crane purchase from ZPMC. Interestingly, the crane order was placed at the height of the Doklam stand-off with China in 2017.

Any attempt to scrap the RMQC order with ZPMC will backfire as there are no alternative crane makers willing to supply in the face of sanctions imposed by the US on the West Asian nation over the latter’s nuclear programme. This has forced India to keep the ZPMC contract alive.

The official said that India was able to get some equipment, but others, mainly the crucial RMQCs, are facing a big “road-block.”

For instance, the first set of mobile harbour cranes ordered at Italgru will be delivered at Chabahar in October, for which the “documentation was done carefully to sidestep the sanctions,” the official said.

The delay in erecting cranes has delayed the official start to the 10-year deal.

“The 10-year period has not yet started. Whatever we are operating now is in the zero period.

“Iran also understands that there are challenges because of the sanctions. Both the sides are not able to fulfil some obligations/conditions. So, Iran said, ‘forget the obligations, let us start operations’, and we have worked out some mechanism,” the official added.

The shareholding of India Ports Global itself underwent a change with Sagarmala Development Company, a firm controlled by the Shipping Ministry, purchasing the stake held by Jawaharlal Nehru Port Trust and Deendayal Port Trust to insulate the two state-run ports from possible impact of the US sanctions.

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