NEW DELHI: India has signalled its intent to press ahead with development of the Chabahar port in Iran with the allocation of Rs 100 crore in the budget of the Indian foreign ministry. The port is of strategic significance to India given that New Delhi sees it as the route to access landlocked Afghanistan and Central Asia by passing Pakistan.

In the budget for 2020-21 announced on Saturday, Finance Minister Nirmala Sitharaman has earmarked Rs 17,372.27 crore for the Indian foreign ministry, marginally lower than what was allocated in the 2019-20 budget in which the ministry was allocated Rs 17,346.71 crore. The reduction in budget outlay was most significant for Nepal, where the reduction has been Rs 400 crore – from Rs 1,200 crore in the 2019-20 budget to Rs 800 crore in the 2020-21 budget.

In the case of Chabahar, the allocation has gone up by Rs 55 crore from Rs 45 crore in the 2019-20 budget. This comes more than two months after the US gave India a written assurance that it would help facilitate global banks to fund the purchase of equipment at Chabahar port -- during the Indo-US “2+2" meeting of foreign and defence ministers in Washington in December. The US had then included a confirmation of the special exemption to the development of the Chabahar port and a rail link from America’s Iran sanctions, provided there was no involvement of Iran’s Islamic Revolutionary Guard Corps.

Analysts in New Delhi say the allocation of resources for Chabahar port is a signal to both Iran and Afghanistan that India is committed to the project first agreed to in 2003.

Getting Indian companies to undertake any activity at Chabahar has been a non-starter given that Indian firms have been nervous of US sanctions despite assurances that India had won a carve-out from the US on developing the Iranian port.

Besides Chabahar, the government has also increased allocation for the port project in Iran and Rs140 crore to Seychelles where it has been keen to develop a coast guard facility. An agreement to this effect was signed in 2015 during Prime Minister Narendra Modi’s visit to the archipelago nation but internal political differences in the Seychelles have resulted in the project slowing down. The 2015 pact was seen as important in the context of India underlining its presence in the Indian Ocean region against the backdrop of China increasing its profile in the region considered India’s backyard.

The 2020-21 budget also allocates Rs 100 crore for organising the G-20 summit in 2022.

India’s defence budget on the other hand saw an increase in the 2020-21 budget with the finance minister allocating Rs 4.71 lakh crore compared to Rs 4.3 lakh crore in last year’s budget. This includes Rs 1.13 lakh crore under the capital head for modernisation which is an increase of Rs10,340 crore over the last year’s allocation. India’s military modernisation plans include new artillery guns and helicopters to fighters and submarines and analysts say modernisation plans can take a hit due to this.

Against the backdrop of a slowing economy and other constraints, the increase in this year’s defence budget over the previous year was about 6%, Laxman Kumar Behera, analyst at the government funded Institute of Defence Studies and Analyses think tank said. “It is a pretty big hike but most of the defence budget goes as pensions and wages," he said estimating a Rs 33,000 crore shortfall for modernisation. “Most of the Ministry of Defence budget goes in paying pensions and salaries and unfortunately there is no solution for this problem than the rationalisation of manpower," Behera said.

In his remarks, India’s newly appointed Chief of Defence Staff, Bipin Rawat said that the armed forces will be “prioritising our requirements for acquisitions and other requirements. After that, if we feel the need for more funds, we will take the requirements to the government. There is no cause of concern."