New Delhi, May 13 (IANS): India on Monday signed a 10-year contract with Iran to develop and operate the Shahid Beheshti terminal at Chabahar port on Iran's south-eastern coast.

The contract was signed in Tehran by India Ports Global Ltd (IPGL) and the Ports and Maritime Organisation of Iran in the presence Union Ports, Shipping and Waterways Minister, Sarbananda Sonowal, the Indian Embassy in Iran posted on X.

Under the agreement, government-owned IPGL will invest about $120 million while there will be an additional $250 million in financing, bringing the contract's value to $370 million, Iranian Minister of Roads and Urban Development, Mehrdad Bazrpash, told journalists in Tehran,

The agreement was signed in the presence of Sarbananda Sonowal, who flew to Tehran for the crucial event amid the hectic Lok Sabha poll campaign.

Sonowal said with the signing of the agreement, the two countries have laid the foundations for India’s long-term involvement in Chabahar.

The new pact replaces an earlier agreement signed in 2016, allowing India to operate the Shahid Beheshti terminal in Chabahar port which was ad hoc in nature and had to be renewed every year.

"Chabahar Port's significance transcends its role as a mere conduit between India and Iran; it serves as a vital trade artery connecting India with Afghanistan and the Central Asian countries," Sonowal said after the signing of the agreement.

“The signing of this contract will have a multiplier effect on the viability and visibility of Chabahar Port,” Sonowal said, adding, "Chabahar is not only the closest Iranian port to India, but it is also an excellent port from a nautical point of view.”

India has been developing a terminal at the port in Chabahar to transport goods to Iran, and the land-locked countries of Afghanistan, Kazakhstan, and Uzbekistan. The new agreement with Iran would open a trade route between South Asia and Central Asia via Iran, bypassing Karachi and the Gwadar Port in Pakistan.

There are plans to link the Chabahar Port with the International North-South Transport Corridor (INSTC) that connects India with Russia via Iran, giving India access to the Central Asian region. This would be an alternative route bypassing the congested Persian Gulf and Strait of Hormuz sea lanes.

The development also comes at a time when China has been keen to increase its investments in ports and other coastal infrastructure in Iran.

Meanwhile, External Affairs Minister S, Jaishankar said in Mumbai that the agreement would provide the pathway for bigger investments and more linkages coming out of the seaport.