India has pledged $1.6bn to build a 500-kilometre railway linking the Chabahar port, located in southern Iran on the Gulf of Oman coast, with Zahedan, close to Iran’s border with Afghanistan primarily through its Zaranj region.

India’s state-owned Ircon International signed a memorandum of understanding (MoU) with Iran’s Construction & Development of Transportation Infrastructures Company in May to undertake the project.

The Chabahar-Zahedan-Zaranj line is a strategic transit corridor as it will allow India to bypass Pakistan in transporting goods to Afghanistan via a sea-land route. It will also provide access to other markets in Central Asia.

The MoU was signed along with a trilateral agreement between Iran, India and Afghanistan to expand the Chabahar port into a regional trade hub and provide an alternative route from the Indian Ocean to land-locked Afghanistan. India’s Prime Minister Narendra Modi has agreed to finance the development of the port with a $500m credit line.

India plans to build and operate two terminals and five berths with cargohandling capacity at the Chabahar port. Other proposed schemes in the Chabahar special economic zone include more than a dozen petrochemicals plants and a 1,000MW power facility, as well as a steel manufacturing complex.