NEW DELHI: Chabahar Port agreement with Iran is a landmark development that will help Indian companies boost their engagement in Central Asia and also significantly reduce the transportation cost, industry chamber Ficci said today.

“Prime Minister Narendra Modi’s outreach to Tehran has infused vigour into the momentum to develop connectivity, infrastructure and in India’s energy security goals,” the industry body said.

India and Iran yesterday signed a bilateral pact┬áto develop the Chabahar port for which India will invest USD 500 million, during Modi’s visit to the Persian Gulf nation.

The key agreement signed was a contract for development of Phase I of the Chabahar port on the southern coast of Iran by an Indian joint venture.

“The signing of commercial contract for the Chabahar Phase 1 will open a route to land-locked Afghanistan and cut transport costs/time by third,” Ficci said.

Chabahar port, located in the Sistan-Balochistan Province on the energy-rich Persian Gulf nation’s southern coast, lies outside the Persian Gulf and is easily accessed from India’s western coast, bypassing Pakistan.

The development of the port “will help Indian companies enhance engagement in Iran and gain access to Afghanistan & Central Asia. In the long run Chahabar will also serve as the point of origin for the proposed Iran-Oman-India pipeline,” the chamber pointed out.

“A multiplier effect rests on the possibility that other international investors may also see the rationale of this important investment, thus paving the way for creation of a strategic bulwark that facilitates greater flow of people and goods among the three countries, as well as in the region and contributes to economic growth of Afghanistan,” Ficci said.

India and Iran had in 2003 agreed to develop Chabahar on the Gulf of Oman outside the Strait of Hormuz, near Iran’s border with Pakistan.

“The bilateral agreement to develop the Chabahar port and related infrastructure signed by Prime Minister Narendra Modi and Iranian President Hassan Rouhani, underlines the extraordinary strategic opportunities that present themselves for India in the region,” Ficci noted.

The chamber said it “sees PM Modi’s timely visit to Iran setting the stage for boosting trade in a big way. The 12 MoUs signed between the two countries cutting across culture, science & technology, exchange of info & knowledge and many another aspects of economic engagement, as a significant effort to build enduring partnership”.