India has approved a $150 million credit line for the development of Iran's Chabahar port, the government said in a statement.

The port in southeast Iran is central to New Delhi's efforts to circumvent arch-rival Pakistan and open up a route to landlocked Afghanistan where it has developed close security ties and economic interests.

Under the agreement signed last year between the two countries, India will equip and operate two berths in the first phase of development at Chabahar Port and extend a credit line of $150 million through its external lending arm.

Both berths will commence operations within 18 months of the signing of a final contract, the statement said.

India will make a capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a ten year lease following which the ownership of equipment will be transferred to Iran.

New Delhi and Tehran agreed in 2003 to develop Chabahar on the Gulf of Oman, near Iran's border with Pakistan, but the venture has made little progress because of the sanctions over Iran's atomic programme. Western nations last month lifted some of those sanctions.-Reuters