The deal to construct 628-km railway line from the port city of Chabahar to Zahedan province was part of a series of bilateral agreements signed between India and Iran in May 2016

Iran denied an Indian newspaper report that New Delhi was dropped from a key rail project along the border with Afghanistan after it showed reluctance in investing fearing American sanctions.

A deputy to Iran's Ports and Maritime Organization, Farhad Montaser, called the story "totally false because Iran has not inked any deal with India regarding the Zahedan-Chabahr" railway.

"Iran has only signed two agreements with Indians for investment in Chabahar: one is related to port's machinery and equipment, and the second is related to India's investment to the tune of $150m," Montaser was quoted by the IRNA news agency as saying on Wednesday.

"We had a list of Indian investments in Chabahar port, which also included the issue of Chabahar railway infrastructure and the railway, but during the negotiations it was not agreed."

He added "sanctions have nothing to do to Iran-India's cooperation in Chabahar".

The Hindu newspaper reported on Tuesday the Iranian government decided to proceed with the long-stalled rail project without India's participation.

A track-laying ceremony for the Chabahar-Zahedan rail line was held last week. It will eventually stretch to Zaranj on the Afghan side, enabling hassle-free trade and movement.

Indian consultancy IRCON had pledged to provide all services and funding for the project, estimated at about $1.6bn, according to the Hindu report.

In 2018, Washington agreed to a waiver for Chabahar port under the Iran Freedom and Counter-Proliferation Act of 2012, but the newspaper said Indian officials were still wary. 

Iran's President Hassan Rouhani has previously described the port as a vital part of shaping Iran's economic future.