Iran has awarded a first contract to private investors for development of its railway infrastructure amid plans to expand the country’s rail freight transport market.

According to The Iran Project, CEO of Islamic Republic of Iran Railways (RAJA) Jabbar Ali Zakeri on Sunday put his signature on a final contract that allows the contribution of a private investor to the construction of a new rail link between cities of Kerman and Sirjan in southeast Iran.

Zakeri said the private investor will contribute to 65% of the funds needed to complete the new Kerman-Sirjan railway project which he said is worth 7,200 trillion rials ($120 million).

It is a first time Iran allows private investors to have a share in railway infrastructure projects in the country.

Private companies have already been involved in operational task and passenger services in the Iranian railway system.

Zakeri said the 169-kilometer railway between Kerman and Sirjan will cut the travelling time between the two cities by 320 kilometers and will increase the freight transport capacity on the route by 9.5 million metric tons per year.

He said the project will also lead to increased revenues for the government from passenger and freight transport between north and south of Iran.

The new RAJA chief said the Iranian government’s policy is to reduce freight transport on the roads and move it to the country’s railway system.

“Connecting to cargo hubs is a key objective of RAJA and it is why we are specially focused on industrial railways,” said Zakeri while referring to a type of railway that is usually not available for public transportation and serve a particular industrial or logistics purpose.

Iran has invested heavily in its road and railway networks in recent years as part of a government plan to increase revenues from international cargo transit.

That has come as demand for freight transport via the Iranian territory has increased, especially from countries like Russia and India.

Figures released last month by the Iranian transportation ministry showed the country was building some 2,800 kilometers of new railways.