The deal will see five million tonnes of liquefied natural gas (LNG) supplied by Iran annually from 2009-2034.

The Indian Government said it aims to work towards a drastic reduction in pollution, with reports from the federal Pollution Control Board showing that pollution levels in most major Indian cities have exceeded national air quality standards for the last five years.

India's state-owned gas utility, GAIL, is trying to to secure supplies of 15 million tonnes of liquefied natural gas starting from 2007-08, and is dealing with various potential suppliers in order to do so.

Australia's North West Shelf venture is also in talks to sell 5 million tonnes of LNG to GAIL, and Australian foreign minister Alexander Downer has said Australia would be willing to provide technical help in building a terminal for the fuel at a southern Indian port.

GAIL, which distributes 90% if the country's nautural gas, is planning to import LNG at four ports, including a proposed terminal at Ennore in south-east India, which would be the facility closest to Australia.

While China's first LNG terminal is not due to come online until late next year, India already has two import facilities operating.