Graph Neural Networks often struggle with long-range information propagation and may underperform in the presence of heterophilous neighborhoods. We address both of these challenges with a unified framework that incorporates a clustering inductive bias into the message passing mechanism, using additional cluster-nodes. Central to our approach is the formulation of an optimal transport based clustering objective. However, optimizing this objective in a differentiable way is non-trivial. To navigate this, we adopt an iterative process, alternating between solving for the cluster assignments and updating the node/cluster-node embeddings. Notably, our derived optimization steps are themselves simple yet elegant message passing steps operating seamlessly on a bipartite graph of nodes and cluster-nodes. Our clustering-based approach can effectively capture both local and global information, demonstrated by extensive experiments on both heterophilous and homophilous datasets.