NEW DELHI: Iran has agreed to receive payments for USD 12 billion worth of crude oil it sells to India in rupees but Reserve Bank of India is yet to agree to the proposal.
RBI had last month said that oil payments to Iran can no longer be settled using a longstanding clearing house system run by the central banks of nine nations — including India and Iran — dubbed the Asian Clearing Union (ACU).
“For January, we have an interim arrangement for paying Iran through a German bank. But for a permanent solution, we will need to look at currencies other than dollar and euro,” a senior government official said.
At a meeting of central banks of India and Iran in Mumbai last week, the Persian Gulf nation agreed to accepting rupee payments but RBI so far has not agreed to it, he said.
The trade between India and Iran is heavily loaded in favor of Iran. As against exporting USD 12 billion worth of oil, Iran imports USD 1 billion worth of products from India.
“But if they are ready to receive payment in a State Bank of India account in Mumbai, it shouldn’t matter to us what they did with that money. If they used the money to import more, that will be good for the country. And if they used it to invest in India, that will create more jobs,” he said.
“Strangely, this proposition is not acceptable to RBI which had scrapped the well running ACU payment mechanism without consulting the oil companies or putting an alternate mechanism in place,” the official said.
Payment in Chinese currency is also being considered.
Oil Minister Murli Deora said a solution to the payment row would be found soon.
For January, SBI will route euro payments from its Frankfurt branch to the account of National Iranian Oil Co in the Hamburg-based Europisch-Iranische Handelsbank AG (EIH Bank).
India imports 12 million barrels of crude oil every month from Iran. Iran accounts for 12 per cent of India’s supplies and is its second-largest supplier behind Saudi Arabia.
Using the new system, Indian Oil Corp will receive a shipload of oil from Iran on January 8. Another cargo is scheduled to reach Essar Oil’s Vadinar Refinery in Gujarat on January 10 and a vessel load will reach MRPL’s Mangalore Refinery a day or two later.
Iran wants Indian firms to open euro accounts with Iranian-owned EIH, which is also known as European-Iranian Trade Bank AG, but that may not be a permanent solution, as the US had imposed sanctions against the bank in September.
S delegation led by an Additional Secretary in the Ministry of Finance and comprising representatives from the RBI, SBI and oil companies will visit Tehran on January 14-16 to find a permanent solution to the issue. .
Payment for Iranian crude in Japanese yen is also not possible as the US sanctions prohibit any freight payment for Iranian crude in Japanese currency.
The UAE dirham is also being considered as an alternative currency, but this also can not be a permanent solution, as the Middle East country strictly monitors payments routed to Iran and may block them under pressure from the US.
Sources said the best option was to pay Iran in Indian rupees, or in Chinese currency. The payment option, as well as issues like credit period, will be discussed at the Tehran meeting next week.
India imported 21.3 million tonnes of crude oil from Iran in 2009-10 and imports in 2010-11 are expected to amount to around 18 million tonnes, as Reliance Industries has totally stopped using crude oil from the Persian Gulf nation.
Iran currently gives IOC, which imports about 3 million tons of crude oil from the Persian Gulf nation, a credit period of 30 days. Mangalore Refinery and Petrochemicals Ltd (MRPL), which imports 7.1 million tonnes crude, gets a 90 day credit period. Essar Oil imports another 3 million tonnes.
At the meeting in Tehran next week, it will be discussed if NIOC is willing to extend these credit period even without RBI standing guarantee for the payments.
Refiners in India used the ACU, which settles payments in dollars and euros, to pay for oil purchases from Iran.
Regulations endorsed by the EU in October required deals involving Iran and the euro to be accompanied by a certificate outlining payment details for each and every transaction.
Under the ACU mechanism, payments for all trade deals between member countries are settled every two months, with individual transactions not accounted for separately.
MRPL is the biggest importer of Iranian crude oil with 7.1 million tonnes (about 4 million barrels a month) of contracted quantity. Mumbai-based Essar Oil imports roughly 3 million barrels per month (about 5 million tonnes a year) and IOC and Hindustan Petroleum Corp (HPCL) about 3 million tonnes each.
ACU, based in the Iranian capital Tehran, settles trade transactions from Bangladesh, Bhutan, India, Iran, Nepal, Pakistan, Maldives, Myanmar and Sri Lanka.
Till 2008, payments under the ACU mechanism was done in US dollars but after United States imposed sanctions against Iran over its suspected nuclear program, the currency shifted to Euro.
United Nations sanctions do not forbid buying Iranian oil and recently the European Central Bank (ECB) asked RBI to provide certificates that the Euro being used to import products are not on US sanctions list.
Sources said while certification for crude oil imports was easy to provide and track, RBI chose to scrap the entire system itself.
-PTI
