India and Iran are still in negotiations regarding the currency conversion rate and interest rate for clearing billions of dollars of dues that Indian oil firms owe to Tehran for buying crude oil since 2012, before economic sanctions were lifted on Iran, a top finance ministry official said.
“Negotiations on it are still going on. On both the issues of exchange rate and interest rate, it is still on,” he said. The negotiations are also being undertaken by the Indian oil refiners with the Iranian firms on the payment route details including selection of bank and the countries through which India will route the pending dues.
“Negotiations are going on at companies’ levels also,” he said.
India owes around $6.5 billion to Iran for oil imported by Indian refiners including MRPL, Essar Oil, HMEL, HPCL and IOC. Until now, India followed a mechanism of payments by which 45 per cent of oil import bill was paid in rupees and the remaining 55 per cent was kept pending for payment channels to clear. This mechanism has come to an end after the US lifted sanctions on Iran.
The official added that while Iranian firms want the dues to be cleared as per the current currency conversion rate, Indian refiners want to use the conversion rate prevalent at the time of purchase of crude oil over the last three years. The Indian currency was 55 rupees per dollar when the 45 per cent and 55 per cent payment mechanism came into force, while currency conversion rate is around 67 rupees per dollar. Iran has also expressed its wish to clear all its dues in euros, the official said.
On April 10, Pradhan had discussed the payment route with his Iranian counterpart Bijan Namdar Zanganeh in Tehran. During the discussions, three banking channels based out of Switzerland, France and Turkey were contemplated.
Tough sanctions put in place in early 2012 had halved Iran’s oil exports and strangled its oil revenue, crippling its economy and finally bringing it to the negotiating table. After a July deal between Iran and P+1 (composed of the five permanent members of the UN Security Council and Germany) that set the road map for lifting of sanctions aimed at Tehran’s nuclear activities, oil dues that many countries owe to Iran are being released in a staggered manner.
Post the sanctions on Iran for its alleged nuclear activities in 2012, India has sharply reduced its imports from Iran and started buying more from other suppliers such as Colombia, Mexico and Venezuela. In FY14 and FY15, India bought nearly 10-11 million tonnes of crude oil from Iran. In 2009-10, crude oil imports from Iran were to the tune of 21.20 million tonnes, which was reduced to 18.50 million tonnes in 2010-11; 18.11 million tonnes in 2011-12 and further dropped to 13.14 million tonnes in 2012-13.