Iran said on Saturday that it is ready to increase its oil exports to India from the current volume of 350,000 barrels per day (bpd) now that the sanctions that had previously hampered Iranian oil export plans have been lifted.
“We hope that India’s imports of oil from Iran will increase now that the sanctions have been removed,” Iran’s Oil Minister Bijan Zangeneh told his visiting Indian counterpart Dharmendra Pradhan.
Zangeneh also said that Tehran and New Delhi have been discussing the development of Farzad B gas field by Indian companies for a long time, expressing hope that the two countries would bring their views over the project closer during Pradhan’s visit.
The Iranian oil minister further emphasized that the Islamic Republic is ready to facilitate energy ties with India in several areas including providing natural gas to Indian petrochemical projects as well as other energy-intensive projects in Iran.
Top on the agenda of talks between Iran and India during Pradhan’s visit will be the settlement of debts that Indian companies owe Iran for previous oil imports from the country.
Indications appeared in the media in early March that the two sides have come across differences over settling of the debts.
The difference reportedly involves the foreign exchange rate for the sum that India owes Iran.
Iran sold oil to refiners like Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MRPL) in US dollar per barrel. Around 45% of the oil bill was paid in rupees in a UCO Bank account while the rest 55% was to be cleared whenever banking channels open with the removal of the anti-Iran sanctions, reported the Business Standard on 6 March.
Rupee to a US dollar was under 55 in February 2013 when the 45:55 payment system became operational. Rupee to a US dollar is at around 67 now.
Ideally, if refiners had kept dollar equivalent to their purchase in separate account over the years they could have readily paid Iran now. But for a barrel of oil they bought in February 2013 at say $80, they would now have to pay Rs 5,360 instead of Rs 4,400 then, added the Business Standard.
Sources said Iran wants its dollar dues in full without factoring in the exchange rate. Refiners like Essar Oil on the other hand want to pay rupee equivalent of the purchase at current rate.
Tehran has told India that the three-year old mechanism of paying 45% of oil import bill in rupees and keeping the remaining 55% pending for payment channels to clear, has come to an end.
It will be opening or re-activating euro accounts with Indian banks and would like to have the past money transferred from refiners into these accounts.
Iran is talking to State Bank of India for the purpose and has also opened an account with IDBI.
Also, it wants settlement with India through the Asian Currency Union (ACU) and has written to the Reserve Bank of India (RBI) in this respect, they said.
The National Iranian Oil Company (NIOC) would ask buyers of crude in India to open Letters of Credit (LCs) in favor of Central Bank of Iran with SBI as was the case in past, the Business Standard has quoted sources as saying, adding that settlement could be done through the ACU and IDBI would be used for the purpose.