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Central Bank to help Indian refiners clear $6.5 billion dues for Iranian oil

06 Aug 2015 Evaluate

Central Bank has agreed to support Indian refiners to clear the outstanding dues of Iran for crude oil purchases which stands at $6.5 billion, accumulated since February 2013 so as to avoid a run on the rupee after Finance Secretary Rajiv Mehrishi last month led a four member delegation to Tehran to discuss modalities of clearing dues. RBI will be detailing the banking channels as well as the payment schedule in order to clear the dues with its Iranian counterpart. Last month Iran and six world powers sealed an accord to curb the Islamic Republic's nuclear programme in return for ending sanctions which will open up banking channels and Tehran is likely to seek past oil dues.  

From February 2013, Indian refiners like Essar Oil and Mangalore Refinery and Petrochemicals (MRPL) have been paying 45% of payment in rupees through UCO Bank, Kolkata which is due on purchase of crude oil from Iran while the remaining has been accumulating thereafter. Last fiscal, they paid nearly $3 billion in six installments through a limited payment channel. Since then the outstanding has reached over $6.5 billion.

Currently, the outstanding dues of Iran for crude oil purchases stand at $3.34 billion for Essar Oil, $2.49 billion  for MRPL, $581 million for IOC, $97 million for HPCL Mittal Energy(HMEL) and $29 million  for Hindustan Petroleum Corp (HPCL). Besides, about Rs 17,000 crore was lying in Iranian account with Uco Bank.

Earlier in 2011, when US and western powers blocked payment channels in a bid to bring Iran to the negotiating table over its controversial nuclear programme, RBI had facilitated oil payments to Iran via Turkey.

In past two fiscals New Delhi restricted import of Iran oil at 11 million tonnes under US pressure but with easing of sanctions it would look to increase imports provided Tehran continues to extend the fiscal terms like insurance and shipping as well as 90-day credit period, on oil it sells to India.

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