Reserve Bank of India yet to give its nod to the proposal
Iran has agreed to receive payments for $12 billion worth of crude oil it sells to India in rupees but the Reserve Bank of India (RBI) is yet to agree to the proposal.
RBI had last month said oil payments to Iran could 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 favour of Iran. As against exporting $12 billion worth of oil, Iran imports $1 billion worth of products from India.
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“But if they are ready to receive payment in a State Bank of India (SBI) 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 today 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 (NIOC) in the Hamburg-based Europäisch-Iranische Handelsbank (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 (IOC) 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 Mangalore Refinery and Petrochemicals Ltd’s (MRPL) 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, but that may not be a permanent solution, as the US had imposed sanctions against the bank in September.
A delegation led by an Additional Secretary in the Ministry of Finance and comprising representatives from the RBI, SBI and oil companies will visit Teheran 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 Teheran 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.