Oil imports from Iran down 35% from 2008-09

Ever since the ban on Iranian oil imports by European Union nations came into effect in February 2012, Indians oil companies have gradually reduced their dependence on oil from the West Asian country and put in place alternative arrangements.

India aims to cut Iranian oil imports by around 15% every year from the current level of 15 million tonne, which itself is down 35% from the level in 2008-09.

The country’s largest buyer of Iran crude oil, Mangalore Refinery and Petrochemicals (MRPL), has reduced imports from the country to 5 million tonne this fiscal from 6.2 million tonne in 2011-12.

MRPL bought around 7.1 million tonne of crude oil during the year 2010-11. Essar Oil, the second largest buyer of Iranian crude, has reduced imports by 15% from 5 million tonne last year and entered into contracts with South American countries like Columbia and Mexico to buy crude.

India has also sought an additional 5 million tonne of crude oil and 1.5 million tonne of liquefied petroleum gas (LPG) from Saudi Arabia to reduce dependency on Iran.

?Imports from Iran could be 14.5-15 million metric tonne in the current financial year ending March 31, slightly lower than an earlier target of 15.5 million tonne,? said oil secretary GC Chaturvedi. India imported 17.4 million tonne of crude from Iran in the preceding financial year.

Since July 2011, India has been using euros to clear most of its purchases of Iranian oil through Ankara-based Turkiye Halk Bankasi. As much as 55% of the $10-billion oil imports from Iran are settled through Halk Bank, while the rest of the payments are made in rupees via Kolkata- based UCO Bank.

India launched the rupee settlement mechanism from April 2012 to avoid US and EU sanctions under which state-owned UCO bank was appointed as the agency from India. It has a tie-up with four Iranian banks ? Parsian, Pasargad, Saman and EN Banks ? for carrying out the settlements of dues.

The new US Treasury sanctions, which came into effect from February, bar banks from transferring Iran?s oil revenues from importing nations to Tehran.

With the US-dollar financing system out of bounds for Iranian companies, India and Iran have begun a barter system in which Tehran accepts Indian rupees in payment for crude oil. It, then, uses these rupees to buy Indian goods like wheat and basmati rice.

Meanwhile, India and Iran are expected to have a joint commission meeting shortly for discussing issues concerning settlement of due in bilateral trade. Sources said, ?Issues related to payment for oil and agri products and other security related matters would be taken up in the meeting.?

Iran is an important source of India?s crude oil imports and a provider of trade routes to Central Asia, Russia and Afghanistan. Iran continues to be a major supplier of petroleum products to India, and the recent reduction in oil imports from Iran was primarily due to market factors and payment-related issues.