Ahead of Prime Minister Narendra Modi’s maiden visit to Iran, Indian refiners have made first euro payments in four years to clear a part of the $6.4-billion in past oil dues.
Mangalore Refinery and Petrochemicals Ltd (MRPL) has paid $500 million and Indian Oil Corp (IOC) $250 million over the past two days, sources with direct knowledge of the development said.
Private sector Essar Oil is to pay $500 million.
The refiners cleared part of their outstanding towards crude oil they buy from Iran, through Union Bank of India which in turn transmitted the payment to National Iranian Oil Co (NIOC) through HalkBank of Turkey.
They bought US dollars and deposited with Union Bank which did an onward transmission in euros.
This the first payment by Indian refiners in a foreign currency since lifting of sanctions against Iran in January this year.
This also comes days ahead of Modi’s two-day visit to Tehran beginning Sunday during which reestablishing credible banking channels between the two nations is likely to figure prominently during talks.
Sources said the remaining outstanding will be cleared in installments to avoid a run on the rupee.
RBI is coordinating the repayments, they said.
With sanctions blocking banking channels, Indian refiners have since February 2013 paid nearly half of the oil import bill in rupees while keeping the remainder pending opening of payment routes.
The dues on the count now total to $6.4 billion.
MRPL owed $2.6 billion, out of which it has now paid $500 million. After payment of $250 million, IOC is now left with an outstanding of $310 million.
Essar Oil owes Iran about $2.6 billion while HPCL– Mittal Energy Ltd has to pay $60 million.