Even as India continues to work on getting a waiver from the US to continue importing oil from Iran, it has also started exploring a possibility of reviving a Rupee-Rial arrangement by allowing an Iranian Bank to set up in India.
India continues to work on a waiver from the US to continue its oil trade with Iran. However, future crude purchase agreements would be tied only after December as New Delhi is expected to have another round of talks with the US officials, highly placed sources told FE Online.
In view of this, India has started exploring a possibility of reviving a Rupee-Rial arrangement by allowing an Iranian Bank to set up in India.
While an earlier rupee payment window opened with UCO Bank or IDBI Bank may be utilised again for making payments for Iranian oil post sanctions, a senior official speaking on condition of anonymity has indicated that the Ministry of Finance has given its nod to Iranian Bank Pasargad to set up a branch in Mumbai, which will also help India to continue its oil supplies with Iran and make payment from the country.
Diplomatic sources told FE Online that at the recently concluded India-US 2+2 dialogue, the US offered to supply oil and gas worth $2.5-3 billion to India at short notice if the country needed it to meet shortfall arising from cut in Iranian oil imports post sanctions.
“The offer was indicated at 2+2 meeting in New Delhi, the details need to be worked out in detail post Nov 4, when petroleum related sanctions against Iran take effect. Transportation cost is an issue to bring oil from US,” added the diplomatic source.
The US is also considering offering concessions on such oil exports that could be at par with the terms India currently enjoys with Iran. What Iran offers to India is cheaper freight and a 60-day credit period to Indian importers such as Indian Oil Corporation, Mangalore refinery and petrochemicals (MRPL) and Nayara Energy (formerly Essar Oil).
According to reports India imports close to 10 per cent of its crude oil need from Iran. The imports from the Islamic Republic had dipped in FY2017-18 to 22.6 million tonnes (mt) from a level of 27.2 mt in FY2016-17. But in the current fiscal year (FY19), imports have again picked up making the Islamic Republic the second biggest exporter of oil to India.