India and Iran have differed on the currency conversion rates for clearing billions of dollars of dues that Indian oil firms owe to Tehran for buying crude oil since 2012.
This assumes importance at a time when Indian refiners such as MRPL, Essar Oil, HMEL, HPCL and IOC are still awaiting a payment channel to clear their dues after the lifting of sanctions by western powers last year. “There is a dispute on euro component of the dues. The Iran oil company and Indian oil firms have to decide on the actual amount. Indian oil companies say they will give dues as per the exchange rates (euro) when contracts were signed. The Iranian side says it should be in current rates of euro,” a senior government official told FE.
This means Indian refiners would have to shell out more if bills are settled on current currency conversion rates. Besides nearly $6 billion to be paid to Iran in euro, the Indian oil refiners would also have to pay Rs 12,000 crore in rupee.
As on April 27, rupee-euro exchange rate stood at Rs 75.18, down 8.1% from Rs 69.56 on the same day in 2012. Since 2012, India’s oil dues to Iran piled up because of economic sanctions on the Islamic country. The last payment was made in September-October 2015, wherein Indian refiners paid $1.4 billion in two tranches through UCO Bank to the Central Bank of Iran’s account held with Oman’s Bank Muscat.
A senior petroleum ministry official told FE that further payments would be made in euro and the contract says that the value would be as on the 88th day after the cargo lands on Indian shores. “Indian refiners would stick to the contract,” the official reiterated. New Delhi and Tehran are diplomatically engaging to sort out the issues. Petroleum minister Dharmendra Pradhan and external affairs minister Sushma Swaraj visited the Islamic nation earlier this month. Prime Minister Narendra Modi is also likely to visit Iran later this year.
On April 10, Pradhan discussed the payment route with his Iranian counterpart Bijan Namdar Zanganeh in Tehran. During the discussions, three banking channels based out of Switzerland, France and Turkey were contemplated. Now, New Delhi is awaiting a confirmation from Tehran on payment channel.
Toughened sanctions put in place in early 2012 had halved Iran’s oil exports and strangled its oil revenue, crippling its economy and finally bringing it to the negotiating table. After a July deal between Iran and P+1 (composed of the five permanent members of the UN Security Council and Germany) that set the road map for lifting of sanctions aimed at Tehran’s nuclear activities, oil dues that many countries owe to Iran are being released in a staggered manner.