“The payment problem with Iran has been resolved with the operationalisation of rupee payment mechanism through UCO Bank.”

Even as India and Iran resolved their long-standing issue of payments for export shipments, a high-level delegation of Indian officials, including businessmen, would be heading towards Tehran on March 10 to explore the huge business potential in view of sanctions imposed by the U.S. and European Union.

India and Iran have agreed to accept payment in rupee term, a move that could unlock huge sums pending on both sides. The delegation will be in Iran from March 10 to 14 and hold meetings with officials in Tehran and business world to explore the potential areas where India could become a partner or a stakeholder in the future. “There is a huge business potential in Iran and a delegation from India would be soon visiting there to tap that huge opportunity,” Commerce Secretary Rahul Khullar had said last month.

“The payment problem with Iran has been resolved with the operationalisation of rupee payment mechanism through UCO Bank. The payments which have been stuck in the past will be cleared expeditiously,” Federation of Indian Export Organisations (FIEO) President Rafeeque Ahmed said in a statement here on Friday.

Mr. Ahmed felt that the move to resolve this issue was a positive step by the government and it would encourage exporters to aggressively export to Iran and optimise utilisation of rupee balance in the oil import pool. The Department of Financial Services has asked the FIEO to bring cases where an exporter is facing payment problem with regard to export to Iran before the government.

Following resolution of the payment issue, he said the Indian business delegation would be able to negotiate new contracts with their Iranian counterparts. The Directorate-General of Foreign Trade (DGFT) has also agreed to grant all export benefits to exporters for which payment is received in Indian rupee and a notification will be issued soon.

The problem with Iran began after the Reserve Bank of India (RBI), in December 2010, withdrew the Asian Clearing Union (ACU) mechanism under which payments were made to Iran. India imports 12 million barrels of crude oil every month from Iran, which is the nation's second-largest supplier after Saudi Arabia.

After the scrapping of the ACU mechanism, Iran, which makes up for over 12 per cent of India's oil needs, had continued to supply oil on credit despite the outstanding amount crossing $3 billion. India is also one of the biggest importer of crude oil from Iran.

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