India plans to save over $8.5 billion in foreign exchange this fiscal by increasing crude oil imports from Iran, Oil Minister M. Veerappa Moily has told Prime Minister.
India, which paid about $144.29 billion last fiscal for importing oil, is renewing imports from Iran as unlike imports from other countries it pays the Persian Gulf nation in rupees.
Detailing plans to save $20 billion in foreign exchange spending, Mr. Moily on August 30 wrote to Prime Minister Manmohan Singh saying about 11 million tonnes of crude will be imported from Iran in the remainder of the fiscal.
“About 2 million tonnes crude oil has been imported from Iran so far during the current financial year. An additional import of 11 million tonnes during 2013-14 would result in reduction in forex outflow by $8.47 billion (considering the international price of crude oil at $105 per barrel),” he wrote.
The plan is in response to Prime Minister’s call to the ministry seeking $25 billion cut in oil import bill to narrow current account deficit.
Mr. Moily, who also wrote an almost identical letter to Finance Minister P. Chidambaram, said he has “worked out some concrete measures which could result in a saving of around $19-20 billion in the current financial year.”
The biggest component of the plan is restarting import of oil from Iran. As US and western sanctions blocked all payment routes, India pays Iran in rupees in a Uco Bank branch in Kolkata.
Other measures include asking state-owned oil firms to keep crude imports at 2012-13 level of 105.96 million tonnes that will save $1.76 billion in foreign exchange.
Also, a mega fuel conservation campaign to limit fuel consumption growth to last year’s 4.1 per cent will save another $2.5 billion, he said.
The plans outlined by Mr. Moily are part of government’s efforts to prop up the rupee, which has slipped 23 per cent against the US dollar this fiscal.
India, which last fiscal imported 13.1 million tonnes of oil from Iran, has been, since July 2011, paying in euros to clear 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent due amount was remitted in rupees in accounts Iranian oil company opened in Kolkata-based Uco Bank.
Payments in euro through Turkey ceased from February 6 this year and now Iran is paid only in rupees. Rupee payment helps save foreign exchange outgo, thereby reducing CAD.