No resolution in sight to the rupee mechanism issue

Crude oil imports from Tehran have dropped by over 40 per cent this year.

With declining imports from Iran and no resolution to the rupee mechanism issue in sight, the government has already worked on a plan to substitute its imports from Iran by increasing its crude oil purchase basket from countries such as Iraq, Venezuela and Oman.

Iran had sometime ago conveyed to India its opposition to the 100 per cent rupee payment mechanism, and had refused to ship oil deliveries under this mechanism. It had said that it was going back to the 45 per cent rupee mechanism payment system, and the balance had to be paid either in euro, yen or rouble.

India and Iran had opened negotiations last month to arrive at some settlement on the issue, but are yet to resolve the issue. Similarly, the failure to make the oil insurance pool fund operational had badly impacted imports as major refiners in public and private sectors have been unable to source their crude imports from Iran due to lack of proper insurance coverage. The Rs.2,000-crore fund was to be financed through the contribution of Rs.1,000 crore by the Petroleum Ministry and a similar amount by state insurers, led by GIC. “The Petroleum Ministry is yet to release Rs.500 crore in shape of first instalment to make the fund operational, which is hampering imports. We are still awaiting a word from them on the issue so that things start moving in the right direction,’’ a senior Finance Ministry official said.

Recently, Petroleum Secretary Vivek Rae said India was targeting 13 million tonnes of oil import from Iran in 2013-14. It had already imported around two million tonnes till last month, and wanted to import another 11 million tonnes during the rest of the fiscal.

Since July, 2011, India had paid in euro to clear 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining amount due was remitted in rupee form in the accounts of Iranian National Oil Company in Kolkata-based UCO Bank. Payments in euro through Turkey ceased from February 6 this but the rupee payments for 45 per cent of the purchases continued through UCO Bank. Iran later agreed to take all of the payments in rupees.

India’s imports of Iranian oil have fallen to 194,000 barrels per day (bpd) during January-September, down from 324,000 bpd in the same period last year, according to latest official figures. The September volumes rose to 296,100 bpd from 151,000 bpd in August due to IOC importing two million barrels of oil from Tehran.

The September volumes were down 8.1 per cent from a year ago.

More In: Industry | Business