The Reserve Bank of India is holding discussions with Tehran on modalities of payment of reported dues of $6.5 billion for oil imports, Governor Raghuram Rajan said on Tuesday.
“We are discussing with them (Iran) the way they want to be paid and certainly, we will work with them on when and how we pay them. I don't think it will happen as a lump sum. It is going to be staggered," Rajan said during the customary post-policy call with analysts as quoted by Economic Times.
He, however, did not disclose the quantum of payments to be made to Iran, which is getting ready for normal trade and banking ties in the post sanctions era.
Indicating that the commitments will be honored, Rajan said meeting the payment should not be a concern as the country has over $350 billion in its forex kitty at present.
India has insisted in the past it wants to repay its oil dues to Tehran in rupees despite Iran's demands to receive the money in a more credible currency such as euro.
In August 2015, a central government official had said RBI will be assisting Indian refiners to clear over $6.5 billion of past dues they owe to Iran for crude oil purchases.
Payment Channel
The central bank, which previously facilitated payment of oil import bill to Iran, had agreed to help in creating the payment channels to clear past dues.
The then finance secretary Rajiv Mehrishi had led a four member delegation to Tehran in July 2015 to discuss modalities of clearing the dues.
After the US and western powers in 2011 blocked payment channels to Iran, RBI had facilitated oil payments to Iran via Turkey.
Iran and six world powers last year sealed an accord to curb the country's nuclear program in return for ending sanctions. The lifting of sanctions is expected to open up banking channels for Tehran.
India is keen that repayment of dues since February 2013 should be done in a staggered manner so as to avoid a run on the rupee. India has also suggested exporting its goods to Iran instead of making the payment, but Iran is not interested in an "oil-for-goods'' deal, not uncommon during the sanctions period. India was Iran's second-largest oil customer when sanctions disrupted Iran's sales at the time.
Since February 2013, Indian refiners like Essar Oil and Mangalore Refinery and Petrochemicals (MRPL) have been paying 45% of payment dues on purchase of crude oil from Iran in rupees through Uco Bank, Kolkata. The remaining has been accumulating, pending finalization of a payment mechanism.
They had last year paid nearly $3 billion in six installments through a limited payment channel following the start of nuclear talks between the Iran and the six world powers. The outstanding has since climbed to over $6.5 billion.
India's dithering in paying its oil dues to Tehran comes as almost all other entities have started paying their oil debts to Iran, including Royal Dutch Shell. IRNA reported that India's oil minister, Dharmendra Pradhan, is due in Tehran on Saturday to hold talks with Iranian officials over the issue.
