India to Clear Oil Dues in 2 Months

India to Clear Oil Dues in 2 MonthsIndia to Clear Oil Dues in 2 Months

Iran has urged India to pay up its $6.5 billion oil dues in two months, partly in rupees and the rest in dollars or euros.

"The payment shall be made in at least three installments. The modalities of installments and the route are being worked out," an unnamed top Indian official was quoted as saying by Business Insider India.

Since February 2013, refiners like Mangalore Refinery and Petrochemicals (MRPL) and Essar Oil have been paying 45%of payment due on purchase of crude oil from Iran in rupees through UCO Bank, Kolkata.

The remaining has been accumulating, pending finalization of a payment route and mechanism.

Last year, they paid nearly $3 billion in six installments through a limited payment channel following the start of nuclear talks between Iran and the West.

The outstanding dues have since climbed to over $6.5 billion. Essar Oil owes $3.34 billion, MRPL $2.49 billion and Indian Oil Corp $581 million to Iran. HPCL-Mittal Energy Ltd owes $97 million and Hindustan Petroleum Corp Ltd another $29 million.

The official said the repayment may happen through the Reserve Bank of India.

Iran is expected to open a new account with one of the Indian banks to accept the payment. The country will use the rupee payments to settle bills for goods and commodities it imports from India.

The official said the new account will be different from the UCO Bank account, which is a non-interest bearing account.

"They want the payments to be made to an interest-bearing account," he said.

"Part of the payment in US dollar or euro and part in Indian rupees."

Last week, Finance Secretary Rajiv Mehrishi had told PTI that India is willing to clear the $6.5 billion in past oil dues and modalities are being worked out.

"What is due to them must be paid to them. It will not be one single bullet of $6.5 billion. It will be (in) tranches." he said.

Mehrishi, who had late last month led a high-level delegation to Iran to discuss payment options, had indicated that the payments can be in a combination of US dollar or euro and Indian rupees.

"It will obviously be partly in dollars, partly in rupee. It could be euro also. Partly hard currency, partly rupee. Exact division is yet to be decided," he said when asked about the mode of payment gateway.

Iran and six world powers (Britain, China, France, Russia and the US plus Germany) sealed an accord last month to curb the Iran's nuclear program in return for ending sanctions.

The upcoming lifting of sanctions has opened up banking channels and Tehran is now seeking previous oil dues.