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Indian oil companies pay $700 million to Iran for oil

The dues to Iran on crude oil that refiners buy have accumulated as Western sanctions blocked payment routes since 2013.

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Essar Oil, MRPL and other Indian refiners on Wednesday paid Iran $700 million to clear over one-tenth of their outstanding oil dues, the first payment this year ahead of easing of international sanctions against the Persian Gulf country.

Essar Oil paid $335 million while Mangalore Refinery and Petrochemicals (MRPL) paid about $300 million, industry sources said.

HPCL-Mittal Energy (HMEL) and Hindustan Petroleum Corp (HPCL) made up for the remainder of the payments made on Wednesday.

Western sanctions against Iran, which had crippled its oil revenues, are widely expected to end in 2016 if Tehran complies with terms of the deal agreed on July 14.

As part of the deal, the US Treasury's Office of Foreign Assets Control (OFAC) had approved the banking mechanism for payment of $1.4 billion by Indian refiners in two equal installments to Tehran.

Sources said the refiners deposited rupee equivalent of $700 million in Kolkata-based UCO Bank which transmitted the money to the Reserve Bank of India (RBI).

RBI will make arrangements for its onward remittance to Iran.

A second instalment of $700 million will be paid in October/November, sources said.

The remaining $4 billion will be cleared in tranches after payment channels are okayed.

The dues to Iran on crude oil that refiners buy have accumulated as Western sanctions blocked payment routes since 2013.

About 45 per cent of the oil import bill is paid in rupees in a UCO Bank branch and the rest has added up.

Since February 2013, refiners like MRPL and Essar Oil have been paying 45 per cent of dues on purchase of crude oil from Iran in rupees through UCO Bank, Kolkata.

The remaining has been accumulating, pending finalisation of a payment route and mechanism. They had last year paid nearly $3 billion in six instalments through a limited payment channel following start of nuclear talks between the West and Iran.

Before today's payment, Essar Oil owed $3.34 billion to Iran, MRPL $2.49 billion and Indian Oil Corp $581 million. HMEL owed $97 million and HPCL another $29 million.

Besides, about Rs 17,000 crore was lying in Iranian account with UCO Bank. 

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