India pays second installment of $550 million to Iran in oil dues

New Delhi: India on July 8 paid the second installment of USD 550 million to Iran to clear over one-fourth of its dues for oil imports from the Persian Gulf nation.

Indian refiners had paid the first installment of USD 550 million on June 26 and second one was paid on July 8. A third tranche of an equal amount will be paid by July 20, government and industry sources said today. Since February 2013, when the US blocked payment channels to Iran for its nuclear programme, India has been paying 45 per cent of its Iran oil bill in rupees through a UCO Bank branch in Kolkata.

For the remainder, it has been waiting for a way to make the payment. As much as USD 4 billion has been accumulated in past dues. A payment mechanism is now in place under which USD 1.65 billion in three equal instalments of USD 550 million each will be transferred to Iran via the UAE central bank, they said, adding the last installment will be paid before July 20.

Rupee payments equivalent to USD 550 million were deposited by Indian refiners in the Uco Bank account, which will now be transferred to the Reserve Bank of India for onward credit to the central bank of the United Arab Emirates, which will make payments in dirhams to Iran. Iran is seeking interest on the pending dues.

However, the Indian government and the RBI have rejected the request, saying they had always been ready to make timely payments but the problem of mode and channel were due to Iran. Under an interim deal with the US and five other world powers in November, Iran won access to USD 4.2 billion in past oil revenue from a number of countries, including India. The funds, which could not be transferred as western powers had clamped down on payment routes, were to be paid in eight installments of USD 550 million each beginning with the first transfer by Japan on February 1.

 South Korea was to make two payments in March totalling USD 1.1 billion and India was to make its first payment on May 17, which, in the absence of payment modalities, was delayed. Since July 2011, India had been paying in euros for 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent was remitted in rupees through Uco Bank. The euro payments ceased from February 6, 2013, but the portion of rupee payments continued through Uco Bank.