Indian oil companies pay USD 700 million to Iran for oil

New Delhi: Essar Oil, MRPL and other Indian refiners paid Iran USD 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 USD 335 million while Mangalore Refinery and Petrochemicals (MRPL) paid about USD 300 million, industry sources said. HPCL-Mittal Energy (HMEL) and Hindustan Petroleum Corp (HPCL) made up for the remainder of the payments made on September 30.

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 USD 1.4 billion by Indian refiners in two equal installments to Tehran.

Sources said the refiners deposited rupee equivalent of USD 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 USD 700 million will be paid in October/November, sources said. The remaining USD 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 USD 3 billion in six instalments through a limited payment channel following start of nuclear talks between the West and Iran.

Before 30 September’s payment, Essar Oil owed USD 3.34 billion to Iran, MRPL USD 2.49 billion and Indian Oil Corp USD 581 million. HMEL owed USD 97 million and HPCL another USD 29 million. Besides, about Rs 17,000 crore was lying in Iranian account with UCO Bank.