RBI Exploring Modalities of Oil Payments to Iran

Mumbai: 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," Mr Rajan said during a customary post-policy call with analysts.

He, however, did not disclose the quantum of payments to be made to the Middle East country, which is getting ready for a life post sanctions.

Indicating that the commitments will be honoured, Mr Rajan said meeting the payment should not be a concern as the country has over $350 billion in its forex kitty at present.

In August 2015, a central government official had said the RBI will be assisting Indian refiners to clear over $6.5 billion of past dues they owe to Iran for crude oil purchases.

The central bank, which previously facilitated payment of oil import bill to Iran, had agreed to help in creating the payment channels to clear the 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 in a bid to bring Iran to the negotiating table over its controversial nuclear programme, the RBI had facilitated oil payments to Iran via Turkey.

Iran and six world powers last year sealed an accord to curb the Islamic Republic's nuclear programme 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.

Since February 2013, Indian refiners like Essar Oil and Mangalore Refinery and Petrochemicals (MRPL) have been paying 45 per cent of payment dues on purchase of crude oil from Iran in rupees through UCO Bank, Kolkata. The remaining amount has been accumulating, pending finalisation of a payment 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. The outstanding has since climbed to over $6.5 billion.

Essar Oil owes $3.34 billion to Iran, MRPL $2.49 billion and IOC $581 million whereas HPCL-Mittal Energy Ltd (HMEL) needs to pay back $97 million and Hindustan Petroleum Corp Ltd (HPCL) $29 million.

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

On state government budgets, RBI Deputy Governor Urijit Patel acknowledged that there is seriousness on fiscal discipline.

"From the budgets that we have received, which are for a fair number of states, the consolidated revenue account of the state governments is actually projected to be in surplus, which is indicative of their intent to adhere to fiscal consolidation," he said.

He added that the gross fiscal deficit ratio is expected to fall by 0.5 per cent to 2.4 per cent in 2016-17.