Resource Digest - - NEWS -

In­dia has agreed to pay Iran an in­ter­est of 1.5 per cent on $6.5-bil­lion that re­fin­ers like Es­sar Oil and Man­ga­lore Re­fin­ery (MRPL) owe it in oil dues, as a 'good­will ges­ture'. Iran had sought an in­ter­est rate of Li­bor-plus 75 ba­sis points on the $6.5 bil­lion In­dian re­fin­ers owe it in past oil dues, to make up for the for­eign ex­change losses.

"Although we be­lieve there is no in­ter­est due, but as a good­will ges­ture oil com­pa­nies have agreed to pay the in­ter­est rate," a Fi­nance Min­istry of­fi­cial said. "Seven days US Li­bor plus 75 ba­sis points equals to an in­ter­est rate of about 1.5 per cent."

The de­mand for in­ter­est rate was made when Oil Min­is­ter Dhar­men­dra Prad­han met Ira­nian Cen­tral Bank Gov­er­nor Vali­ol­lah Seif in Tehran on April 9. Iran wanted in­ter­est to be paid af­ter dif­fer­ences cropped up over for­eign ex­change rate. Iran sold oil to re­fin­ers like Es­sar Oil and Man­ga­lore Re­fin­ery and Petro­chem­i­cals Ltd (MRPL) in US dol­lar per bar­rel. Around 45 per cent of the oil bill was paid in ru­pees in a UCO Bank ac­count while the rest 55 per cent was to be cleared when­ever bank­ing chan­nels open.

Now with lift­ing of sanc­tions, Iran has pre­sented its un­paid bill. But Es­sar Oil and other re­fin­ers want to pay Iran at the ex­change rate preva­lent at the time of buy­ing crude oil in the last three years. Ru­pee to a US dol­lar was un­der 55 in Fe­bru­ary 2013 when the 45:55 pay­ment sys­tem be­came op­er­a­tional. Ru­pee to a US dol­lar is near­ing 67 now.

"Iran be­lieves it will lose about Rs 1,500 crore due to the ex­change rate vari­a­tion and this in­ter­est rate will help make up for it," he said.

The of­fi­cial said In­dia is agree­able to pay­ing in­ter­est rate even though the 'Bi­lat­eral Pay­ment Agree­ment' en­tered into in Au­gust 2012 does not pro­vide for pay­ment of in­ter­est.

With In­dia agree­ing to Pay­ment of in­ter­est, re­fin­ers will clear the past dues as per the ex­change rate pre­vail­ing at the time of billing. This means re­fin­ers will pay the amount billed at the time of buy­ing crude oil from Iran plus 1.5 per cent in­ter­est.

The of­fi­cial said Ira­nian Cen­tral Bank of­fi­cials will shortly visit In­dia to fur­ther dis­cuss the modal­i­ties. Ide­ally, if re­fin­ers had kept dol­lar equiv­a­lent to their pur­chase in sep­a­rate ac­count over the years they could have read­ily paid Iran now. But for a bar­rel of oil they bought in Fe­bru­ary 2013 at say $80, they would now have to pay Rs 5,360 in­stead of Rs 4,400 then.

Iran, he said, wants dol­lar equiv­a­lent of the dues in eu­ros. It wants the past oil dues as well as billing for the fu­ture oil to be cleared to Asian Clear­ing Union (ACU). The Cen­tral Bank of Iran has re­quested the Re­serve Bank of In­dia (RBI) for bring­ing it un­der ACU mech­a­nism. RBI in turn has sought con­cur­rence from the Depart­ment of Eco­nomic Af­fairs for brin­ing Iran un­der the ACU mech­a­nism.

"Set­tling pay­ment through ACU mech­a­nism hinges on avail­abil­ity of in­ter­na­tional bank­ing chan­nels to make euro set­tle­ments. We are still await­ing that to hap­pen," the of­fi­cial said.

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