NEW DELHI— Iran wants to use the rupee payments it receives for exporting oil to India to buy government securities as well as for financing its imports from third countries. Since Iran buys goods worth less than half of the rupee payment, it wants to use balances to finance third country imports.
After RBI scrapped a long-standing mechanism of settling payments through the Asian Clearing Union mechanism, India pays 55 percent of the value of oil its imports from Iran in euro payments through Turkey’s Turkiye Halk Bankasia. The balance 45 percent of crude payments are made in rupees through UCO Bank.
Under the rupee payment mechanism, 45 percent of the oil import bill from Iran is credited in rupees in the accounts of Iranian Banks maintained with UCO Bank.
Sources said these rupee resources are being used for making payments for Indian exports, including project exports, to Iran.
But since Iran buys goods worth less than half of the rupee payment, it wants to use balances to finance third country imports.
The operational modalities have to be discussed and agreed between the two sides, they said.
In 2011-12, India bought crude oil worth USD 13.5 billion from Iran while it exports to the Persian Gulf nation was around USD 2.4 billion.
At these levels, Indian oil companies would pay over USD 6 billion to Iran in rupee.
Also, Iran wants to be paid interest on the balances in the rupee vostro accounts of Iranian banks with UCO Bank.
Vostro is an account that one party holds for another.
In addition, Iran wants permission for placing the rupee balance as deposits with UCO Bank and purchasing government securities, sources said.
At present, regulations for the rupee vostro accounts do not provide for such use of funds.
New Delhi is examining the requests made by Iran, they said.
India imported 17.44-18 million tons of crude oil from Iran — 10.5 percent of the nation’s total oil imports in 2011-12. This year, imports from Iran are likely to dip to 14-16 million tons or 8.4 percent of 190 million tons of planned crude oil imports.
Bilateral trade between the two nations is skewed in favor of Iran. In 2011-12, the total trade between India and Iran was around USD 15.94 billion. While India’s exports were around USD 2.4 billion, India’s imports from Iran were around USD 13.5 billion. India’s imports exceed that of its exports by USD 11.14 billion.
Sources said while India’s gross exports to the world increased by more than 21 percent during 2011-12 as compared to previous year, India’s exports to Iran declined by 3.8 percent.