IOC’s imports worth $7 billion in 13 months - Iran oil payments bring relief for Re
New Delhi   22-Jul-2013

At a time when the rupee continues to be under pressure against the greenback and other major global currencies, the rupee payment mechanism with Iran against crude oil imports has offered some support to the beleaguered currency.

Crude oil import from Iran by state-owned Indian Oil Corporation under the rupee payment mechanism during the last 13 months was worth $7 billion, according to UCO Bank — the only Indian bank designated to receive the oil payments in rupee from oil importing companies. Had the rupee-payment mechanism not been in place, $7 billion of foreign exchange outgo would have pushed down the rupee further during 2012-13.

UCO Bank, backed by its tie-ups with five Iranian banks, began carrying out settlements of dues in April 2012.

According to senior government officials involved in the exercise, apart from the support for the rupee, UCO Bank too has benefited through access to the float funds — the interest-free fund available with the bank between the time the money is deposited and its withdrawal — in these accounts.

India has been, since July 2011, paying in euros to clear 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent of the outstanding was remitted in rupees in accounts that the Iranian oil company opened with Kolkata-based UCO Bank. During 2012-13, India, which planned to import 15.4 million tonnes of crude oil from Iran, ended up importing 16 per cent less at 13.14 million tonnes because of difficulties in getting tankers to move the oil and their insurance coverage.

Since 2012, the United States and the European Union have imposed sanctions on Iran's oil and financial sectors even as India has reiterated that it will not stop crude imports from Iran. While the payments in euro through Turkey ceased from February 6 this year, the rupee payments for 45 per cent of the purchases continued through UCO Bank.