India to pay another $700 mn to Iran on Oct 12

India will pay the second tranche of USD 700 million to Iran to clear part of past oil dues on Oct 12 since the dilution of trade sanctions by the US and five other world powers in July. In an accord, Iran had agreed to restrict its nuclear programme in exchange of easing of sanctions, which had crippled its oil economy.

New Delhi: India on October 12 will pay another USD 700 million to Iran to clear part of past oil dues, the second payment since the Persian Gulf nation reached a historic nuclear deal with western powers.

Essar Oil, Mangalore Refinery and Petrochemicals Ltd (MRPL), Indian Oil Corp (IOC) and Hindustan Petroleum Corp (HPCL) had on September 30 paid the first tranche of USD 700 million to clear a chunk of the USD 6.5 billion they owe to Iran for past oil purchases.

A second tranche is scheduled to be paid on October 12, officials at the refiners said. Iran had in July reached an accord with the US and five other world powers to restrict its nuclear programme in exchange of easing of sanctions, which had crippled its oil economy.

The sanctions are 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.

On September 30, Essar Oil had paid USD 335 million, MRPL USD 300 million, IOC USD 62 million and HPCL USD 3 million, officials said adding that the refiners deposited rupee equivalent of USD 700 million in the Kolkata-based UCO Bank.

UCO Bank purchased dollars for onward transmission to Iran. 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 the 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 the September 30 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.