India to pay Iran $900 mn in oil dues

India will pay Iran $900 million in two tranches beginning next week to clear part of the past dues for crude oil it buys from the Persian Gulf nation.

This payment will be on top of $1.65 billion it had paid in June/July to clear more than one-third of over $4 billion in dues that had accumulated.

Indian refiners - Mangalore Refinery and Petrochemcials Ltd (MRPL), Essar Oil, Indian Oil Corp (IOC) and Hindustan Petroleum Corp Ltd (HPCL), will make payment of first installment of $400 million on Monday or Tuesday, sources with direct knowledge of the development said.

The remaining $500 million will be paid before November 24. The United States plus 5 other world powers had in July granted Iran access to $2.8 billion of its funds held in foreign banks.

This was in addition to $4.2 billion Iran had received between January and July. Of the $2.8 billion, $900 million is to come from India, sources said.

Iran and the United States, China, France, Germany, UK and Russia had in July agreed to extend a six-month interim accord until November 24 pending a long-term deal to end their nuclear dispute.

Sources said the $900 million has to flow out before November 24. While the payment of the first installment has been fixed, the date for next will be decided by the Reserve Bank of India (RBI), they said.

Indian refiners had paid the previous $1.65 billion in three equal installments of $550 million each - first on June 26, second on July 8 and third on July 24.

Since February 2013, when the US blocked payment channels to Iran for its nuclear programme, India has been paying 45 per cent of its Iran oil bill in rupees through a UCO Bank branch in Kolkata. For the remainder, it had been waiting for a way to make the payment.

As much as $4 billion had been accumulated in past dues. Sources said the payment mechanism used in June/July will again be used to clear $400 million dues.

Rupee payments equivalent to $ 400 million will be deposited by Indian refiners in the UCO Bank account, which will now be transferred to the Reserve Bank of India for onward credit to the central bank of the United Arab Emirates, which will make payments in dirhams to Iran.

Since July 2011, India had been paying in euros for 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent was remitted in rupees through UCO Bank.

The euro payments ceased from February 6, 2013, but the portion of rupee payments continued through UCO Bank.