India wants to pay Iran for oil in rupees

India’s media reported on Sunday that the country is trying to encourage refiners to settle all outstanding payments to Iran over past oil purchases in rupees. The reported plan flies in the face of an earlier announcement by officials in Tehran that the Islamic Republic wants New Delhi to make settle all unpaid money for oil purchases in euros only.  

The Press Trust of India (PTI) has quoted a senior government official as saying that the country’s Finance Ministry plans to exempt payments to Iran from hefty withholding tax if Tehran approves to receive full payment for oil it sells to India in rupees.

With sanctions against Tehran blocking payment channels, 45 percent of the oil India imports from Iran are settled in rupees since January 2012. The remaining gets accumulated and cleared as and when easing of sanctions opens payment window. 

In June last year, Iran agreed to receiving all of the payment in rupees but wanted waiver of 40 percent withholding tax, the PTI added. 

India’s Finance Ministry will issue the required waiver, the PTI has quoted the senior government official as saying. 

"The Budget for 2012-13 had exempted Indian refiners from paying withholding tax when paying 45 per cent of dues in rupees to Iran. The same benefit will be extended to 100 percent payments made in rupees," the unnamed Indian official has said.

The cabinet approval for exempting payments to National Iranian Oil Company (NIOC) would be sought, the PTI further quoted the official as saying. 
Iran may no longer be keen on taking payments in rupee when the option of getting payment in hard tradable currencies like US dollar and Euro is on the verge of opening, the PTI warned.

Indian refineries should pay some $6.5 billion in outstanding oil dues that have been frozen in bank accounts as a result of sanctions against Iran.

Essar Oil has to pay Iran about $3.1 billion, Mangalore Refinery and Petrochemicals Ltd owes $2.8 billion, and Indian Oil Corp owes $581 million. HPCL-Mittal Energy Ltd (HMEL) has to pay $97 million and Hindustan Petroleum Corp owes $29 million, India’s media earlier reported.

Iran said in late December 2015 that it wants India to pay outstanding oil dues in euros, stressing that it needs the euros to pay the installments for the loans it has received for its infrastructure projects.   

Hossein Yaqoubi-Miab, the director for international affairs department of the Central Bank of Iran (CBI), said that preparations have already been made by Tehran to receive euro payments from India as soon as the sanctions are lifted.

The landmark nuclear deal reached between Iran and the P5+1 group of countries – the five permanent members of the Security Council plus Germany – has paved the way for releasing Iran’s blocked petrodollars.

India has already started the proceedings to make the outstanding payments to Iran in several installments each valuing at several hundred million dollars.

Yaqoubi-Miab emphasized that once the sanctions are lifted, a large share of the cash for Iran that has been frozen in Indian accounts will be transferred to government accounts in Tehran, Shana reported.

He said Iran wants its assets that have been frozen in Indian accounts to be transferred to Iran immediately after the removal of the sanctions.

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