India is likely to resume paying Iran in Euros after a historic accord between western super powers and the Persian Gulf state made it easier to import crude oil from one of its biggest suppliers.
India will, however, stick to its plans to cut crude oil imports from Iran by over 15 per cent to about 11 million tonne in the year ending March 31, 2014, as easing of the Western economic sanctions do not yet allow increased buying.
The US and five other world powers struck an accord with Iran on Sunday, agreeing to ease part of an economic stranglehold in exchange for steps to cap Tehran's nuclear programme and ensure the Islamist government doesn't rush to develop atomic weapons.
The easing of sanctions re-opened the Euro channel to pay for Iranian oil while European Union lifted ban on insuring tankers carrying oil from the Persian Gulf state, officials in the petroleum ministry and oil companies said.
"Our understanding of the agreement is that payment channel is now clear. We now have to sit down with the Iranians to discuss which bank or country the payments can be routed from," an official said.
India had since July 2011 paid in euros to clear 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45% due amount was remitted in rupees in accounts Iranian oil company opened in Kolkata-based Uco Bank.
Tougher sanctions blocked the payments in euro through Turkey from February 6 this year but the rupee payments for 45% of the purchases continued through Uco Bank.
Also, with European reinsurers refusing the provide cover to ships carrying Iranian oil, imports virtually came to a stop in first quarter of current fiscal and resumed only after Iran ferried the oil in its own tankers.
This will, however, ease with the end of the EU ban that is part of a first-step agreement that will give Iran as much as $7 billion in relief from economic sanctions over six months.
"However, stipulation that countries show significant reduction in imports from Iran in exchange for waiver from the US sanctions, continues," another official said.
And so, India will buy no more than the planned 11 million tonne crude oil from Iran in the current fiscal, over 15% lower than 13.1 million tonne oil imported from Iran in 2012-13.
Mangalore Refinery and Petrochemicals (MRPL) and Essar Oil (OIL) plan to import 4 million tonne each from Iran, as against about 5 million tonne each they imported in 2012-13, he said.
Indian Oil Corp (IOC), which imported 1.566 million tonne oil from Iran in 2012-13, has entered into a term contract for importing 1.2 million tonne crude oil from Iran this fiscal.
Hindustan Petroleum Corp Ltd (HPCL) may imported 0.8 million tonne from Iran if insurance issues are sorted out.
MRPL and HPCL halted crude imports from Iran in April after insurance companies added an exclusion clause for refineries processing Iranian crude. While MRPL resumed imports in August, HPCL is yet to do so.
The refiners have accumulated around $2 billion in dues to Iran ever since payment in euros through Turkish Halkbank was stopped in February after sanctions were tightened against Iran.