NEW DELHI: India’s top financial official will visit Iran this weekend to discuss how to pay its oil import dues, sources said on Wednesday after the deal Tehran struck with world powers to curb its nuclear programme in return for the lifting of sanctions.

Finance Secretary Rajiv Mehrishi will lead a delegation of officials from Reserve Bank of India, state-run UCO Bank and oil companies from July 25-26, three sources with direct knowledge of the matter said.

India, the world’s fourth-largest oil consumer, has run up a $6.5 billion bill for Iranian oil that it has been largely unable to pay because banking channels were blocked by Western financial sanctions.

Under the July 14 accord, sanctions would be dialled back gradually if Tehran makes good on commitments intended to make it harder to build an atom bomb. Failure to comply would cause the sanctions to “snap” back into force.

India’s refiners have been withholding 55 per cent of payments for Iranian oil imports since February 2013. The rest was settled in rupees through UCO Bank and could be drawn on by Iran to buy essential goods such as food and medicines.

The sources, who requested anonymity due to the sensitivity of the matter, said Iran was expected to seek payments from Indian refiners in stages, and not in one go.

Iran will soon begin talks with India on finalising a mechanism to recover the billions of dollars in oil dues held by Indian refiners, Gholam Reza Ansari, Iran’s envoy to India, told Reuters last week.

Essar Oil owes $3.34bn, Mangalore Refinery and Petrochemicals Ltd $2.49bn, followed by Indian Oil Corp, which has to pay $581 million to Iran, said one of the sources.

HPCL-Mittal Energy Ltd (HMEL) owes $97m and Hindustan Petroleum Corp has to pay $29m, this source said.

“About 170bn rupees ($2.67bn) are lying in Iran’s account with UCO Bank,” said a second source.

This source also said ONGC Videsh, the overseas investment arm of the country’s biggest explorer Oil and Natural Gas Corp also planned to visit Tehran in the coming days to discuss development rights of the giant Farzad B gas field.

India, Iran’s second biggest oil client after China, has reduced purchases from Tehran under pressure from sanctions.

However, in the quarter to June, India’s first fiscal quarter and the first three months of annual contracts with Iran, India shipped in nearly 50 percent more oil from Tehran at 306,000 barrels per day (bpd) compared with the same period last year.

Published in Dawn, July 23rd, 2015

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