Exporters ask government to look into advance payment issue with Iran

NEW DELHI: In order to facilitate trade with Iran, exporters have asked the government to modify the payment mechanism between the countries so that they can receive funds in advance, as is the normal practice with other nations.

Although the payment issue between India and Iran has been resolved, FIEO President Rafeeque Ahmed said, clarity is needed for receiving advance payments pending shipment.

The normal trend in the international trade for commodities is that the buyer remits some advance (between 15-50 per cent) as soon as the contract gets signed, Ahmed told reporters here.

This is to take care of buyers stake and commitment to take delivery even when the prices of cargo go down, he said adding "the issue needs some clarity".

He said that he would meet the banking secretary and RBI officials on the issue.

The long-standing payment problem with Iran has been resolved as shipments to the Islamic nation will now be paid in Indian rupee.

"The payment problem with Iran has been resolved with operationalisation of rupee payment mechanism through UCO Bank. The payments which have been stuck in the past will be cleared expeditiously," he said.

Persian Bank in Iran would be the nodal bank for payment issues.

Payment worth about USD 1 billion has been stuck after withdrawal of the ACU mechanism, he said, adding with the new mechanism in place, Indian exporters are gradually getting their dues.

The problem with Iran began after the Reserve Bank of India ( RBI) in December 2010 withdrew the Asian Clearing Union (ACU) mechanism under which payments were made to Iran.

Recently about 80 exporters along with the officials from commerce ministry had visited Tehran to explore business opportunities and discuss about the payment problem.

Officials from RBI and UCO Bank also accompanied the delegation.

Talking about products demand in the Islamic country, he said: "there is a huge demand for all types of commodities there and we have the potential to supply. There is a big demand for rice, wheat, sugar and tea".

India has potential to increase exports to USD 5 billion by 2013-14 from USD 2 billion, he added.

Fieo has also set up an Iran cell to update the industry on the export prospects to Iran.