India and Iran hold talk on oil trade, explore ways to fix payment issues

NEW DELHI: India and Iran are holding negotiations to revive Asian Clearing Union (ACU) mechanism to increase oil exports to Delhi and address the payments due from Indian refiners.

An Iranian delegation is currently here to discuss various aspects of energy partnership, including payments and export of additional crude oil to India, people familiar with the developments said. Various aspects are being considered including ACU mechanism to spruce up energy ties in the post-sanctions period, domain experts said.

Besides connectivity, energy sector could be another success story between two nations. Iran was once number two crude oil supplier to India but lost the position owing to sanctions. “We are looking to steadily increase oil supplies to India. We are also looking at reviving ACU mechanism to increase oil exports to Delhi as well as address payment due from Indian refiners. Iran has received few more tranches of due since last October from Indian side,” Iranian Ambassador to India Gholamreza Ansari told ET.

Last October Essar Oil, Mangalore Refinery and Petrochemicals and other Indian refiners paid the second instalment of $700 million to Iran to clear part of their outstanding oil dues. The payments came on top of $700 million the four refiners had cleared on September 30.

After October payment, they have cleared a one-fifth of the $6.5 b owed to Iran.

Before the payments made last September-October, Essar Oil owed $3.34 b to Iran, MRPL $2.49 billion and Indian Oil Corp $581 million. HPCL-Mittal Energy owed $97 million and HPCL another $29 million.

Due to absence of Iranian banks in India smooth and timely payment for oil imported from Tehran became a challenge for Indian refiners when the sanctions were in place.