New Delhi: Clearing the way for oil refiners to pay Iran in Indian rupee, the finance ministry on Thursday issued notification exempting payments made for crude oil purchased from the Persian Gulf nation from any local tax. (Agencies)
"I believe the notification has been issued," a source at an oil company said.
India will pay 45 percent of the value of its oil exports from Iran in rupees. The rest will continue to be paid in euros through a bank in Turkey.
"The money will be routed through Uco Bank. Whenever the next bill is raised, oil companies will deposit the rupee equivalent of the value of oil in the Uco bank which will then transfer it to the designated bank of the Iranian central bank," he said.
Oil companies will not be required to open any account in Uco bank.
Finance Minister Pranab Mukhejree had in his Budget for 2012-13 exempted payments to Iran from taxes in "national interest".
It was feared that the money paid to National Iranian Oil Co (NIOC) may be considered as income generated by Iranian firm in the country and liable to be taxed. The withholding tax was up to 40 percent, which neither NIOC nor the Indian refiners wanted to pay.
Iran is India's third largest crude oil supplier accounting for for less than 10 percent of its total crude oil imports. Despite Western sanctions, New Delhi is keen to retain Tehran as its key supplier but has faced problems paying for oil imports.
New Delhi will import 15.5 million tons of crude oil from Iran this fiscal, down from 17.44 million tons of the previous year.
India currently pays about USD 1 billion a month through a Turkish bank but there are fears that US and European sanctions against Iran may block even this route.
As a way out, rupee payments have been agreed to.
Under the mechanism agreed, NIOC will accept 45 percent of the payments in an account opened in Kolkata-based UCO Bank. UCO Bank has been chosen because it has no US or European exposure and its overseas presence is limited to Hong Kong, Singapore and China.
New Delhi publicly rejects Western sanctions against Iran but has privately pushed refiners to cut imports. Imports in 2012-13 may be cut to 13 million tons instead of 15.5 million tons publicly stated target.
Without sanctions waiver, imports from Iran could come to a halt as shippers have refused to transport oil without an insurance cover.
India is the world's fourth-largest oil importer and second biggest customer of Iran.
The nation's top importers - Mangalore Refinery and Petrochemicals Ltd (MRPL) and Essar Oil will both cut Iranian oil imports this fiscal. MRPL plans to reduce Iranian oil buy to less than 100,000 barrels per day from 142,000 bpd while Essar Oil plans a 15 percent cut to 85,000 bpd from 100,000 bpd.
Indian Oil Corp (IOC) will buy 30,000 bpd while Hindustan Petroleum Corp Ltd (HPCL) plans to reduce imports from Iran to 60,000 bpd from 70,000 bpd. Bharat Petroleum Corp Ltd (BPCL) does not plan to buy any crude from Iran.
Reliance Industries stopped buying oil from Iran a few years back.
New Delhi: Clearing the way for oil refiners to pay Iran in Indian rupee, the finance ministry on Thursday issued notification exempting payments made for crude oil purchased from the Persian Gulf nation from any local tax.