New Delhi: India is likely to import less oil from Iran this fiscal year ending in March, compared with 2010-11, a government source said on Wednesday, as pressure mounts on Asian buyers to reduce crude imports from sanction-hit Islamic Republic.   

Iran is India's second largest crude oil supplier meeting about 11 percent of the South Asian country's imports. Tehran is facing Western sanctions over its nuclear plans that many say is aimed at making a bomb. Iran says it wants to produce power.   

The sanctions make it tough for importers to pay for Iran's oil. Indian purchases have been fraught with payment problems in the past 13 months after a clearing mechanism was scrapped. Indian refiners have since sought alternative supplies.   

 "Iran constitutes a declining but a significant part of our energy imports," the government source said.   

"We will continue to buy crude from Iran to the extent possible. But Indian companies have to make their own decision taking into account the factors in the market."   

India's oil imports from Iran have declined from 21.8 million tonnes, or 16.43 percent of total imports, to 18.5 million tonnes or about 11 percent, in 2010/11.   

U.S. State Department spokeswoman Victoria Nuland said last week Washington was working closely with its partner countries to help them cut dependence on Iranian oil by finding alternative supplies.   

 World's top oil exporter Saudi Arabia has offered extra oil to India, potentially to replace Iranian barrels.    

Up to now India has defied financial sanctions imposed by the United States and European Union to punish Iran over its disputed nuclear programme.   

Instead, New Delhi has come up with elaborate trade and barter arrangements to pay for oil supplies.   

But India's determination to pursue trade with Iran despite Western sanctions could be undermined after a bomb attack in New Delhi blamed on Tehran this week.    

New Delhi has good relations with both Iran and Israel, and so the attack makes its diplomatic balancing act between the two countries all the more difficult, and has thrust the mounting tension between the Middle East rivals onto its doorstep.   

"Our relationship with Iran is not in contradiction to nuclear proliferation objectives or our relationship with the U.S. or against our partners in west Asia and Europe," the Indian government source said.