India to clear dues worth $6.5 billion to Iran in tranches, says Rajiv Mehrishi

New Delhi: India will clear $6.5 billion of dues it owes to Iran for oil import in tranches, with the first installment going out as early as in a week, Finance Secretary Rajiv Mehrishi has said.

“What is due to them, must be paid to them. It will not be one single bullet of $6.5 billion. It will be (in) tranches. They also don’t want as bullet, they also want it in some kind of tranches. So we are working out with Iran,” he told PTI in an interview here.

Mehrishi, who had late last month, led a high level delegation to Iran to discuss payment options, indicated that the payments can be in a combination of US dollar or euro and Indian rupees.

“It will obviously be partly in dollars, partly in rupee. It could be euro also. Partly hard currency, partly rupee. Exact division is yet to be decided,” he said when asked about the mode of payment gateway.

He, however, refused to elaborate on options being explored, saying “it is being worked out.” Since February 2013, refiners like Mangalore Refinery and Petrochemicals (MRPL) and Essar Oil have been paying 45% of payment due on purchase of crude oil from Iran in rupees through Uco Bank, Kolkata.

The remaining has been accumulating, pending finalisation of a payment route and mechanism. They had last year paid nearly USD 3 billion in six installments through a limited payment channel following start of nuclear talks between the Western world and Iran.

The outstanding has since climbed to over $6.5 billion.

Essar Oil owes $3.34 billion, MRPL ($2.49 billion) and Indian Oil Corp ($581 million) to Iran.

“We are prepared to pay Iran whatever is due to them. We are not uncomfortable with any level of payment at all. We will make sure that happens in a calibrated fashion. All this money has been earmarked for them.

“The companies are ready to pay. Essar is ready to pay, MRPL has no difficulty. Obviously, they will be careful with their money and they always know it is a liability. Anyways, the payment due would be reflected as a contingent liability on their balance sheet also,” Mehrishi said.

Iran and six world powers last month sealed an accord to curb the Islamic Republic s nuclear programme in return for ending sanctions.

Lifting of sanctions would open up banking channels and Tehran is likely to seek past oil dues. India is keen that the repayment of dues that have accumulated since February 2013, be done in a staggered manner so as to avoid a run on the rupee.

Asked when the first tranche of payment could be made, he said, “It can happen in week’s time, it can happen in 2 months, we don’t know.”

The official said RBI will detail out the banking channels as well as payment schedule with its Iranian counterpart.

HPCL-Mittal Energy Ltd (HMEL) owes $97 million and Hindustan Petroleum Corp Ltd (HPCL) another $29 million.

Besides, about Rs 17,000 crore was lying in Iranian account with Uco Bank.