Before PM’s Iran trip, refiners clear part of $6.4-bn dues

Mangalore Refinery and Petrochemicals Ltd (MRPL) has paid $500 million and Indian Oil Corporation Ltd (IOCL) $250 million over the past two days, sources said. Private sector Essar Oil is to pay $500 million.

The refiners cleared part of their outstanding towards crude oil they buy from Iran, through Union Bank of India which in turn transmitted the payment to National Iranian Oil Co (NIOC) through HalkBank of Turkey. 

They bought US dollars and deposited with Union Bank which did an onward transmission in euros.

This is the first payment by Indian refiners in a foreign currency since lifting of sanctions against Iran in January. It also came days ahead of Prime Minister Modi’s two-day visit to Tehran, which starts on Sunday and during which reestablishing credible banking channels between the two nations is likely to figure prominently in talks.

The remaining outstanding will be cleared in installments to avoid a run on the rupee. RBI is coordinating the repayments, they said. With sanctions blocking banking channels, Indian refiners have since February 2013 paid nearly half of the oil import bill in rupees while keeping the remainder pending opening of payment routes.

The dues on the count now total $6.4 billion. MRPL owed $2.6 billion, out of which it has now paid $500 million. After payment of $250 million, IOCL is now left with an outstanding of $310 million. Essar Oil owes Iran about $2.6 billion while HPCL-Mittal Energy Ltd has to pay $60 million.

The refiners had last paid $700 million to Iran in October using a limited window provided by the USA to clear some of the outstanding using the dollar. At that time, Essar Oil had paid $338 million while MRPL had remitted $299 million. IOCL had paid another $60 million.