The government today said it is working out a suitable mechanism for payment of oil imports from Iran, more than two months after RBI scrapped a long- standing mechanism used to pay for Iranian crude.
"Efforts are on to find suitable mechanism for payment of current or future oil imports," Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha.
The RBI on December 23 said oil and other import payments to Iran will have to be settled outside the existing Asian Clearing Union (ACU) mechanism, which involves the central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka.
After the scrapping of the ACU, Iran, which makes up for over 12% of India's oil needs, has continued to supply oil on credit and the outstanding dues has run into a staggering $4 billion.
Yesterday Oil Minister Jaipal Reddy said that India had paid Euro 1.5 billion ($2.08 billion) to clear pending dues for buying crude oil from Iran.
After the Reserve Bank in December stopped use of a long -standing clearing mechanism for payments, India had last month decided to pay for the Iranian oil using euros through German-based Europisch-Iranische Handelsbank AG (EIH Bank).
"... Arrangements have been made to pay the arrears in respect of oil imports through European banks after complying with EU Regulations," Meena said.
During 2009-10 fiscal, India imported 21.2 million tonnes crude oil from Iran.
Though the ACU was scrapped in December, payments were due for oil bought since September as Iran sells oil on a 30 to 90 day credit period.
Under the ACU mechanism, imports by the nine nations are settled every two-months with every member paying for imports after netting out its exports among the union.
ACU, based in the Iranian capital of Tehran, settles trade transactions between Bangladesh, Bhutan, India, Iran, Nepal, Pakistan, the Maldives, Myanmar and Sri Lanka.
Till 2008, payments to Iran under the ACU mechanism were done in US dollars, but after the United States imposed sanctions against the Middle East country over its suspected nuclear weapons programme, the currency was switched to the euro.
United Nations' sanctions do not forbid buying of Iranian oil and recently the European Central Bank (ECB) asked the RBI to provide certificates that the euro was being used to import products not on the US sanctions list.
