Iran has asked Indian refiners like Essar Oil and MRPL to pay interest rate of Libor-plus 0.75 per cent on the USD 6.5 billion they owe it in past oil dues, to make up for the foreign exchange losses.
The demand was made when Oil Minister Dharmendra Pradhan met Iranian Central Bank Governor Valiollah Seif in Tehran earlier this month. “They are seeking interest rate on past oil dues. They mentioned a rate of Libor (London Inter-Bank Offered Rate) - plus 0.75 per cent in the meeting,” a senior official said.
Iran is insisting on interest being paid after differences cropped up over foreign exchange rate. Iran sold oil to refiners like Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MRPL) in US dollar per barrel. 45 per cent of the oil bill was paid in rupees in a UCO Bank account while the rest 55 per cent was to be cleared whenever banking channels open. Now with lifting of sanctions, Iran has presented its unpaid bill.
But Essar Oil and other refiners want to pay Iran at the exchange rate prevalent at the time of buying crude oil in the last three years.
Rupee to a US dollar was under 55 in February 2013 when the 45:55 payment systems became operational. Rupee to a US dollar is nearing 67 now. “They (Iran) say they are losing a lot of money due to exchange rate variation and now want to make it up through interest rate,” the official said. India is agreeable to paying some interest rate even though the ‘Bilateral Payment Agreement’ entered into in August 2012 does not provide for payment of interest.
The official said Iranian Central Bank officials will shortly visit India to further discuss the modalities. Ideally, if refiners had kept dollar equivalent to their purchase in separate account over the years they could have readily paid Iran now.
But for a barrel of oil they bought in February 2013 at say USD 80, they would now have to pay Rs 5,360 instead of Rs 4,400 then. He said Iran wants its dollar dues in full without factoring in the exchange rate. Refiners like Essar Oil on the other hand want to pay rupee equivalent of the purchase at current rate.
Iran, he said, wants dollar equivalent of the dues in Euros. Tehran has told India that the three-year old mechanism of paying 45 per cent of oil import bill in rupees and keeping the remaining 55 per cent pending for payment channels to clear has come to an end.
It will be opening or re-activating euro accounts with Indian banks and would like to have the past money transferred from refiners into these accounts.