India might seek an extension of the 4 November deadline set by the United States for sanctions on oil exports by Iran if it doesn’t manage to secure a waiver. New Delhi is hoping to get a waiver from the sanctions as it cut down oil imports from Iran in the last few months, said sources. Last week, the Donald Trump administration indicated that it could look at offering waivers from sanctions to a few countries that had reduced import of crude oil from Iran.
“We are very hopeful that we will get a waiver but at the same time one of the proposals is to seek extension to the November 4 deadline, in case there is no waiver. Negotiations are on and very soon we will know the contours,” said a senior government official who didn’t wish to be named.
‘Consider buying from Iran’
Earlier in the week, Petroleum and Natural Gas Minister Dharmendra Pradhan said a couple of oil companies, including Indian Oil Corp. Ltd (IOC) and Mangalore Refinery and Petrochemicals Ltd, have already placed orders for oil purchase from Iran in November. Meanwhile, India has started making alternate arrangements by diversifying its oil suppliers and looking at making payments in rupee. Saudi Arabia, too, has shown willingness to supply additional oil to India in case sanctions kick in.
“India has her own fuel requirements. The waiver for India will be convenient, but even if the Trump administration chooses not to give it, we must seriously consider buying from Iran,” said Nirupama Soundararajan, senior fellow and head of research, Pahle India Foundation. “At this point, given our current account deficit (CAD) constraints, that Iran is willing to trade in rupees is of most significance,” said Soundararajan. She added that in case the waiver does not come by and India decides to adhere to the US sanctions, an extension of the deadline will become necessary.
The West Asian country is India’s third largest oil supplier and if sanctions kick in, India will have to look at other suppliers and this could have cost implications. India’s import bill is already ballooning with the rise in global crude oil prices. While prices eased marginally this week, it touched $86.74 a barrel in the previous week — the highest since 2014. A senior finance ministry official Thursday, however, said the government expected global crude price to remain below $85 a barrel.
The rise in crude oil prices have led to widening of the current account deficit — the difference between inflow and outflow of foreign currency — as India imports about 70 per cent of its total oil needs. The 13 per cent depreciation of the rupee this year has also made imports costlier. Further, this has pushed up fuel prices in India. It is imperative to find ways to finance current account deficit and the pressure would remain as long as oil prices are rising, the Confederation of Indian Industry said in a note to the government.
Finance Minister Arun Jaitley earlier said his government is committed to maintaining fiscal prudence and steps would be taken to ensure that the situation is under control. Last month, the government increased import duties on 19 items to curb their inbound shipment. Besides, the Reserve Bank of India has been aggressively selling foreign exchange to cushion the rupee. Sources said the government would look at raising resources though issuance of bonds to NRIs if need be.