Tuesday May 28, 2019
MAHUA VENKATESH
PM Modi and Iranian President Hassan Rouhani during agreement signing ceremony at Hyderabad House in New Delhi | Photo: PTI
New govt plans to hold talks with Iran at the earliest to discuss ways to resume oil imports and is even looking to pay in Indian currency.
New Delhi: Weeks after India stopped oil imports from Iran, the Modi government is keen to resume supply from the Middle Eastern country and is looking at ways to make payments in Indian rupee to get around US sanctions, two government sources told ThePrint.
The Modi government, which is returning with a bigger mandate in the Lok Sabha elections, will immediately initiate talks with Iran to discuss steps that will allow it to resume oil imports, said the sources.
However, the quantum of import is expected to drop significantly.
India stopped oil imports from Iran after the six-month sanction waiver from the US ended on 2 May.
“The government is not keen on this (ban). It is keen to resume imports, though the quantum will be limited,” said a senior government official who didn’t wish to be identified.
The official said Iran’s Pasargad Bank, which got the Reserve Bank of India’s nod to open a branch in Mumbai, may be used to make payments for the oil supply.
“Payments can be deposited in the Iranian bank and then Iranian authorities can decide how to utilise the money,” the official said.
With the government looking to make payments in rupee, the official said, “These talks have been held earlier too but got stalled due to elections. They will be revived and this will be one of the first focus areas of the government.”
In the past, India has also bartered goods with Iran in exchange for crude oil.
A second government official and an oil analyst, both of who spoke on the condition of anonymity, said this option is also available to India but considering the “huge payments” incurred with oil imports, it will not be feasible to look at this measure as the only alternative.
Once a mechanism has been put in place, India will also have to resolve the issue of insurance for the shipment of crude.
“Since many international companies may not agree to provide cover, the policymakers will have to figure out a way,” one of the two officials said.
Message to Iran & domestic production
According to data from the Petroleum Ministry, Iraq and Saudi Arabia are the top suppliers of crude oil to India. Iran follows at third spot. Besides these three, UAE and Venezuela have also supplied a large chunk of crude to India.
Sources said an increased quantum of imports is likely from Saudi Arabia and the US from June.
India imports over 80 per cent of its oil needs annually.
While there is no cause for concern on crude supply with other nations already offering an increase in supply to India, sources said continuation of oil import — albeit a “small quantity” — from Iran would be an important message to Tehran from the standpoint of diplomacy.
India’s domestic oil production has dropped in the last five years. In 2017-18, India produced 35.7 million metric tonnes (MMT) of oil, down from 37.5 MMT in 2014-15.
During its first term, the Modi government had promised to make India more self-sufficient in oil production.
“Several steps have been taken to ensure production increases but these will take time to fructify. In the next few years, we will see these measures bearing fruit,” said the analyst.
From 202.85 MMT in 2015-16, India’s crude oil imports rose to about 217 MMT in 2017-18, according to data published by Petroleum Planning and Analysis Cell, under the Petroleum Ministry.