* Indian state-run refiner makes its first rupee payment for
* Payment, equivalent to $482.19 mln, in settlement of last
* Other Indian refiners expected to follow suit this week or
By Nidhi Verma
NEW DELHI, June 19 India's Bharat Petroleum Corp
has made its first payment for Iranian oil in rupees,
two industry sources said on Tuesday, becoming the first refiner
to use a payment channel that skirts tightening Western
sanctions on Iran's trade.
India is Iran's second-largest oil buyer, but has struggled
to find ways to pay for the oil as Western sanctions curb
international financial payments destined for Tehran's coffers.
Since December 2010, refiners in India have been using
Turkey's Halkbank to pay their annual oil import bill
of more than $10 billion, after a previous payment channel was
Tehran and New Delhi agreed in January to settle 45 percent
of the oil trade in rupees to ensure payments continue should
any problem arise with the Halkbank agreement, and also as a way
to encourage more exports from India to Iran that could be
settled in rupees.
"BPCL made (its) first payment on Friday and the second on
Saturday. It has settled a backlog of 27 billion rupees for last
fiscal year's imports," said one of the source familiar with the
development. The figure is equivalent to $482.19 million.
BPCL, unlike other refiners, could not open an account with
Halkbank to pay for oil imports to the National Iranian Oil Co
(NIOC). BPCL last received oil from Iran in January.
NOT FREELY TRADED
The rupee is not freely traded so Iran's ability to use the
currency to buy anything other than Indian products is limited.
India last week lifted a hefty tax on the rupee payments, a
move refiners had awaited before starting to make payments into
A second source confirmed the payment in rupees but R.K.
Singh, chairman of the refiner, and its finance head, S.
Vardrajan, did not respond to phone calls seeking comment.
Other Indian refiners are expected to start using the new
payment facility either later this week or early next week.
Indian refiners are expected to cut volumes under the term
deals by more than 20 percent in the year that began in April,
according to Reuters' calculations, while the government says
imports could drop by 11 percent from 2011/12 figures to about
India's oil ministry has requested the finance ministry to
allow state-run refiners to lift crude from Iran on a CIF, or
cost, insurance and freight basis.
India has already won a waiver from tough U.S. new sanctions
in lieu of cutting imports from Iran.
Iran plans to use the rupees received by Indian refiners to
pay for imports from India.
With BPCL paying Iran in rupees, Indian exporters hope to
boost their sales to Tehran, which has cut imports from the West
due to the sanctions.
India is also keen to prop up sales to Iran of an array of
products, from food and engineering goods, as its exports to the
Islamic nation are worth only about $2.7 billion, while its oil
imports from Tehran are more than $10 billion a year.
One official of an Indian engineering goods manufacturer
said officials of an Iranian bank had notified him the rupee
mechanism for trade with the Middle Eastern country was working.
"Parsian Bank has informed us that rupee mechanism is
working fine and we have got a confirmation that we will get
payment against one of our letters of credit on the 20th or 21st
of June," said Pankaj Bansal, a partner in TMA International.
($1=55.99 Indian rupees)
(Editing by Clarence Fernandez)