NEW DELHI, March 17 India has exempted
payment in rupees for oil imports from Iran from hefty local
taxes, a move that would help refiners settle some of their oil
trade with the sanctions-hit country if the current mechanism
through Turkey folds under fresh sanctions.
The finance bill, part of the annual budget presented on
Friday, said the exemption in the "national interest" would be
implemented from April 1.
India and Iran in January agreed to settle 45 per cent of
oil trade in rupees, which are not freely traded on
international markets. Iran planned to use rupees to pay for
imports from India.
But the mechanism had not been taken up because of the 40
percent withholding tax, which both Indian refiners and the
National Iranian Oil Co (NIOC) had refused to pay on
India's State-run Hindustan Petroleum Corp in
February said Indian firms cannot pay for Iranian crude imports
in rupees unless the federal finance ministry exempted such
payment from the tax.
"It is therefore proposed to insert a new clause ... to
provide for exemption in respect of any income of a foreign
company received in India in Indian currency on account of sale
of crude oil to any person in India," subject to certain
conditions, including government approval, the bill said.
India buys 12 percent of its oil needs from Iran, worth
about $11 billion annually.
Iran, facing ever tighter sanctions from the U.S. and the
European Union over its nuclear ambitions, is the second-biggest
oil supplier to India while New Delhi is Tehran's second biggest
client after China.
Currently Indian refiners are paying for their oil imports
through Turkey's Halkbank, but refiners fear this
system may fall foul of the new sanctions.
Sources at Indian refiners said they would be making 45
percent of payments in rupees and the remainder through Halkbank
as long as that mechanism functions.
"If the Budget is passed by the parliament, we may pay 100
percent through (the rupee mechanism) if the Turkey route
stops," said one of the officials.
(Reportinng by Nidhi Verma; Editing by Jo Winterbottom and