Azerbaijan, Baku, Jan. 11 / Trend, A.Yusifzade /
The Reserve Bank of India said it is trying to sort out the vexatious issue of payment for oil supplies from Iran following its decision to abolish the use of a regional payment mechanism for these transactions, The Economic Times reported.
"The RBI was first to identify the problem and battle the problem. RBI was ensuring that oil supplies come from Iran," RBI Governor D Subbarao said at the Second Business Standard Annual Lecture.
The Reserve Bank on December 23 said all trade-related payments with Iran have to be made outside the Asian Clearing Union (ACU), a regional clearing house through which most trade between India and Iran -- which is subject to strict sanctions imposed by the US and the Europe -- was being conducted.
Earlier last week, India and Iran had agreed to route payments through the Hamburg-based European-Iranian Trade Bank AG (EIH), an Iranian bank that is already under US sanctions.
Meanwhile, State Bank of India has refused to facilitate temporary payments through a proposed alternate channel, a move that can potentially halt the import of oil from Iran, the country's second-biggest supplier of crude.
SBI has refused to issue fresh Letters of Credit (LCs) to public and private sector refiners, who import some 12 million barrels of crude oil from Iran every month, an official with the nation's largest lender said.
"There are uncertainties involved. We need to be sure about the payment mechanism," the official said after a meeting was called by the Finance Ministry to discuss the matter.
In the absence of a LC, which is a letter from a bank guaranteeing payment by a buyer to a seller within a fixed timeframe, one cargo intended for Hindustan Petroleum Corporation Ltd (HPCL) is stuck at Iranian ports.
Meanwhile, one cargo of Iranian crude meant for MRPL's Mangalore Refinery -- which is India's largest importer of Iranian crude -- is being loaded today, but it is uncertain if Iran will deliver it in the absence of a LC.
There has been no disruption in crude oil supplies requisitioned prior to the December 23 RBI order so far, as the LCs were already in place. However, no LCs are being opened now, the SBI official said.
Industry sources said SBI wants oil firms to make advance payments for the crude imports, a proposal which is not acceptable to public sector refiners, who fear that Iranians cannot be held accountable in case of a default in delivery once money is transferred in advance.
Alternatives such as SBI facilitating payments on the basis of corporate guarantees from the importers will be discussed in the second round of meetings at the Finance Ministry, they said.