Indian firms have paid the first installment of their Iran oil debts, Finance Minister Pranab Mukherjee told reporters on Friday, Reuters reported.
India and Iran have resolved the issue over payments, he said, triggered at end-December when the Reserve Bank of Indian scrapped a long-standing regional clearing house mechanism under the US pressure.
Indian refiners' debts to Iran for some 400,000 barrels per day of crude had mounted towards $5 billion but a new mechanism put in place recently has allowed them to start payments.
On August 1, the National Iranian Oil Company said the two sides had agreed to settle the bill as soon as possible and the payments would be made in two parts.
Early this week, Indian refiners have paid about $1.43 billion through Turkey's Halkbank.
Indian companies are first clearing debts whose credit period has expired. Iran normally sells oil to Indian clients with 90 days credit.
Mangalore Refinery and Petrochemicals Ltd, Iran's biggest Indian client, has paid about one billion euros ($1.42 billion), reducing its debt that had not been paid on time to $1.2 billion, said one of the sources, who all requested anonymity.
"They have not given a firm plan for August supply but they are confirming supplies on a cargo by cargo basis," this source said, referring to supplies to MRPL.
Iran's second-biggest Indian customer Essar and state-run HPCL have each paid $50 million, cutting debts whose credit period has expired to $1.5 billion and $1.2 billion respectively, the sources said.
IOC, the country's biggest oil refiner but Iran's smallest customer, has paid $20 million, reducing its immediately payable debts to $600 million.