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India to talk to Iran about paying for oil imports wholly in rupees

NEW DELHI: India will talk to Iran about paying for its oil imports fully in rupees after the Middle Eastern nation ended a brief trial of the mechanism and reverted to a system of partial rupee payments, an oil ministry official said. 

Iran, isolated from the global financial system due to U.S. and 
European Union sanctions against its nuclear programme, wants to boost imports from India to fix its trade imbalance and utilise billions of rupees lying in an Indian bank account. 

India, on the other hand, wants to use its local currency, which has declined sharply against the dollar, to settle imports and save foreign exchange. 

"They had given some invoices in rupees for 100 percent but I think lately they have stopped that. So that matter had to be further discussed," oil secretary Vivek Rae told reporters on the sidelines of an industry event on Thursday. 

India pays 45 percent of the import value of Iranian oil in rupees and Indian refiners hold back the remaining 55 percent as Iran explores avenues for alternative payment mechanisms. 

It is not clear why Iran stopped accepting full payment in rupees. Analysts say the falling value of the rupee meant less realisation for Iran, which wants the remaining 55 percent to be settled in a hard currency, mainly euros. 

India could save $8.5 billion in forex spending on Iranian oil imports in 2013/14 if imports remain at last fiscal year's level of 260,000 barrels per day (bpd), Oil Minister 
Veerappa Moily wrote in a recent letter to the Prime Minister. 

India in June got exemptions from the U.S. sanctions by significantly cutting imports from Iran. 

India's foreign ministry is 'on board' with a proposal to raise imports from Iran, Rae said, allaying fears that the plan could be scuppered by other ministries. 

"Iran is very desperate to sell crude oil," Rae said.