Essar Oil, Mangalore Refinery and Petrochemicals and other Indian refiners today paid the second instalment of $700 million to Iran to clear part of their outstanding oil dues. This is the second payment by Indian refiners this year ahead of easing of international sanctions against the Persian Gulf country.
Essar Oil paid $338 million while MRPL remitted $299 million, sources privy to the development said. IOC paid another $60 million while Hindustan Petroleum Corp (HPCL) paid $3 million.
The payments today come on top of $700 million the four refiners had cleared on September 30. After today's payment, they have cleared more than one-fifth of the $6.5 billion outstanding they owed to Iran. The payments follow Iran reaching an accord with the US and five other world powers in July this year to restrict its nuclear programme in exchange of easing of sanctions, which had crippled its economy.
The sanctions are expected to end in 2016 if Tehran complies with the terms of the deal agreed on July 14.
As part of the deal, the US Treasury's Office of Foreign Assets Control (OFAC) had approved the banking mechanism for payment of $1.4 billion by Indian refiners in two equal installments to Tehran. On September 30, Essar Oil had paid $335 million, MRPL $300 million, IOC $62 million and HPCL $3 million, the sources said.
For today's payment, the refiners deposited rupee equivalent of $700 million in the Kolkata-based UCO Bank. UCO Bank purchased dollars for onward transmission to Iran.
The remaining $4 billion will be cleared in tranches after payment channels are okayed. The dues to Iran on crude oil that refiners buy have accumulated as western sanctions blocked payment routes since 2013.
Since February 2013, refiners like MRPL and Essar Oil have been paying 45% of dues on purchase of crude oil from Iran in rupees through UCO Bank, Kolkata.
The remaining has been accumulating, pending finalisation of a payment route and mechanism. They had last year paid nearly $3 billion in six instalments through a limited payment channel following start of nuclear talks between the West and Iran.
Before the payments were made on September 30 and on Tuesday, Essar Oil owed $3.34 billion to Iran, MRPL $2.49 billion and Indian Oil Corp $581 million. HPCL-Mittal Energy (HMEL) owed $97 million and HPCL another $29 million.
Besides, about Rs 17,000 crore was lying in Iranian account with UCO Bank.
