With Prime Minister Manmohan Singh underlining the need to reduce the oil import bill by at least $25 billion (about `1.63 lakh crore) in the current financial year to contain the current account deficit (CAD), India is exploring opportunities for bilateral currency swap agreements with oil-producing countries that could include Iraq and the UAE.
The move would enable India to pay in rupees for oil imported from other economies. Besides, it would also reduce India’s widening CAD — the difference between inflows and outflows of dollars and make the rupee internationally more acceptable and tradable.
India pays Iran rupees for oil imports. Under a plan to pay Iran in rupees and increase oil imports by 2 million tonnes per annum, India expects to save close to $8 billion (about `52,192 crore) from Iran alone. Kuwait and Iraq are two other countries that India is talking too on the same lines.
Besides, oil-producing countries, it is set to have more such deals with other economies as well.
The commerce and industry ministry has already set up a taskforce to work out details of such agreements.
With an imminent war-like situation in Syria, global oil prices could further skyrocket.
“There is an increasing trend among countries to institute bilateral currency swap agreements for trade purposes. The Central Bank of China has so far singed 20 such agreements where the yuan is currency of settlement,” Soumya Kanti Ghosh, chief economic adviser, State Bank of India, said.
“The most crucial of such contracts are three bilateral arrangements with Iran, Russia and Venezuela to purchase oil with yuans as settlement currency.”