'No change in quantity of oil purchased from Iran' | business | Hindustan Times
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'No change in quantity of oil purchased from Iran'

business Updated: Feb 22, 2012 02:08 IST
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India has not asked its refiners to cut crude oil purchases from Iran, which is facing tough US and European sanctions over its nuclear programme, a top oil ministry official said on Tuesday.

"There is no change in imports from Iran. We are not asking our companies to reduce imports from Iran," the official said amid reports that the Persian Gulf nation is offering extra crude supplies to India after stopping supplies to UK and France.

The official said so far there was no problem in routing payments through Turkey to Iran for the oil India buys.

"There is status quo," he said.

Indian refiners currently pay Iran about USD 1 billion a month in euro equivalent through Turkiye Halk Bankasi.

Mangalore Refinery and Petrochemical Ltd, the nation's largest buyer, may replace a fraction of its 142,000 barrels per day of imports from Iran with Saudi crude in the year beginning April.

But private sector Essar Oil is sticking to its purchase of 100,000 bpd of oil from Iran.

Industry sources said Iran may have offered more supplies to India following a suspension of oil exports by the Persian Gulf nation to French and British buyers.

European Union, which had followed US in imposing sanctions on Iran to deter Iran from developing nuclear weapons, had announced it will not buy any crude from the Islamic nation from July 1.

Sources said Indian firms may be wary of increasing oil imports from Iran as they fear Turkey may snap routing payments once EU sanctions come into full force.

Iran had last month agreed to receive 45% of the payments for about 370,000 barrels per day of oil it sells to India, in rupee.

But the mechanism hasn't been functioning because of taxation issues.

Payments received by National Iranian Oil Co in India in Indian rupee are liable to be taxed as tax authorities would view it as income generated by the Iranian national oil companies in the country. The income tax levied on such income is called withholding tax, which is as high as 40%.

Under the mechanism agreed last month, NIOC will accept 45% of the payments in an account opened in Kolkata-based UCO Bank. UCO Bank has been chosen because it has no US or European exposure and thus would not be impacted by sanctions.

Iran is India's second largest oil supplier accounting for 12% of its needs.