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Rediff.com  » Business » Iran offers discounts on oil, free shipping to India

Iran offers discounts on oil, free shipping to India

November 08, 2013 08:44 IST

Iran has offered discounts on crude oil price and free shipping if India agrees to buy more of its oil.

India has indicated that it may not meet the 11 million tonne oil import target from Iran this year and Tehran is attempting to induce New Delhi to lift more oil.

Last year it bought 13.1 million tonne oil from Iran. Sources said Iran has offered to give nominal discounts in price as well as free deliver of oil at Indian ports in its ships.

While free shipping alone could save Indian refiners about $1 per barrel in transportation cost, the discount in price would boost margins on processing Iranian oil.

Iran has not stated in firm terms the discount it will offer but has indicated it is willing to sell crude oil to Indian refiners at price lower than internationally traded rates.

The Persian Gulf nation already sells crude oil to India on a 90 day credit period. It is longer than 30 days that other sellers in the Middle East offer to buyers to pay for the crude oil.

Sources said while refiners can raise purchase of Iranian oil, payment remains an issue. Iran has refused to accept full payments in rupee.

After the sanctions by western nations blocked all other payment routes, Iran had raised a few invoices for oil it sold to India in rupees but stopped doing so soon after.

It has reverted to the old system of taking only 45 per cent of the payments due in rupees and for the rest is seeking payments in rouble, yen or yuan.

Mangalore Refinery and Petrochemicals Ltd (MRPL) and Essar Oil Ltd (OIL) plan to import 4 million tonne each from Iran, as against about 5 million tonne each they imported in 2012-13, sources said.

Indian Oil Corp (IOC), which imported 1.566 million tonne oil from Iran in 2012-13, has entered into a term contract for importing 1.2 million tonne crude oil from Iran this fiscal.

Since July 2011, India had paid in euros to clear 55 per cent of its purchases of Iranian oil through Ankara-based Halkbank. The remaining 45 per cent due amount was remitted in rupees in accounts Iranian oil company opened in Kolkata-based UCO Bank.

Payments in euro through Turkey ceased from February 6 this year but the rupee payments for 45 per cent of the purchases continued through UCO Bank. Iran later agreed to take all of the payments in rupees.

India is keen that the system of full payments in rupee is resumed as it will help save on forex outflow. 

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