- uploaded: Aug 7, 2012
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The Indian Finance Ministry has now exempted payment in rupees by issuing an official notification for oil refineries here to pay for crude oil imports from the sanctions hit nation of Iran from paying a 40% local tax.
India has been paying over 10 billion US$ to Iran in euros through a bank in Turkey and with this arrangement now 45% of its payments will be paid in Indian rupees. The Indian Rupee is not freely traded internationally.
Earlier this year Indian Finance Minster while presenting his budget for 2012-13 in parliament had exempted payments to Iran from taxes which was in the national interest, however due to lack of official notifications, the system remained a non-starter.
When Iran raises the next bill for oil exports to India, oil companies in India will deposit the rupee equivalent of the value raised and route it via UCO bank for transfer to the Iranian Central Bank. UCO Bank was chosen because it has no US or European exposure and its overseas
Presence is limited to China, Hong Kong and Singapore.
India was granted a waiver by the US a few days ago after it had reduced imports of Iranian oil, now imports from Iran will be normal but the quantity will be reduced and shippers can transport oil with an insurance cover. India is the world's fourth-largest oil importer and second biggest customer of Iranian oil.
Iran is also a leading importer for the aromatic rice 'basmati' that it procures from here and exports are in the region of a million tones every year
The rupee payment will now also help Indian exporters to boost sales and create a new market for their goods in Iran, which has reduced imports from western countries under pressure from the sanctions.
While Iran plans to use the rupees to pay for imports from India, exporters here had had detailed discussion with the visiting Iranian trade delegation a few weeks ago where they wanted other food items to be allowed including engineering goods, currently the bilateral balance in trade is in Iran's favor.
Observers point out that India has diplomatically done well and has made the US agree about the importance it attaches to it's relation