New Delhi: India hopes to resolve an oil payment row with Iran when officials travel to Tehran this week, oil secretary S. Sundareshan said on Monday, as New Delhi looks to balance its energy needs with its diplomatic interests.
The two nations have not been able to find a solution on how to pay for oil after the Reserve Bank of India (RBI) said in December payments to Iran could no longer be settled through a longstanding clearing house system run by Asian central banks.
“Iran payment is very, very important for the ministry of petroleum and natural gas and oil companies, including private companies. We are in discussions with NIOC (National Iranian Oil Co) to resolve the issue,” Sundareshan said.
Iran has agreed to keep sales running through January, but beyond that, the flow of 400,000 barrels per day of crude India buys from its second-largest supplier hinges on finding a permanent solution over payments.
“We would require payments to be channelized through alternate banks which will be suggested by NIOC. We have on table some banks which have been suggested. We will work through them,” he said.
Sundareshan also said the oil ministry has sought Rs10,000 crore ($2.2 billion) of additional subsidy from the finance ministry for state oil retailers as compensation.
Profitability at two of India’s top state-run oil firms is being hit on rising global crude prices, as the government delays increasing state-set fuel prices due to political pressure amid high inflation.
Sundareshan told reporters a decision on Cairn-Vedanta deal would be taken by end-January or early February.
Last month, oil minister Murli Deora said India would take a decision by March, further delaying a key nod by a month citing “too many complications”, on whether to allow UK explorer Cairn Energy’s plan to sell majority stake in its local unit to Vedanta Resources.
On Monday, the Economic Times reported Prime Minister Manmohan Singh had directed the oil ministry to decide on whether to approve or reject the Cairn-Vedanta deal within this month, citing a PMO official who did not wish to be identified.
Last August, Cairn Energy agreed to sell a stake of 40 to 51% in its Indian arm Cairn India to Vedanta in a deal worth upto $9.6 billion.