New Delhi: Bharat Petroleum Corp. Ltd. (BPCL) and Hindustan Petroleum Corp. Ltd. (HPCL) will forego buying Iranian crude even as Mangalore Refinery & Petrochemicals Ltd. (MRPL) accepts an offer from the Persian Gulf nation to waive shipping charges.

Refiners want to import crude in rupees amid a 13% slump against the dollar this year while Iran doesn’t want to accept the Indian currency, according to the government in New Delhi. While MRPL has accepted an offer for free shipping, BPCL and HPCL haven’t brought oil from the Islamic Republic since April.

“Unless and until the payment issue is resolved, there’s no point taking Iran crude," said B.K. Datta, the director of refineries at BPCL, the country’s second-biggest state refiner. “We have plans to buy Iran crude this year, but can’t until there is clarity on the payment mechanism," he said in a phone interview from Mumbai.

India has faced difficulties in getting tankers and insurance for transporting oil from Iran after the US and the European Union (EU) imposed sanctions to curb its nuclear programme. Purchases have also been disrupted after Iran objected to payments in the rupee, the second-worst performer among Asia’s most widely traded currencies.

“We thought initially Iran will be taking the payments all in rupees, but there is some reluctance on their side particularly after the change of government there," oil secretary Vivek Rae said in New Delhi on 1 October.

Nobody answered two calls made on Friday to the office of National Iranian Oil Co.’s director for international affairs, Mohsen Qamsari. Friday isn’t an official working day in Iran.

Hassan Rouhani, who was elected as Iran’s president in June, pledged to restore the Islamic Republic’s crude-export dependent economy. Production has shrunk 27% in the past two years to about 2.6 million barrels a day last month, according to data compiled by Bloomberg.

$1 Saving

Iran, a member of the Organization of Petroleum Exporting Countries (Opec), has been shipping crude cargoes for free to MRPL since August, according to a company official who asked not to be identified because he isn’t authorized to speak to the media.

The free shipping will translate into a saving of a little less than a dollar for every barrel of crude, according to the official, who declined to provide further details of MRPL’s purchases.

BPCL and HPCL haven’t bought Iranian crude in the financial year that began in April because local insurers refused to cover the risks for using the oil. An Indian government plan to prepare a Rs2,000 crore ($319 million) insurance fund for future purchases from Iran is yet to be implemented.

US Waiver

“Only after the outstanding issues are resolved, we can discuss pricing and discounts for Iran crude," said B.K. Namdeo, the director of refineries at HPCL, the country’s third-largest state refiner. “What’s the point now to discuss discounts if we are not able to import?"

India plans to purchase 11 million metric tonnes of Iranian crude in the year ending 31 March, according to oil secretary Rae. That would be a drop of more than 15% from the previous year.

The US in June renewed a waiver for India and eight other nations from a law that cuts institutions off from its banking system if they process payments for Iranian oil. The state department has said nations must significantly reduce their purchases of Iranian crude to be eligible for the exemption, which is subject to a review every 180 days. Bloomberg

Pratish Narayanan in Singapore contributed to this story.

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