New Delhi: Officials from the foreign and petroleum ministries, led by their respective ministers, will meet on Wednesday to consider a proposal to buy more crude from Iran—a move that could save the nation billions of dollars in foreign exchange.

Iran was the second largest supplier of crude to India before international sanctions were imposed on the Gulf nation over allegations that it was developing a nuclear bomb, which Tehran denies.

But with global crude prices rising again, India is considering increasing imports from Iran. In addition, India pays for the crude in rupees and not dollars, which has become more expensive.

According to the external affairs ministry, India sources 180 million tonnes (mt) of crude oil annually from abroad, and Iran has fallen to the eighth or ninth position out of the top 10 sources of imports.

External affairs minister Salman Khurshid said on Tuesday that he will meet petroleum minister M. Veerappa Moily to consider his suggestion to buy more crude from Iran, but cautioned that India would have to carefully weigh many issues, including the mode of payment, before taking a decision. “I will probably meet him (Moily)...sometime tomorrow," Khurshid said.

Moily, according to media reports, recently wrote to Prime Minister Manmohan Singh advocating importing about 11 mt of crude oil from Iran, worth a saving of $8.5 billion in foreign exchange.

Energy-starved India imports nearly 80% of its fuel requirements. In 2012, India was the fourth largest energy consumer with a consumption of 563 million tonnes of oil equivalent, according to a BP Plc, the World Bank and PricewaterhousehouseCoopers estimate.

Khurshid warned that a decision on whether or not to turn to Iran requires careful consideration. “One is a suggestion (Moily’s) that this is what we could do, the other is the compulsions and the conditions and limitations of being able to do it. We don’t subscribe to the US sanctions, we subscribe to the UN (United Nations) sanctions...it is the UN sanctions that apply to us," Khurshid said.

“But the issue is not just that. If there are sanctions that apply to others and they comply with them, there are issues whether there is insurance available, whether vessels are available for the carriage of that oil, etc... Whether there are banking systems that are activated and available to use for payment. So clearly, all these have to be considered before we say this is what we will be able to do," he said.

India pays Tehran in rupees, unlike other countries, but has been reducing supplies from Iran to ensure Indian financial institutions are not cut off from the US financial system, should Washington retaliate.

Economic sanctions are one of Washington’s main strategies to choke funding to Iran’s nuclear programme, which Tehran says is for peaceful purposes.

Speaking at an energy conference in New Delhi, Khurshid urged Indian businesses to be “adventurous" and take risks while exploring global options. He promised the oil sector all help from his ministry, through India’s embassies and missions abroad to secure oil and gas blocks.

Talking about long-term ideas for India’s energy security, Khurshid said India was looking at prospective liquified natural gas supplies from Canada, Mozambique, Tanzania, Australia, Russia and Papua New Guinea.

Describing the proposed $9 billion Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline as a “big-ticket idea", Khurshid said it was an important and “real-time investment in India’s future" that required understanding and patience with regard to the “difficult situations" in India’s neighbourhood.

“If we are going to respond and react to every little difficult situation and let it get out of control and spill over into a larger sphere, we will never be able to fulfil things that we hope that we can do," he said.

Deepak Mahurkar, director and leader, oil and gas, at PricewaterhouseCoopers, said oil and gas imports accounted for more than 56% of India’s trade deficit in 2012.

“The current account deficit is widening and balance of payments is growing. In the last four months, India has drawn down 4% of foreign exchange reserves.

“The obvious solution to this is to try to domestically produce oil and gas and renewable energy. Unfortunately, even if the most favourable policy is rolled out, it’s going to take years and decades to show favourable results," Mahurkar added.

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