India agrees to Iran’s demand for pay 1.5% interest on $6.5-billion oil

NEW DELHI: India has accepted to pay Iran an interest of 1.5 % for $6.5-billion oil dues that refiners like Essar Oil and Mangalore Refinery owe it in oil dues, as a ' goodwill gesture ' . "Although we believe there is no interest due, but as a goodwill gesture oil companies have accepted to pay the interest rate," a finance ministry official said. "Seven days US Libor plus 75 basis points equals to an interest rate of about 1.5 per cent." The demand for interest rate was made after meeting of oil minister Dharmendra Pradhan with Iranian Central Bank Governor Valiollah Seif in Tehran on April 9. Around 45 per cent of the oil bill was paid in rupees in a UCO Bank account while the rest 55 per cent was to be cleared whenever banking channels open. Now with lifting of sanctions, Iran has presented its unpaid bill. But Essar Oil and other refiners want to pay Iran at the exchange rate prevalent at the time of buying crude oil in the last three years. The official said India is agreeable to paying interest rate even though the ' Bilateral Payment Agreement ' entered into in August 2012 does not provide for payment of interest. With India agreeing to Payment of interest, refiners will clear the past dues as per the exchange rate prevailing at the time of billing. This means refiners will pay the amount billed at the time of buying crude oil from Iran plus 1.5 per cent interest. The official said Iranian Central Bank officials will shortly visit India to further discuss the modalities. Iran, he said, wants dollar equivalent of the dues in euros. It wants the past oil dues as well as billing for the future oil to be cleared to Asian Clearing Union . The Central Bank of Iran has requested the Reserve Bank of India (RBI) for bringing it under ACU mechanism. RBI in turn has sought concurrence from the Department of Economic Affairs for brining Iran under the ACU mechanism.