MOSCOW (MRC) -- The Reserve Bank of India has capped weekly dollar purchases by oil refiners to pay off their debts to Iran in order to avoid pressure on the rupee, three sources said on Monday, as per Hydrocarbonprocessing.
India is one of the biggest buyers of Iranian crude and built up a payments backlog when Iran was under Western sanctions, with its refiners owing about USD6.5 B to Iran.
They have cleared USD770 MM in Euros through Turkey's Halkbank to National Iranian Oil Co (NIOC). State-run Union Bank of India facilitated the payments.
The refiners had been holding back 55% of payments to Iran after a channel through Halkbank was closed in 2013, although payment of some of those funds was allowed after an initial temporary deal to lift the sanctions.
Last week, on the basis of an RBI advisory, India's oil ministry wrote to refiners saying the remaining dues can be settled in three months from May 30 and told companies to ensure demand for foreign exchange is limited to USD500 MM per week, the sources told Reuters.
"RBI wants to stagger payments to Iran to pre-empt any undue volatility in the domestic forex market," said one source.
The rupee touched a near three-month low of 67.77 to the dollar last week, partly due to dollar purchases to settle a portion of the Iranian oil dues the week before.
India's oil ministry has asked state refiner Mangalore Refinery and Petrochemicals Ltd. (MRPL) to coordinate with other firms to ensure that weekly payments do not exceed USD500 million.
We remind that, as MRC informed earlier, in August 2015, MRPL initiated its downward integration by amalgamation with ONGC Mangalore Petrochemicals Limited (OMPL). Last year, OMPL had commissioned a state-of-the-art aromatic complex with 914,000 tpa capacity of paraxylene and 283,000 tpa capacity benzene adjacent to the refinery. The amalgamation will ensure optimal utilization of resources which will lead to improvement in overall working culture and environment.