India moves to start rupee payments for Iran oil.

Reuters reported that India removed a hefty tax and took other steps to ease payments in its rupee currency for some imports of Iranian oil as it seeks to continue purchases in face of Western sanctions that blocked an earlier payment method.

India, Iran's second biggest oil client, won a waiver this month from tough new US sanctions. After earlier Western measures directed against Iran's nuclear program hit the then existing payment conduit in December 2010, India has been using Turkey's Halkbank for its USD 10 billion plus annual oil import bill with Tehran.

Tehran and New Delhi agreed in January to settle 45% of the oil trade in rupees which are not freely traded. Iran planned to use the rupees to pay for imports from India but tax issues and lack of advance payments for Indian exporters were barriers.

Officials said that India finally exempted payment in rupees for oil imports from Iran from the local tax and allowed advance payment for exports to the sanctions hit nation.

India wants more exports of food and other items allowed under sanctions such as engineering goods to strengthen its own economy and fix a trade imbalance tilted in favor of Iran.

Mr MP Jindal president of the All India Rice Exporters' Association said that "No doubt this could be of help but the trade under the rupee mechanism has to take off smoothly."

India, the world's second biggest rice producer, exports about 1 million tonnes a year of mostly basmati to Iran, a leading importer of the aromatic grain.

Mr Pankaj Bansal partner at engineering goods maker TMA International said that "It is a big relief now. We hope to realize our pending payments running in millions of rupees and also expect this rupee payment mechanism to work fine without any hiccups. Now we can hope to expand our business with Iran.”

Source : steelguru.com