Iran ends free shipping of crude oil to India

The Dollar Business Bureau

Oil Minister Dharmendra Pradhan on Wednesday said Iran has stopped free shipping of crude oil to India and asked refiners, including Mangalore Refineries Pvt. Ltd. (MRPL) and Essar Oil, to arrange for freight.

"From April 2016, the National Iranian Oil Company (NIOC), has informed oil-importing companies like MRPL and Essar Oil that the future delivery would be based on Free on Board (FOB) basis and freight has to be arranged by the buyer," Pradhan said in a written reply to the Rajya Sabha on Wednesday.

In November last year, Iran had offered free crude oil delivery to the Indian refiners as tough Western sanctions had crippled its exports.

Iran had been selling Indian refiners crude oil on cost, insurance, and freight (CIF) basis for the last two-and-half years.

Pradhan said the NIOC has agreed to provide vessels and insurance till the time Indian companies are able to arrange the same.

Since western sanctions were lifted on Iran, the country has made various changes in the way it trades its vast oil.

"NIOC has asked for all the payments in euros," Pradhan added.

Indian oil refiners such as Essar Oil and MRPL have paid 45% of their import bill in rupees to the Iranian oil company’s UCO Bank account, since February 2013.

Iran has collected almost Rs.12,000 crore in the UCO Bank account to make payments for imports of steel and other commodities from India.

"In the international market, contracts for the supply of crude oil are negotiated on FOB or CIF basis. Hence, the cost of import of crude oil from Iran during 2016-17 will depend on the negotiated terms and conditions between NIOC and Indian oil companies," Pradhan said.