India exempts rupee payments for Iran oil from hefty taxes: Government order

A cyclist walks past an Indian Oil company in Mumbai India

A cyclist walks past an Indian Oil company in Mumbai India

India has reportedly handed Iran a tax break worth hundreds of millions of dollars, effectively green-lighting a crude oil import deal that had thus far been hindered by sweeping U.S. sanctions.

India's biggest refiner expects Iran to invest in a refinery expansion project at one of its subsidiaries after New Delhi made a decision to facilitate the repayment of about $1.5 billion in outstanding debt to Tehran.

However, Mr Singh's comments come a few days after the government exempted rupee payments to the National Iranian Oil Co (NIOC) for crude oil imports from a withholding tax.

India, Iran's top oil client after China, has turned to paying for Iranian oil in rupees as major banking channels dealing in global currencies are closed off by the USA sanctions.

Indian Oil Corp (IOC) plans to pull down the 1 million tonnes per year Nagapattinam refinery of its subsidiary, Chennai Petroleum Corp Ltd (CPCL) and build a brand new 9 million tonnes unit in next 5-6 years.

The tax exemption order, though, only refers to crude oil.

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Iran will be able to use the rupee funds for a range of expenses - including imports from India, the cost of its missions in the country, direct investment in Indian projects, and its financing of Iranian students in India, according to another government document reviewed by Reuters. The rest of the investment will be through debt and equity, including fresh capital from its main founder Indian Oil Corp, The Economic Times reports. Iran owns 15.4 per cent of the company.

The rollback ended United States participation in the Obama-era accord, which now hangs in the balance as Iran no longer enjoys the billions of dollars in sanctions relief it was granted under the deal in exchange for curbs on its nuclear program. "We have already talked to many bankers".

Sources said New Delhi may export goods, including wheat, soybean meal and consumer products, to Iran during the exemption period.

Washington did, though, give a six-month waiver from sanctions to eight nations, including India, and allowed them to import some Iranian oil. In 2013-14 and 2014-15, India bought 11 million tonnes and 10.95 million tonne crude, respectively from Iran.

Sourcing from Iran increased to 12.7 million tonnes in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 million tonnes to catapult it to the third spot.

Besides blocking of banking channels from November, shipping firms are unwilling to transport Iranian oil. Its insurance companies are also providing insurance cover for such shipments, sources added.

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