Press Trust of India (PTI)
Jan. 29, 2011
Commerce secretary Rahul Khullar said absence of any payment settlement system in place is hurting trade
New Delhi: The Reserve Bank of India (RBI) clamp down on the main conduit used for settling trade transactions with Iran has affected trade with the Persian Gulf nation, commerce secretary Rahul Khullar has said.
RBI had last month disbanded a mechanism of using central banks in the region to settle payments for imports and exports from Iran and in absence of an alternate system, the $13.4 billion trade between the two nations is impacted.
"Ofcourse, there is a hindrance (in exports and imports). There is no (payment) settlement system in place... it is hurting trade. Exporters on both sides are hurt,” Khullar told PTI.
The bilateral trade between the countries stood at $13.39 billion in 2009-10. Iran is India’s second largest crude oil supplier after Saudi Arabia, exporting oil worth $1 billion every month.
Khullar said exporters of both the countries are not able to ship their goods as there is no payment mechanism in place.
"They (Iranian traders) don’t want to send (goods) because they don’t know how they will receive payments. You (India) don’t want to send because you don’t know how you are going to receive payments... How they will get paid for their dues... it affects the exporters of both the sides,” he said.
While trade of other goods has almost come to a halt, Iran continues to export nearly 400,000 barrels per day of crude oil to India on credit.
Trade with Iran till last month was settled using euro through the Asian Clearing Union (ACU), which was disbanded by the Reserve Bank of India on 23 December. The two sides are exploring alternate banks and currencies to route the payment.
When asked if any other currency other than US dollar or euro can be used for settling payments, Khullar said: "No, primarily these are hard convertible currencies.”
On 23 December, RBI had said that oil and other import payments to Iran will have to be settled outside the existing Asian Clearing Union mechanism, which involves the central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka.
Under the ACU mechanism, imports by the nine nations are settled every two-months with every member paying for imports after netting out its exports among the union.
"A new settlement system has to be put in place. Until that is put in place, there is a problem. When that will be put in place, things will get back to normal...That is being negotiated between Iran and India,” Khullar said.
India imports $12 billion of crude annually from Iran -- about 14% of its total crude import bill.