Oil minister Dharmendra Pradhan's statement that India will continue to import crude oil from Iran brings cheer to the otherwise dim retail market in the country. The bold move in the face of the US sanctions will definitely help India bring down its average purchase cost of crude and thus, the retail price of oil.
Iran, the third-largest oil supplier for India behind Iraq and Saudi Arabia, sold 22.6 million tonne (mt) in 2017-18. This year, India was planning to import around 25 mt, but leading refiners such as Reliance Industries and Nayara Energy (formerly Essar Oil) have stopped buying while many others are scaling down imports.
As per reports, Indian Oil Corp and Mangalore Refinery and Petrochemicals Ltd together have placed an order for 1.25 mt crude from Iran. The US sanctions against the Gulf country, starting November 4, will block all payment routes, and India will not be able to use its traditional route to pay in euros via European banking channels. This has led to the two countries discuss options in rupee.
Earlier, a rupee payment route had been made operational and Iran used to pay back in rupee to settle for wheat, pharmaceutical and other goods it bought from India. At a time when Brent crude is trading at near $85 per barrel, Iranian crude will save India from dollar outflow, check the country's growing current account deficit and prevent rupee fall.