New Delhi, Mar 18 : India and sanctions-hit Iran have found a way to keep their trade going by having sorted out rupee mechanism in the wake of tightening noose around Tehran by the US-led western world on nuclear issue.
Stating this after return from Iran at the head of a business delegation, Federation of Indian Export Organisations president Rafeeque Ahmed said the rupee mechanism issues have been sorted out with active involvement of FIEO, India's United Commercial Bank and Iran's Persian Bank. A few more banks will be added to facilitate banking transactions after Navroz holidays in Iran.
He said Persian Bank has agreed to reduce Letter of Credit (LC) opening margins from 120 per cent to 10 per cent and described it a great move forward. Dealing in Indian rupee will provide comfort to exporters and will act as a natural hedge when high volatility is being witnessed in currencies.
India has decided to exempt payment in rupees for oil imports from Iran from local taxes as this would would help Indian refiners settle some of their oil trade with Iran if the current mechanism of payment through a Turkish bank folds under fresh sanctions against Tehran.
Union Finance Minister Pranab Mukherjee, in his Budget speech on Friday, said the exemption in the 'national interest' would be implemented from April 1.
India and Iran in January agreed to settle 45 per cent of oil trade in rupees which Iran will use for imports from India.
But the mechanism had not been taken up because of the 40 per cent withholding tax, which both Indian refiners and the National Iranian Oil Co (NIOC) had refused to pay on transactions.
It is this issue that has now been resolved between the two countries during the recent visit by the Indian trade delegation of 80 businessmen.
Mr Ahmed, who led the delegation, said their objective is to build long-term business relationship with Iran and not to use the opportunity of sanctions against the Persian nation.
He said the delegation had useful meetings with Iran, Tehran and Tabriz chambers of commerce which resulted in encouraging business for Indian delegates in rice, soyabean, sugar, steel, auto components, pharmaceuticals, cosmetics, diagonostic and surgical equipment, and textile machineries.
The FIEO chief said Iran also showed interest in Indian IT and IT enabled services, tourism, health and medical tourism.
Mr Ahmed said Iran is looking for joint ventures in mining, hydro power and railways and would prefer India as partner because of its technical competence and also for utilising oil money lying with India.
The finance bill introduced in Parliament by Mr Mukherjee said;"It is therefore proposed to insert a new clause ... to provide for exemption in respect of any income of a foreign company received in India in Indian currency on account of sale of crude oil to any person in India," subject to certain conditions, including government approval.
India buys 12 per cent of its oil needs from Iran, worth about 11 billion dollars annually.
Iran is the second-biggest oil supplier to India, while New Delhi is Tehran's second biggest buyer of crude after China. (UNI)