The pressure of US sanctions on Iran is evident
with Indian refiners shifting attention to other crude oil producing nations.
Supplies from Iraq and Kuwait have seen a significant increase, even as Saudi
Arabia maintained its position as the largest supplier. The sanctions also made
payments for supplies from Iran difficult. Indian refiners paid for their
Iranian oil imports through Turkey’s Halkbank. But, there is a fear that this
system may collapse due to the new US sanctions. A method was also worked out
wherein National Iranian Oil Company would accept a share of the payments in
rupee in an account opened in UCO Bank. However the 40 per cent withholding tax
component made the mechanism a non-starter. Domestic refiners had refused to
shoulder the additional tax burden, which made sourcing from Iran very
expensive. In the Budget for 2012-13, the Government stepped in to exempt tax
on payment received by a foreign company in Indian currency on account of sale
of crude oil to any person in India.
