Govt hopeful of resolving Iran's currency issue by next month

As India’s oil trade with Iran came to a halt, Iran's rupee reserves have reduced significantly in UCO and IDBI Bank, the two banks authorised to facilitate rupee trade.

New Delhi: As India's export of commodities like sugar to Iran has been hit due to Tehran's rupee reserves shortage with Indian banks, the government on Wednesday said the two nations are negotiating for the use of other currencies for bilateral trade and is hopeful of resolving the matter by next month.

Iran's rupee reserves have reduced significantly in India's UCO and IDBI Bank, the two banks authorised to facilitate rupee trade.

As a result, exports of agri-commodities like sugar, tea and rice have almost stopped because exporters are not sure of getting paid on time.

"Our negotiations with Iran are on. The Ministry of External Affairs is negotiating. We hope to see a breakthrough soon. ...We are trying to resolve this by April," Food Secretary Sudhanshu Pandey told PTI.

Iran still has some quantity of other currencies.

The two countries are discussing to allow any other currency that banks can accept for bilateral trade, he said.

Asked when sugar export from India will resume, the secretary said the issue will hopefully get resolved by April and thereafter the shipments can take place.

Iran needs sugar. It imports sugar from India as prices are better and transportation cost is less, he said.

During last year, Iran had imported 11 lakh tonnes of sugar from India, which is one-sixth of the country's total exports, he added.

Impact of US sanctions on India-Iran trade relations

In November 2018, the sanctions against Iran got reinstated when the Trump administration unilaterally withdrew from the Joint Comprehensive Plan of Action of 2015 or popularly known as the Iran nuclear deal.

As the sanctions barred Iran from using US dollars for transacting oil sales, Iran started accepting the Indian rupee in return for crude oil exports to India.

However, India-Iran trade relations hit a roadblock in May 2019 when New Delhi suspended its oil trade with Tehran.

As a result, Iran’s rupee reserves have started drying up.

US President Joe Biden likely to lift sanctions on Iran

With Joe Biden in the oval office, the Indian administration optimistic about reviving its oil trade with Iran.

“As a buyer, I would like to have more buying places. I should have more destinations to go for purchasing (oil),” Union oil minister Dharmendra Pradhan told the media recently in response to a question if he wants the Biden administration to relax sanctions on Iran.

To recall, Biden played a major role in formulating the Iran nuclear deal as the Vice President in the Barack Obama administration.

Moreover, during his election campaign last year, Biden committed to reviving the Iran nuclear deal saying, “I will offer Tehran a credible path back to diplomacy.”

(With PTI Inputs)