Fuel supplies to Mauritius may be disrupted due to RBI move

Posted By: Pti
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New Delhi, Jan 13 (PTI) Fuel supplies to Mauritius, whichsources its entire requirement of petrol, diesel and jet fuelfrom India, may be disrupted following RBI clamp down on themain conduit the Indian companies use to pay for Iranian oil.

The Reserve Bank of India''s (RBI) rather sudden andunilateral decision to discontinue the Asian Clearing Union(ACU), a move that effectively stops settlements in US dollarsand the euro, will most impact Mangalore Refinery (MRPL) whichsources 60 per cent of its crude needs from Iran.

MRPL supplies Mauritius'' entire requirement of 1,00,000tons of petrol, 3,50,000 tons of diesel and 2,70,000 tons ofjet fuel annually by processing Iranian crude oil.

The company has written to RBI warning of disruption inthese supplies due to its move on Iran, sources privy to thedevelopment said.

Its three-year contract to export 1.1 million tons ofproduct annually to Mauritius has been finalised based oncrude supply arrangements from Iran.

"Non availability of Iranian crude oil would result insupply disruption to Mauritius and the entire Mauritius maycome to stand still as they operate with a very low level ofinventory," a source quoted MRPL''s letter to RBI.

MRPL is India''s largest importer of Iranian crude oil at7.5 million tons per annum. Iran is India''s second largestcrude oil supplier after Saudi Arabia. It sold 21.3 milliontons of crude oil to India in 2009-10.

So far supplies from Iran have not been disrupted as theIslamic republic has agreed to sell crude oil on creditpending resolution of the gridlock, sources said adding RBIhad taken the decision to scrap the ACU without putting inplace an alternate payment mechanism and without consultingimporters.

Neither United Nations nor US sanctions prohibit crudeoil purchase from Iran. European Union, through which paymentstill last month were being routed, had only asked forcertification of commodity imported from Iran using euros.

MRPL, source said, asked RBI to issue certification ofcrude oil imports as per the State Bank of India (SBI)approved format to meet the requirement of Deutsche BundesBank, the central bank of Europe, for the purpose.

Besides guaranteeing such large volumes annually, Iranalso gives 90 days credit period for payments for crudeimports as opposed to global practice of 30 days credit.

If such large volumes are stopped, India will be forcedto tap the expensive spot market to meet the deficit, theysaid.

MRPL and other Iranian crude importers - Indian Oil Corp,Hindustan Petroleum and private sector Essar Oil-- want analternative mechanism for settlement of payments againstimports of crude oil from Iran to be put in place immediately.

Besides MRPL, IOC and HPCL import 3 million tons each andEssar imports about 5 million tons of crude oil, PTI ANZ

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