New Delhi: Indian exporters will be able to receive payments in the restricted rupee currency for sales to Iran within two weeks, the chief of India's top exporters' body said on Friday, as New Delhi puts a mechanism in place to maintain trade despite U.S. sanctions.
About $3 billion in Iranian import arrears have accumulated since December 2010, M. Rafeeque Ahmed said, when a previous payment conduit was closed under pressure from Washington, which is using sanctions to try to stop Tehran's suspected nuclear programme.
"The government has told us the mechanism for payment in rupee (to Indian exporters) will be in place in two weeks' time," Ahmed, president of the Federation of Indian Export Organisations, told in an interview.
"Between December 2010 and January 2012 we have sent goods worth about $3 billion and almost all of it is stuck."
Ahmed is taking part in government negotiations to find a solution to the payment problems that have hit trade between the two countries after U.S. sanctions on dollar deals. His organisation is a quasi-government body set up by the trade ministry.
Indian oil importers have been paying for around $11 billion a year of crude since the middle of 2011 through Turkey's Halkbank, but this route would have been expensive for Iranian importers given sharp falls in the rial.
India was Tehran's second-biggest crude customer last year after China and Iranian oil accounts for about 12 percent of its needs.
Most of the Iranian arrears are for imports of iron and steel, chemicals and cereals, machinery and pharmaceuticals, Ahmed said.
Indian rice suppliers have also reported defaults by Iranian buyers and have said they are owed at least $144 million.
With payments for oil through Halkbank now looking vulnerable to fresh sanctions, India and Iran have agreed to settle 45 percent of this trade in rupees and boost exports to narrow their trade gap. Oil buyers are waiting for tax issues to be cleared up before they use the mechanism.
Iran's central bank has already deposited with India's UCO bank about $1 billion which had been used in the Asian Clearing Union (ACU), the longstanding mechanism that ended in 2010.
This will be used to kick off rupee payments to India's exporters allowing Tehran a way to use the restricted currency it would otherwise find hard to spend.
India abides by United Nations sanctions on Iran, but has refused to go along with new financial measures imposed by the United States and European Union which aim to punish Iran for its nuclear ambitions.
India has pushed back the visit of a delegation to Iran to March 10 to 14 from this month to explore boosting exports, said Ahmed, who will be part of that team.
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