Iran slashes credit period for Indian oil companies

New Delhi, April 7: Iran has cut by one-third the time it gives to Indian refiners to pay for oil they buy from it and has also raised ship freight rates as a retaliatory measure to India’s decision to reduce Iranian oil imports.

Iran, India's third biggest oil supplier, used to give a 90-day credit period to refiners like Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) to pay for the oil they would buy from it.

Now, Tehran has reduced this to 60 days, essentially means that IOC and MRPL would have to pay for the oil they buy from Iran in 60 days instead of previous liberal term of 90 days, sources said.

Iran oil sale terms were the most attractive for Indian refiners. Besides a liberal credit period, it also shipped the oil to India for a nominal 20 per cent of normal ocean freight. Other Middle-East sellers offer not more than 15-day credit period.

Sources said National Iranian Oil Co (NIOC) has also decided to cut the discount it offers to Indian buyers on freight from 80 per cent to about 60 per cent.

IOC and MRPL — largest state buyers of Iranian crude — will cut imports from Tehran to 4 million tonnes in 2017-18 from 5 million tonnes in the previous year.

BPCL and HPCL will cut oil imports from Iran by 0.5 million tonnes each to 1.5 million tonnes as New Delhi built pressure on Tehran to award the Farzad-B field to its discoverer, ONGC Videsh Ltd.

Iran has deterred in awarding rights to develop the 12.5 trillion cubic feet discovery OVL had made 10 years back and now New Delhi is using its oil imports as a bargaining tool to get Tehran to agree.

Earlier this week, Iranian oil minister Bijan Zangeneh had dismissed the threat of cutting imports, saying, “We cannot enter deals under threats.” “Using language of threats is not appropriate,” Mr Zangeneh was quoted as saying by Iranian news agency Irna. “There are a lot of customers for Iranian oil and their demand surpasses our export capacity.”

We cannot enter deals under threats. Using language of threats is not appropriate. There are a lot of customers for Iranian oil and their demand surpasses our export capacity. — B. ZANGENEH, Iranian Oil minister