The country’s oil imports from Iran have already declined in FY18 to 22.6 million tonnes (mt) from a level of 27.2 mt in FY17.

New Delhi: The US may offer higher quantities of oil and gas to India on concessional terms from its own reserves to help the country tide over Iran sanctions that propose to suck out close to 10 per cent of Indian crude imports once full scale of import curbs becomes effective early next fiscal.

Diplomatic sources said that US is willing to double its oil supplies to India next year, which could enable the country import close to $ 8 billion worth of fuel in 2019 against $3.8 billion paid to the US in 2018.

For India, the fear is that US may not allow oil imports to major importing countries from Iran once the its initial 180 days sanction waiver ends. This would mean that India could face problem in importing Iranian oil from May.

“The US has indicated its intent of supplying oil and gas worth $8 billion annually to India at a short notice if the country needed it to meet shortfall arising from any future cut in Iranian oil imports. The terms of this supply could also be favourable, akin to the one being provided by Iran,” the source quoted earlier said.

The deal for higher oil trade with the US was also discussed at last year’s 2+2 meeting in New Delhi. It is now being negotiated at the officials’ level, after which oil companies are expected to sign supply contracts.

Sources said that the US could also offer concessions on such oil exports that could be at par with the terms India currently enjoys with Iran. The Islamic Republic offers free insurance, cheaper freight and a 60-day credit period to Indian importers such Indian Oil Corporation, Mangalore Refinery and Petrochemicals (MRPL) and Nayara Energy (formerly Essar Oil).

Transportation cost is an issue to bring oil from the US and if this is resolved through favourable supply terms backed by concessions, US oil could also become attractive for India, said an official of a public sector oil importing company asking not to be named.

The source also added that India would continue to adopt the same strategy as it did prior to 2015 when a West imposed sanction on Iran affected oil supplies.

This would mean that India would possibly use escrow accounts for payment against crude oil imports, possibly in rupee, and may cut down its import a bit but will certainly not stop its oil import from Iran completely.

Towards this end, India is maintaining its rupee-rial arrangement with Iran. It could also use Iranian Bank Pasargad that will soon to set up a branch in Mumbai. Also, an earlier rupee payment window opened with UCO Bank or IDBI Bank may be utilised again for making payments for Iranian oil post sanctions. India imports close to 10 per cent of its crude oil need from Iran.

The country’s oil imports from Iran have already declined in FY18 to 22.6 million tonnes (mt) from a level of 27.2 mt in FY17.

But in the current fiscal year (FY19), imports from Iran have again picked up, making the Islamic Republic the second biggest exporter of oil to India.

In FY19 (April-December), India has imported close to 20 mt of oil from Iran and expects to end the year oil imports of over 25 million tonnes (mt). India is still working on extension of the sanction waiver from the US post-180 days to continue its oil trade with Iran. But further crude purchases agreements would be tied only after March by when India is expecting another round of meetings with US officials.

Late last year, Opec and allies (Russia) agreed to cut oil production by 1.2 million barrels per day from January 2019, which may increase the price in short-term. “Though, looking at the slowdown in demand growth due to global factors, we expect prices to remain low which would benefit countries like India,” Fitch Solutions Macro Research said in a recent note on the oil sector.