Iran, no longer under sanctions, has ended free shipping of crude oil to India and has terminated a three-year old system of getting paid for half of the oil dues in rupees.

The Persian Gulf nation is now insisting on being paid in Euros for the oil it sells to Indian refiners. It also wants refiners like Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MPRL) to clear nearly $6.5 billion of past dues in Euros, officials said.

had in November 2013 offered free delivery of crude oil to Indian refiners as tough Western sanctions crippled its exports. With shipping lines refusing to transport Iranian crude for fear of being sanctioned, used its shipping line for the delivery and did not charge for transportation.



"National Iranian Oil Company has written to Indian firms saying it will no longer be shipping oil for free," an official said.

"It will continue to ship the oil in its tankers but will charge a discounted tariff," he said.

The transportation fee will for now be less than half it takes to ferry oil from

"May be in future this 50% discount too may go," he added.

Iran however has continued with its liberal fiscal terms of offering 90-day credit period — ie payment becomes due only after three months of invoice being raised.

With US lifting sanctions in January, Iran has told Indian authorities that the three-year old mechanism of paying 45% of oil import bill in rupees and keeping the remaining 55% pending for payment channels to clear, stands terminated.

The pending payments now total to nearly $6.5 billion, which Iran has agreed to receive in instalments over the next six months, officials said.

"NIOC is raising invoice for oil it is now exporting to Indian refiners in Euros," he said.

Since February 2013, Indian refiners like Essar Oil and MRPL paid 45% of their import bill in rupees to UCO Bank account of Iranian oil company. The remaining has been accumulating, pending finalisation of a payment mechanism.

With the lifting of sanctions, the payment channels will reopen and Iran is seeking the pending $6.6 billion in Euros. The payments would be done in instalments to prevent a run on the rupee with MRPL likely to be asked to clear its outstanding dues of close to $3 billion first.

Indian Oil Corp, which owes over $580 million to Iran, may be the second in the queue followed by smaller payments by HPCL-Mittal Energy Ltd and Hindustan Petroleum Corp.

Essar Oil may be the last to clear its about $3 billion dues.

Officials said Iran has not yet decided on utilisation of the $3 billion which has accumulated in the rupee account with UCO Bank.

It could use the money to make payments for imports of steel and other commodities from India.