Two of India’s state-owned companies have contracted for Iranian crude for November, Pradhan said at The Energy Forum here and non-committally said one does not know whether or not the sanctions have been waived off.

State refiners Indian Oil Corp. Ltd (IOCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) have contracted 1.25 million tonnes of Iranian oil for import in November.

Pradhan’s statement assumes importance given that India, the world’s third-largest oil importer is a major importer of Iranian oil. Of the 220.4 million metric tonnes (million MT) of crude oil imported by India in 2017-18, about 9.4%, was from Iran.

President Donald Trump pulled the US out of a historic 2015 accord with energy-rich Iran, which was inked to curb the Islamic Republic’s nuclear programme in return for ending sanctions. However, according to Alice G. Wells, principal deputy assistant secretary of state for south and central Asia, the US has not taken any decision on sanctioning India for importing oil from Iran and investing in the Chabahar port.

Wells, who was in New Delhi earlier this month as part of the delegation accompanying US secretary of state Mike Pompeo for the India-US “2+2" dialogue, said there was no “blanket waiver or country-specific waiver" from US sanctions on trading with or investing in Iran or buying arms from Russia. She said the sanctions that come into force on 4 November were designed to bring Tehran to book and not penalize India, which meets 83% of its crude oil requirements from outside.

Pradhan said a new world order is being established. “Isn’t this a recognition of India’s leadership?" he asked.

Increasing tensions between the US and Venezuela, the US demanding an end to all imports of Iranian oil by early November and the rupee’s being Asia’s worst performing currency of the year have compounded the situation and put India in a difficult spot.

With US sanctions on Iran looming, Moody’s Investors Service had estimated a decline of around $500 million in earnings for IOCL and other Indian state-owned refiners such as Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) combined, on account of substituting crude oil imports from the Persian Gulf country.

India, which is reeling under the impact of high oil prices, has also reminded Saudi Arabia of the Organization of the Petroleum Exporting Countries’ (Opec) promise of increasing production by an additional one million barrels per day, said Pradhan.

Opec accounts for around 40% of global production. The grouping’s June decision to increase production by around one million barrels per day (bpd) or around 1% of global supply came against the backdrop of calls from the US, China and India to help moderate prices.

Pradhan said he had reminded Saudi Arabia’s energy minister Khalid A. Al-Falih two days ago of Opec’s June decision.

This comes at a time when India has pitched the International Solar Alliance (ISA) as a counterweight to Opec, at the recently concluded first general assembly of the first treaty-based international government organization headquartered in India.

Prime Minister Narendra Modi said that ISA will play a role similar to that of Opec. With India being one of the major Opec consumers, India has called for a global consensus on “responsible pricing" against the backdrop of rising global oil prices.

Pradhan later told reporters, “We will be guided by our national interest."

“This is not going back on deregulation. Fuel prices continue to be decided on a daily basis based on factors like benchmark international rate and foreign exchange rate," he added.

While Brent prices had softened a bit on Monday from $86 per barrel mark and was trading at $83.53 per barrel, traders worldwide are betting on oil price to cross the $100 mark yet again. International crude oil prices had reached a record high of $147 per barrel in July 2009.

The cost of the Indian basket of crude, which represents the average of Oman, Dubai and Brent crude, rose to $84.14 a barrel on 5 October, according to the Petroleum Planning and Analysis Cell. To this, taxes at the central and state levels are added, besides dealers’ commission, to arrive at the retail price.

On Monday, petrol and diesel were selling at Rs82.03 per litre and Rs73.82 per litre, respectively in New Delhi. Subsidised domestic cooking gas prices have also been increased by Rs2.89 per 14.2 kg cylinder to Rs502.40, an all-time high.

“We are going through challenging times," Pradhan said.

The National Democratic Alliance government had last week effected a Rs2.50 per litre cut in prices of petrol and diesel to ease inflationary pressure and boost consumer confidence. Many Bharatiya Janata Party-ruled states have also cut value-added tax (VAT) on fuel by an equivalent amount at the Centre’s request.

Moody’s Investors Service in a report on Monday said that the government’s decision is credit negative for IOCL, BPCL and HPCL and will impact its earnings by Rs6,500 crore. The effective reversal of fuel price deregulation will also constrain future private sector investments in the sector.

“In effect, the government has asked OMCs to sell petrol and diesel at subsidized prices, for which they will not be reimbursed by the government," the report said.

In the run-up to 2019 general elections, Fitch Ratings recently raised the spectre of return of state control on fuel pricing in India.

“The step taken by the government reverses the price deregulation of diesel and petrol and increases the likelihood that the government may ask upstream companies Oil and Natural Gas Corporation (Baa1 stable) and Oil India Limited (Baa2 stable) to share the fuel subsidy burden," the report said.

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