India allows re-exports to Iran
11 Jun 2013
The government has allowed export of imported products to sanction-hit Iran under the rupee payment mechanism provided 15 per cent value-addition takes place in the country.
The move is aimed at fully utilising the accumulated rupee payments against oil purchases from Iran lying in UCO Bank.
''Exports of such goods to Iran which have been imported against payment in freely convertible currency would be permitted against payment in Indian rupees also, subject to at least 15 per cent value-addition,'' the Directorate General of Foreign Trade said in a notification.
This is because the value of oil imports from Iran is much more than all of India's current exports to that country, reports quoting commerce department sources said.
Iran, which is facing economic sanctions by the US and the EU and most companies in the West for its alleged nuclear activities, is in dire need for essentials, including food and medicines.
India had put in place a rupee payment mechanism last year to continue trading with the country as foreign banks refuse to handle payments to and from Iran.
The rupee payment mechanism allows payments for Iranian oil to be deposited in India's UCO Bank in rupees. The money is then used to make payments to Indian exporters to Iran thereby avoiding payments in dollars and through foreign banks.
Since India imports large quantities of crude oil from Iran, there is a substantial amount of rupee balance in Iran's account lying idle.
Indian exporters, however, have suggested limits on the re-exports.
''The move will benefit Indian exports and we can look forward to sizeable growth in the country's exports to Iran in the current fiscal. However, the government should put a cap on such exports so that the basic idea of promoting manufactured exports remains the focus,'' FIEO president Rafeeque Ahmed said.
The value of Indian exports to Iran is expected to touch $6 billion in 2013-14 from the present $4.5 billion, according to FIEO.
"The opening of letter of credit from Iran under the rupee payment mechanism has been impressive touching about $400 million on monthly basis.
"With the new provision being put into place, we can look for exports close to $6 billion in 2013-14," Ahmed said in a statement here.