The rupee payments made to the National Iranian Oil Company (NIOC) has been exempted by the Finance Ministry of India, for crude oil imports, allowing Indian refiners to settle about $1.5 billion of outstanding payments to NIOC.

Amidst oil import and trade war between Iran and the US, India has consistently shown its inclination towards oil trade with Iran, despite Tehran being put up under stringent US sanctions in early November last year. Forwarding the crude trade and bypassing the sanctions, India and Iran had signed a bilateral agreement to settle oil trades through an Indian government-owned UCO Bank, in the Indian currency, which is not freely traded on international markets.

However, the income of Iranian exporter that is deposited in Indian bank is subjected to a massive 40 percent tax, which made it nearly impossible for Iran to conduct trade, which ultimately led to a freeze in oil import-export between the two countries. Hence, the Indian Finance Ministry exempted National Iranian Oil Co from the hefty taxes applied on imported oil products. An Indian government official, without revealing his identity said, “In the previous round of sanctions Iran was allowed to use funds for imports from India but this time we have expanded the scope for use of funds to benefit both nations.”

The overall imports of India from Iran billed to $11 billion in April-November, 2018, but it had slipped down from 3rd biggest to 6th position as a supplier to India, the second largest customer after China. Registering as a Foreign Portfolio Investor will allow to Iran to invest in Indian government debt. As per Reuters’ reviewed government document, the Rupee funds will let Iran settle expenses like imports and project investments from and in India respectively, mission funding and arranging finance for Iranian students in India. The tax exemption order will, however, not be reflected any changes on other imports of other commodities.