October 1, 2012

 

   

After months of negotiations to help partly meet payments for Iranian oil and fix an imbalance in trade in favour of Tehran, India will send a delegation to sanctions-hit Iran next week to clinch a wheat export deal.

 

According to government sources Friday (Sep 28), refiners in India, Iran's second-biggest oil client after China, have been settling 45% of oil purchases from Tehran in rupees under a new payment mechanism, while continuing to pay the remainder in euros through Turkey's Halkbank.

 

New Delhi scrapped a previous decades-old mechanism for paying for imports from Iran in December 2010 under pressure from the US. Since then, it has struggled to find a lasting solution to problems caused by US and European sanctions.

 

Ahmad Khaledi, an Iranian deputy oil minister who handles international affairs and commerce, is in New Delhi for a day-long meeting of talks on oil sector cooperation, which have so far not yielded any results.

 

When the Indian delegation travels to Tehran next week, officials are expected to offer 2-3 million tonnes of wheat to Iran, the sources said.

 

"The delegation will have members from a number of ministries like commerce and agriculture and officials from state companies," said one source involved in the negotiations.

 

The government could offer to sell to Iran at around US$300 a tonne free on board, the latest price at which it has exported wheat from its reserves, a trade source said.

 

"It will be a little early to talk about price. We are still in the process of arriving at a price to be offered to Iran," another source said.

 

Shipments of food to Iran are not targeted under sanctions aimed at curbing its disputed nuclear programme. Arranging payments is difficult because of financial sanctions, even though India has won a waiver from Washington on the strictures.

 

India and Iran have been in talks for almost a year now but quality issues have held back New Delhi and Tehran from signing any wheat deal.

 

Iran has not bought Indian wheat since the mid-1990s because of concerns about Karnal bunt, a fungal disease. An Iranian delegation came to India in June to inspect warehouses and laboratories. They also took wheat samples to Tehran.

 

Iran could buy wheat from India after examining the samples, said the Islamic Republic's envoy to New Delhi Seyed Mehdi Nabizadeh.

 

Food Minister K.V. Thomas has said India could export 2-3 million tonnes of wheat to Iran. Other than partly settling its oil dues, supplies of wheat to Iran will help India cut its huge stockpiles at overflowing government warehouses.

 

Local supplies have swelled due to bumper harvests since 2007. Wheat stocks at government warehouses on September 1 were 46.2 million tonnes, nearly three times the official target of 17.1 million tonnes.

 

Stocks are expected to remain high because a revival in monsoon rains has raised the prospect of yet another bumper wheat harvests next year.

 

In September 2011, India lifted a four-year-old ban on wheat exports and in July this year it allowed two million tonnes of wheat exports from government warehouses.