New Delhi, December 21

India’s crude oil suppliers such as the Abu Dhabi National Oil Company (ADNOC) have expressed concern over repatriation of funds in preferred currency and the high transaction costs on conversion of funds along with exchange fluctuation risks.

India’s crude oil import bill, which accounts for 25 per cent of the overall merchandise imports, stood at $157.5 billion in FY23. The Parliamentary Standing Committee on Petroleum and Natural Gas was informed that no crude oil imports by oil marketing companies (OMCs) were settled in Indian currency in the last fiscal year.

“During FY23, no crude oil imports by Oil PSUs were settled in Indian Rupee. Crude oil suppliers (including ADNOC) continue to express their concern on the repatriation of funds in the preferred currency and also highlighted high transactional costs associated with conversion of funds along with exchange fluctuation risks. Indian Oil Corporation (IOCL) has informed that it incurred high transaction costs as crude oil suppliers pass on the additional transactional costs to IOCL,” Oil Ministry informed the panel.

Rupee Vostro accounts

The Ministry told that committee that the Reserve Bank of India (RBI) issued a circular on July 11, 2022 giving modalities to open Special Rupee Vostro accounts to promote growth of global trade and to have invoicing, payment and settlement of exports and imports in the Indian currency.

“However, suppliers have expressed their concern on the repatriation of funds in the preferred currency and also highlighted high transactional costs associated with conversion of funds along with exchange fluctuation risks,” it added.

The RBI circular allows Authorised Dealer (AD) banks in India to open Rupee Vostro Accounts of correspondent banks of the partner trading country with an approval from the RBI with details of the arrangement.

“Currently, Reliance (Industries) and Oil PSUs do not have an agreement with any crude oil supplier to make purchases in Indian currency for supply of crude oil,” the Ministry told the panel.

Remove bottlenecks

The committee had met with the representatives from the OIL PSUs and MoPNG in October 2021 as well as January and September 2023.

The panel recommended the Oil Ministry to take up the issue with the Finance Ministry and the RBI.

“The committee expresses concern over the lack of momentum in settlement of crude oil import bills in Indian rupee and recommend the MopNG to take up the issue with the Ministry of Finance and the RBI for removing bottlenecks in settlement of crude oil import bills in Indian rupee and promote the same,” it added.