India’s push for the rupee to be used to pay for the import of crude oil has not found any takers as suppliers have expressed concern about the repatriation of funds and high transactional costs, the oil ministry told a parliamentary standing committee.

The default payment currency for all contracts for the import of crude oil is the dollar as per international trade practice.

However, in a bid to internationalise the Indian currency, the Reserve Bank of India on July 11, 2022, allowed importers to pay with rupees and exporters to be paid in rupees.

While there has been some success with non-oil trade with a select few countries, the rupee continues to be shunned by oil exporters.

“During FY 2022-23, no crude oil imports by oil PSUs were settled in Indian rupee. Crude oil suppliers (including UAE’s ADNOC) continue to express their concern on the repatriation of funds in the preferred currency and also highlighted high transactional costs associated with the conversion of funds along with exchange fluctuation risks,” the oil ministry told the parliamentary department related standing committee.

The ministry, whose submissions are part of the committee’s report which was tabled in Parliament last week, said Indian Oil Corporation (IOC) has informed that it incurred high transaction costs as crude oil suppliers pass on the additional transactional costs to IOC.”

The RBI, it said, had last year permitted the opening of rupee vostro accounts in the partner trading country.

Under this mechanism, Indian importers undertaking imports through this mechanism shall make payment in Indian rupee which shall be credited into the special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier.

“Payments for crude oil can be made in Indian rupee, subject to the suppliers’ complying with regulatory guidelines in this regard,” the ministry said.

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