NEW DELHI, Sept 12: India will talk to Iran about paying for its oil imports fully in rupees after the Middle Eastern nation ended a brief trial of the mechanism and reverted to a system of partial rupee payments, an Indian oil ministry official said.

Iran, isolated from the global financial system due to US and European Union sanctions against its nuclear programme, wants to boost imports from India to fix its trade imbalance and utilise billions of rupees lying in an Indian bank account.

India, on the other hand, wants to use its local currency, which has declined sharply against the dollar, to settle imports and save foreign exchange.

“They had given some invoices in rupees for 100 per cent but I think lately they have stopped that. So that matter had to be further discussed,” oil secretary Vivek Rae told reporters on the sidelines of an industry event on Thursday.

India pays 45pc of the import value of Iranian oil in rupees and Indian refiners hold back the remaining 55pc as Iran explores avenues for alternative payment mechanisms.

It is not clear why Iran stopped accepting full payment in rupees. Analysts say the falling value of the rupee meant less realisation for Iran, which wants the remaining 55pc to be settled in a hard currency, mainly euros.

India could save $8.5bn in forex spending in 2013/14 if oil imports from Iran remain at 260,000 bpd, Oil Minister Veerappa Moily wrote in a recent letter to the PM.—Reuters