India to Pay Part of Oil Debts to Iran Soon: Official

"What is due to them, must be paid to them. It will not be one single bullet of $6.5 billion. It will be (in) tranches. They also don't want as bullet, they also want it in some kind of tranches. So we are working out with Iran," Mehrishi was quoted by the Press Trust of India (PTI) as saying.

Mehrishi, who had late last month led a high-level delegation to Iran to discuss payment options, indicated that the payments can be in a combination of US dollar or euro and Indian rupees.

"It will obviously be partly in dollars, partly in rupee. It could be euro also. Partly hard currency, partly rupee. Exact division is yet to be decided," he said when asked about the mode of payment gateway.

He, however, refused to elaborate on options being explored, saying "it is being worked out."

Since February 2013, refiners like Mangalore Refinery and Petrochemicals (MRPL) and Essar Oil have been paying 45% of payment due on purchase of crude oil from Iran in rupees through Uco Bank, Kolkata.

The remaining has been accumulating, pending finalization of a payment route and mechanism. They had last year paid nearly USD 3 billion in six installments through a limited payment channel following start of nuclear talks between six world powers and Iran.

The outstanding has since climbed to over $6.5 billion, according to the report.

Essar Oil owes $3.34 billion, MRPL ($2.49 billion) and Indian Oil Corp ($581 million) to Iran.

"We are prepared to pay Iran whatever is due to them. We are not uncomfortable with any level of payment at all. We will make sure that happens in a calibrated fashion. All this money has been earmarked for them.

"The companies are ready to pay. Essar is ready to pay, MRPL has no difficulty. Obviously, they will be careful with their money and they always know it is a liability. Anyways, the payment due would be reflected as a contingent liability on their balance sheet also," Mehrishi said.