What rupee-rouble trade mechanism is being set up for payments?

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India is exploring a rupee-rouble trade mechanism for payments with Russia.

India is considering accepting a Russian offer to purchase crude oil and other commodities at reduced prices, with payments to be conducted through a rupee-ruble transaction. While the specifics of this mechanism are still under development, the objective is to facilitate trade and manage India's escalating energy and fertilizer import costs amidst international sanctions on Russia.
Mechanism for facilitating payments is under development

Work is currently underway to establish a rupee-ruble trade mechanism that can be utilized for payments related to oil and other goods. This initiative is part of India's broader strategy to navigate rising global energy prices and potentially secure raw materials for fertilizers at more affordable rates. The Indian government is actively looking into ways to manage its increasing import bill, which is projected to rise by approximately US$50 billion in the upcoming fiscal year.
Addressing logistical and financial challenges

While Russia is offering oil and other commodities at a significant discount, India needs to resolve practical issues such as tanker availability, insurance coverage, and the compatibility of oil blends. Despite these logistical hurdles, Indian officials have indicated that international sanctions do not explicitly prohibit the country from importing fuel. The development of the rupee-ruble payment system is a key step in overcoming financial barriers to these potential transactions.
Potential for reduced energy and fertilizer costs

India, which typically imports 80 per cent of its oil needs and sources only about 2 per cent to 3 per cent from Russia, is looking to increase its Russian oil imports to mitigate a 40 per cent surge in oil prices this year. Simultaneously, the government is seeking cheaper fertilizer raw materials from Russia and Belarus. This is particularly pertinent as India's subsidy bill for fertilizers has already doubled for the fiscal year ending March 31, with further increases of 200 billion to 300 billion rupees anticipated in the next financial year.

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What rupee-rouble trade mechanism is being set up for payments?

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