This follows the world powers signing the historic nuclear deal with Iran last month that has opened the door to the easing of sanctions.
A senior official said on Thursday that the cumulative dues worth $6.5 billion (Rs 41,000 crore) could be discharged partly in rupees, and the balance in dollars or euros.
“The modalities of payment and the route are being worked out,” the source said.
He said Iran will open a fresh account with one of the Indian banks for receipt of the rupee payment, which it will use to pay for its imports from India.
Since February 2013, Indian state-run and private refiners have paid around 45 percent of the payment due in rupees, through the Kolkata branch of the state-run UCO Bank.
The balance has been accumulating, pending finalisation of a payment route and mechanism.
The source said the new account will be different from the UCO Bank account, which is non-interest bearing.
Iranian Foreign Minister Javad Zarif said here last week that Iran’s central bank and government officials are working with their Indian counterparts on the technicalities of the settlement of India’s oil import dues that have grown to over $6.5 billion.
Indian Oil’s finance director A.K.Sharma told reporters last week the company could pay a part of its oil import dues to Iran as early as this month.
The state-run oil marketer still owes around $500 million to Iran for crude supplied, he said.
Iran was until 2006 India’s second-largest supplier of crude oil, but dropped to number seven by the end of 2013-14.
Meanwhile, Indian industry said on Thursday that the lifting of sanctions on Iran is likely to have a huge beneficial impact on India’s economy, especially on its current account deficit (CAD) and inflation situation.
“The removal of the sanctions would allow India to freely buy crude oil from Iran, resulting in lower shipping costs from reduced transportation time,” the Confederation of Indian Industry said in a statement here.
CII noted that some Indian companies may benefit directly with the easing of sanctions.
“Mangalore Refinery and Petrochemicals may recover its pending crude liability to Iran, which today stands at Rs.14,000 crore,” CII said
“ONGC could also make headway in pushing for its development rights in Iran’s Farzad B gas field, which they bid for in 2012,” it added.