India's oil ministry wants to raise imports of Iranian crude - even though US sanctions call for a cut - and has argued its case in a memorandum ahead of President Barack Obama's meeting with Prime Minister Manmohan Singh on Friday.
Oil accounts for about a third of India's total imports and higher dollar prices combined with a rupee near all-time lows have increased its cost, adding pressure to a bloated current account deficit.
Oil Minister M. Veerappa Moily is looking for cuts of up to $25 billion in the oil bill and boosting volumes from Iran, which accepts partial payment in rupees even though they are not widely traded, could save foreign exchange outflows.
The oil ministry argues in the memorandum seen by Reuters that imports from Iran could be justified at close to 2012/13's low level of 260,000 barrels per day (bpd) and still win a waiver from US sanctions that is tied to cuts of 15 per cent.
India, together with Iran's other major clients China, Japan and South Korea, has won a waiver from US sanctions that aim to force Tehran to negotiate an end to its nuclear programme.
Sanctions have more than halved Iran's oil exports from about 2.2 million bpd before the measures and cost it billions of dollars a month in lost oil revenue.
Recent rapprochements with a new Iranian leader have prompted the United States to say it is ready to engage in talks "on the basis of mutual respect" with Iran as long as Tehran is willing to demonstrate its nuclear programme is for civilian purposes.
Prime Minster Singh will be in New York on Sept. 27 for a meeting of the United Nations General Assembly at which the United States has said an encounter between President Barack Obama and Iranian President Hassan Rouhani is possible.
But the foreign ministry has suggested India does not want to make Iranian oil part of this week's talks between Obama and Singh.
HARD TO ACHIEVE INCREASE?
India's Foreign Secretary Sujatha Singh on Friday said India was not looking to add the issue of Iranian oil to a busy agenda in the bilateral Singh-Obama meeting on Friday.
"I think that on this entire question of purchases of Iranian crude, that is something that we do with Iran. I am not sure that we would want to raise it from our side. If the United States wants to raise it, it is welcome to," the foreign secretary