Iran has cut by one—third the time it gives to Indian refiners to pay for oil they buy from it and has also raised ship freight rates as a retaliatory measure to New Delhi’s decision to reduce Iranian oil imports.

Iran, India’s third biggest oil supplier, used to give a 90—day credit period to refiners like Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) to pay for the oil they would buy from it.

Now, Tehran has reduced this to 60 days, essentially means that IOC and MRPL would have to pay for the oil they buy from Iran in 60 days instead of previous liberal term of 90 days, sources privy to the development said.

Iran oil sale terms were the most attractive for Indian refiners. Besides a liberal credit period, it also shipped the oil to India for a nominal 20 per cent of normal ocean freight.

Other Middle-East sellers offer not more than 15-day credit period.

Sources said National Iranian Oil Co (NIOC) has also decided to cut the discount it offers to Indian buyers on freight from 80 per cent to about 60 per cent.

IOC and MRPL — largest state buyers of Iranian crude — will cut imports from Tehran to 4 million tonnes in 2017-18 from 5 million tonnes in the previous year.

Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) will cut oil imports from Iran by 0.5 million tonnes each to 1.5 million tonnes as New Delhi built pressure on Tehran to award the Farzad—B field to its discoverer, ONGC Videsh Ltd.

Iran has deterred in awarding rights to develop the 12.5 trillion cubic feet discovery OVL had made 10 years back and now New Delhi is using its oil imports as a bargaining tool to get Tehran to agree.

Earlier this week, Iranian Oil Minister Bijan Zangeneh had dismissed the threat of cutting imports, saying, “We cannot enter deals under threats.”

“Using language of threats is not appropriate,” Zangeneh was quoted as saying by Iranian news agency Irna. “There are a lot of customers for Iranian oil and their demand surpasses our export capacity.”

India is Iran’s second biggest oil buyer after China and was among a few which had continued to import crude despite Western sanctions against Tehran.

Since lifting of the sanctions last year, Iran is playing hardballs over award of rights to develop Farzad—B gas field in the Persian Gulf to OVL, the overseas arm of state—owned Oil and Natural Gas Corp (ONGC).

OVL has submitted a revised master development plan of over USD 5 billion for developing the field.

The new plan, filed with Iranian Offshore Oil Company (IOOC), excludes liquefaction facilities to turn the gas into LNG for ease of shipping to nations like India, sources said.

The two nations were initially targeting concluding a deal on Farzad—B field development by November 2016 but later mutually agreed to push the timeline to February 2017.

Now, the deal is being targeted to be wrapped up by September after the two sides agree on a price and a rate of return for OVL’s investments.

Farzad—B was discovered by OVL in the Farsi block about 10 years ago. The project has so far cost the OVL—led consortium, which also includes Oil India and IOC, over USD 80 million.

Iran was initially unhappy with the USD 10 billion plan submitted by OVL for development of the 12.5 trillion cubic feet (tcf) reserves in Farzad—B field and an accompanying plant to liquefy the gas for transportation in ships.

It felt the USD 5 billion cost OVL and its partners have put for developing the field was on the higher side and wanted it to be reduced. OVL will earn a fixed rate of return and get to recover all the investment it has made in the field development.

The field in the Farsi block was discovered by the OVL— led consortium in 2008. It has an in—place gas reserve of 21.7 tcf, of which 12.5 tcf is recoverable.

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