India is Iran's second largest client after China and absorbs about 20 percent of its crude exports, but Indian firms have been struggling for more than six months to pay Tehran due to international banking sanctions imposed on the Islamic republic over its nuclear programme.

Central Bank of Iran chief Mahmoud Bahmani has estimated India's overdue crude payments at around $5 billion, according to the official IRNA news agency.

"We have got no intimation of allocation, which suggests there will be no oil coming in from Iran next month," said a source from private refinery Essar Oil, which imports 36 million barrels of oil each year from Iran.

"We had anticipated this (a cut in supplies)," the Essar source said, adding they had tied up for alternative supplies from four other countries in the Middle East.

Indian media reports also said another importer Hindustan Petroleum Corporation Ltd (HPCL) was also anticipating a stoppage.

"We will draw more from other suppliers with whom we have term deals. The year has just begun," an unnamed HPCL official was quoted as saying in The Economic Times, adding that his firm had made arrangements to replace Iranian oil.

Officials from the Mangalore Refinery and Petrochemicals Limited (MRPL), Indian Oil and BPCL who regularly import oil from Iran, were unavailable for comment.

Earlier this week, India's oil ministry officials said New Delhi was seeking a way to make payments.

The annual trade between India and Iran stands at an estimated $12 billion, with India purchasing some 400,000 barrels of Iranian crude per day.

Copyright AFP (Agence France-Presse), 2011