New Delhi, Aug 28 (IANS): The oil ministry has worked out a plan to save $22 billion in the oil import bill from Iran thus helping reduce the current account deficit (CAD), Petroleum Minister M. Veerappa Moily has said.

"Oil (imports) is one of the components responsible for CAD. The prime minister has told us to save $25 billion in the import bill. As of today, we have pieced together a plan to save $22 billion in import bill," Moily said.

He said the savings would be around one percent of the GDP.

Moily was talking to reporters Tuesday at an event to present a cheque for Rs.5 lakh to the widow of Arjuna awardee sportsman late Makhan Singh.

Senior oil ministry sources told IANS that the plan includes renewing imports from sanctions-hit Iran, which India pays in rupees thereby saving foreign exchange and reducing the CAD.

Officials calculate that importing, for instance, 10 million tonnes oil from Iran means saving $10 billion in foreign exchange outgo. During the last fiscal, India imported 13.1 million tonnes of oil from Iran, down from 18.11 million tonnes of 2011-12.

After not buying any oil from Iran in first four months of the current fiscal, imports were resumed this month with state-run Mangalore Refinery and Petrochemicals getting the first tanker-load.

In view of the current volatility of the rupee against the dollar, India is discussing with Iraq the possibility of trade in local currencies, which would help insulate India's oil imports from Iraq also.