Indian insurers still want the sovereign fund, meant to protect the domestic refiners using Iranian crude oil, to be set up. This is despite India getting waiver from the West on tough economic sanctions for doing business with Iran.
“Unless the European and American companies are allowed to undertake re-insurance of Indian purchases, the need for putting together a domestic arrangement in India does not go away,” G. Srinivasan, Chairman and Managing Director, New India Insurance, told Business Line .
India had decided to set up a fund to back domestic insurers covering refineries dependent on Iranian crude oil.
Though Iran signed a deal with six world powers last week to ease sanctions against its disputed nuclear programme, it was still not clear whether the earlier restrictions on global re-insurers have been lifted, an oil industry official said.
Domestic refiners such as Mangalore Refinery and Petrochemicals Ltd (MRPL) voice a similar sentiment. The Indian insurance companies are not governed by the US and the EU sanctions, but have to depend on re-insurance from the western companies because of the high risks.
Adopting a ‘wait and watch’ strategy, the refiners say so far, Iran is insuring the shipment. “But, we have to see for how long,” an industry official said.
Sanctions dealing with insurance coverage of ships carrying Iranian oil and refineries processing were among the most effective in curbing imports from the Gulf country.
An insurer said that Friday’s announcement of a six-month waiver to further reduce Iran’s crude oil sales does not imply that international sanctions have been removed.
Countries dependent on Iranian oil such as India, China and Japan, were given the first round of waiver in June last year on the condition that they gradually reduce their purchases from Iran. This was further extended till end of this year.
On Friday, this was extended by another six months.
An attempt to put together a sovereign insurance pool by India is now bogged down by a few irritants. Both the Petroleum and Finance Ministries are not on the same page regarding the funding of the insurance pool.
While the Petroleum Ministry is for the Oil Industry Development Board (OIDB) providing guarantee instead of actual funding, the Finance Ministry is keen that actual funding for the pool.
Also, the proposed insurance pool is intended to cover the assets of local refiners. While the initial corpus envisaged was Rs 2,000 crore, the refiners contend that this may not be adequate to cover their large assets.