If the proposed Rs 2,000-crore Indian Energy Insurance Pool is not operational by next month, say major crude oil importers, they will not be bringing in any from Iran.
This casts a big shadow on the petroleum ministry’s plan to import 11 million tonnes of crude from Iran in this financial year — the attraction in doing so from that sanctions-hit country is that it will accept payment in rupees, instead of scarce dollars.
In fact, the bigger hurdle is the size of the proposed insurance pool. According to sources, while oil companies were asking for a cover of Rs 9,500-11,000 crore, the government is offering only Rs 2,000 crore.
State-owned general insurers had also invited their private sector counterparts to be part of this pool but none of the latter accepted, citing the high associated risks.
Petroleum Minister M Veerappa Moily had a plan to save $8.47 billion on the year’s crude oil import bill by paying for 11 mt of Iranian crude in rupees.
Of this, Mangalore Refinery and Petrochemicals Ltd (MRPL), a subsidiary of government-owned Oil and Natural Gas Corporation, and Essar Oil (not state-owned) were to import at least eight mt.
“There is no clarity on the insurance front. The insurance pool was supposed to be finalised in August. Based on this assurance, we started our imports in August. Now, even in November, the insurance hurdles are not settled. Unless the government finalises it by December, we will not be able to import Iran crude this year,” said P P Upadhya, managing director of MRPL.
Of the Rs 2,000-crore insurance pool, the petroleum ministry was to contribute around Rs 1,000 crore through the Oil Industry Development Board and the finance ministry another Rs 1,000 crore. The latter had recently asked OIDB to provide Rs 500 crore with immediate effect.
Echoing Upadhya, a senior Hindustan Petroleum Corporation official said, “We were planning to import 800,000 mt of Iranian crude. But if we are unable to get the insurance issues sorted, we will be substituting it with Saudi Arabia or Kuwait.”
Indian insurers used to depend on European companies to re-insure their risks. However, with the sanctions on trade with Iran from both America and the European Union, these have refused to re-insure, making the proposed insurance pool vital for future import.
When asked about this, an official from a public sector insurance company said, “They require a cover between Rs 9,500 crore and Rs 12,000 crore. However, we will be able to provide a cover of only Rs 2,000 crore. Hence, the pool is stuck, as the industry feels the cover is inadequate.” This pool was to have the four state-owned general insurers — New India Assurance, United India Assurance, National Insurance and Oriental Insurance -- and the sole re-insurer, General Insurance Corporation of India, as members.
Till September-end (the first six months of 2013-14), India has imported only about two mt from Iran, of the proposed 11 mt. An Essar spokesperson refused to comment on the issue.
India imported 18.5 mt of crude from Iran in 2010-11, which came down to 17.4 mt in 2011-12 and 14 mt in 2012-13.
Source:- business-standard.com
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