Essar Oil Cuts Cyclone Claim To Rs 302 Crore

Essar Oil is scaling down its insurance claim for the damages suffered by its Vadinar refinery in Gujarat due to the cyclone in 1998 from Rs 500 crore to Rs 302 crore.

The lead insurer to the cover is United India Insurance, while the remaining insurance companies have participated in it to the extent of 10 per cent each. The entire risk cover is re-insured with Munich Re.

An Essar Oil spokesperson refused to comment on the development but sources familiar with the move confirmed the claim figure.

According to insurance officials, the claimed pay-out is on account of property damages and advance loss of profits (ALOP) cover. Initially, the claim was preferred under damage to property, ALOP and third-party liability.

Insurance officials said that the delay in processing the claim was principally due to inspections which had to be conducted to assess the extent of damage. Further, the re-insurers also required some clarification on the claims. The final claim figure was arrived at after negotiations with all parties.

Essar Oil's ALOP cover lapsed in November 1999, while construction on the project was stopped a month earlier. The ALOP cover was availed of when the project is still in an execution stage.

The claim is on account of the cyclone which hit the Gujarat coast in 1998 and did considerable damage to Essar Oil's refinery installations in Vadinar.

According to company officials, the main constraint in restarting the project is in manpower and equipment mobilisation, and tying up some loose ends in funding. The onset of monsoon has also compounded the problem, sources said. However, recent indications are that construction will re-start in another two-three months.