Psu Refiners Hit As Insurers Stop 3rd Party Cover

The US crisis has hit oil public sector undertakings (PSUs) which supply aviation turbine fuel (ATF) to airlines at airports. Insurance companies have withdrawn the war cover on third-party liability at the time of refueling aircraft, leaving oil PSUs vulnerable to payment of any liabilities that occur in the events of war, terrorism or hijacking.

Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOC) take annual aircraft refueling policies, protecting themselves against third party liabilities as a refueller in the event of an aircraft loss. Henceforth, the oil PSUs will have to take the liability on their own books should any mishap occur to an aircraft as a result of war, terrorism or hijacking.

It is difficult to quantify the exact amount of liability arising out of any mishap on account of refuelling. BPC's aircraft refuelling policy covers the cost of two aircraft with the protection value pegged at Rs 700 crore. The policy will now be limited to cover accidents to aircraft refueled by the oil PSU should it be on account of the company's own error, said BPC director finance A Sinha.

This exclusion in the aircraft refuelling policy comes in the wake of shock reactions by aviation-related insurers facing huge claims following the September 11 US attacks. Insurance companies, on the other hand, have not withdrawn the war cover on refineries and establishments. Third- party liability and war cover continues under the asset policy of oil companies.