The idea of a Rs 2,000-crore Indian Energy Insurance Pool, to cover the risk for refineries in importing crude oil from Iran, is likely to be formalised by next month. The finance ministry has asked the petroleum ministry to hasten matters.
According to a Hindustan Petroleum Corporation Ltd (HPCL) official, the company would import at least 800,000 tonnes from Iran this financial year, if the insurance issues are sorted.
HPCL had imported 2.3 million tonnes from Iran last year but had stopped doing so due to insurance issues. Indian insurers used to depend on European companies to re-insure their risks. However, with samctions on trade with Iran from America and the European Union, these have refused to reinsure. “Without proper insurance, we are not going to import,” said the official.
The finance ministry had given a recent reminder to make the insurance pool a reality and asked the Oil Industry Development Board to provide Rs 500 crore with immediate effect.
The ideas was that the petroleum ministry would contribute around Rs 1,000 crore through the OIDB and the finance ministry another Rs 1,000 crore.
The insurance pool is important, as the government hopes to save about $8.5 billion in foreign exchange this year by paying for the Iranian imports entirely in rupees. The plan was to import at least 11 mt this financial year; till September-end (the first six months of 2013-14), it had imported only about two mt. HPCL had raised import of crude from Iraq and Saudi Arabia, as a substitute.