As a way out, Oil Ministry has proposed that Iran ship the crude oil in their own ships, practically absolving the importer of the liability to get insurance cover for the carrier and the oil. "We have asked Shipping Ministry to allow Iranian ships to transport oil," Oil Secretary G C Chaturvedi told reporters. Also, the ministry is seeking intervention of the finance ministry to get state-owned General Insurance Corp (GIC) to provide insurance cover to domestic ships carrying oil from Iran.
"We are currently receiving supplies from Iran," he said adding American insurance companies too can be tapped as Washington this month exempted India from Iran-related financial sanctions in exchange for significant cuts in Indian purchases of Iranian oil. Sovereign guarantee to cover for loss of ship or loss of oil cargo, may be extended to shippers as the last resort in case all options fail.
India has relegated Iran as its third largest supplier by bringing down imports from 18.5 million tons in 2010-11 to 17.44 million tons in 2011-12 and to 15.5 million tons this fiscal. Domestic shippers have refused to transport oil from Iran begining July in absence of insurance cover. Unlike private refiners, state-owned oil companies need government permission to import oil on a Cost, Insurance and Freight (CIF) basis requiring the seller to arrange for the carriage of goods by sea.
Current policy requires refiners to favour Indian insurers and shippers by buying only on a Free on Board (FOB) basis i.e. requiring the seller to deliver goods on board a vessel designated by the buyer. Indian shipping lines would not lift Iranian cargoes from July as a plan brokered by shipping ministry to ask state insurers to provide a limited cover of USD 50 million for Iran voyages has been delayed because insurance regulator has sought more details.
New Delhi aims to buy 310,000 barrels per day or 15.5 million tons of oil from Iran in 2012-13 fiscal. This includes 80,000 bpd to 100,000 bpd of purchases by Essar Oil, the only private customer. While Mangalore Refinery and Petrochemicals Ltd (MRPL) uses ships of Great Eastern Shipping Co, Indian Oil Corp (IOC) and Hindustan Petroleum Corp (HPCL) use state-owned Shipping Corp of India`s (SCI) ships to ferry crude oil from Iran.
An oil ministry official said oil companies have begun rupee payments to Iran for crude oil with Bharat Petroleum Corp (BPCL) recently making a payment of about Rs 3,000 crore. Since December 2010, Indian refiners have been using Turkey`s Halkbank to pay for Iranian oil imports. This year, Tehran and New Delhi agreed to settle 45 per cent of the oil trade in rupees. And payments in rupee began this week after finance ministry notified lifting of a hefty local tax on rupee payments.