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The insurance fund for domestic refineries importing crude oil from Iran is likely to be delayed following lack of consensus over the release of Rs 500 crore that the Oil Industry Development Board has to pay to the Finance Ministry.
Speaking to Business Line , Rajiv Takru, Financial Services Secretary, said, “The insurance companies are ready to launch the pool. However, we are stuck on the guarantee issue. The OIDB (under the Ministry of Petroleum and Natural Gas) has asked us to go ahead with a corporate guarantee, but we are awaiting payment of the initial tranche of Rs 500 crore from them. We have discussed the issue at several levels now.”
According to insurance industry officials, the proposed Rs 2,000 crore fund is stuck in a limbo as the Finance Ministry is insisting on the initial payment. The other big hurdle to the pool is the size of the insurance cover, which is limited to Rs 2,000 crore, which the domestic refiners feel is insufficient.
Insurance pool
In April this year, the Finance Ministry, in consultation with the insurance companies and the Oil Ministry decided to set up a Rs 2,000-crore fund through contributions by State-owned insurers, which were to collectively provide Rs 1,000 crore, while the balance was to be pooled in by the Oil Industry Development Board.
The energy insurance pool is being set up to provide insurance cover to domestic refineries such as Mangalore Refinery and Petrochemicals Ltd, a subsidiary of Oil and Natural Gas Corporation; Hindustan Petroleum Corp Ltd; and Essar Oil that process crude oil from Iran.
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.
Currently, Indian general insurers provide a cover to oil refiners and then re-insure the risk with global re-insurers. But with Iran under US/EU sanctions, global re-insurers provide cover with a “sanction clause” that limits the payout in case of a claim.
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