New Delhi: The government is planning to set up an insurance fund worth Rs 2,000 crore to provide cover to refineries after European re-insurers have refused to cover units that process oil imported from Iran.
The fund will start after the refiners contribute money to it, Financial Services Secretary Rajiv Takru said.
The fund would be to be managed by re-insurer General Insurance Company, he said.
Insurance pool fund will be created by contributions from both insurance companies and the Oil Industry.
As per the proposal, national insurance companies and the Oil Industry Development Board will contribute to the fund.
The move will help all refineries importing crude oil from Iran, particularly Mangalore Refinery & Petrochemicals Ltd, whose current insurance cover is coming to an end in May and has so far not found any insurer willing to hedge risks.
Presently, Indian general insurers provide cover to oil refiners and then re-insure the risk with global re-insurers.
But under the US and EU sanctions, the global insurers provide re-insurance with "sanction clause", which limit the amount to be paid in case a claim arises.
India will reduce Iranian crude purchases to less than 13 million tonnes in the current financial year from 18.1 million tonnes last fiscal.
Insurance companies in the country have refused providing cover to refineries processing Iranian oil as they could not get reinsurance from their European counterpart.
Reinsurance makes up for 90 per cent of the insurance cover provided.
New Delhi fears that next the insurers would seek a certificate that fuel exports out of India are not out of any of Iranian oil.
US and Europe have introduced tough sanctions last year to cripple Iran of its oil revenues. EU sanctions have blocked European reinsurers from any involvement in Iranian oil.
Since then, the General Insurance Corp of India feels that cover and losses on processing the Iranian crude would not be payable by reinsurers due to existing sanctions.
India, the world's fourth-biggest oil importer, has struggled to get tankers and insurance for transporting supplies from Iran after the US and the European Union imposed sanctions on the Persian Gulf nation to curb its controversial nuclear programme.
The US in December renewed a waiver for India and eight other nations from a law that cuts institutions off from its banking system if they process payments for Iranian oil.