Economy Feb 28, 2012
New Delhi: India is considering providing sovereign guarantee to domestic shipping lines for import of crude oil from Iran which is facing sanctions from the US and Europe.
The sanctions prohibit EU-based entities from providing insurance and guarantees for transportation of oil from Iran. Most of the Indian shipping lines take protection and indemnity cover (P&I) mainly from them.
"The government is exploring options like sovereign guarantee and Cost&Freight (C&F)for importing crude from Iran in the wake of European sanctions...A decision will be taken in the next two-three months," Shipping Secretary K Mohandas told reporters here today.
The development comes in the wake of apprehensions from state-run SCI, the largest domestic tanker owner that it will not get international insurance cover following European Union sanctions against Iran announced on January 23. Mohandas said the Shipping Corporation of India (SCI) has brought the issue to the notice of the government and deliberations are on.
"It is a problem area," he said adding that providing sovereign guarantee and C&F seems to be a practical solution. C&F is a term of sale which means the seller will bear all expenses barring insurance charged up to the named port of destination.
SCI which operates about 40 tankers will lose its EU insurance coverage for its oil fleet operating in Iran from July 1, as European insurers will be prohibited from indemnifying ships carrying Iranian oil.
Mohandas admitted that Indian firms are likely to be worst-hit by sanctions in Asia as neighbouring China and Japan fleets are covered by their domestic providers. Apart from SCI, companies like Great Eastern Shipping and Mercator Lines have contracts with state-run oil companies like Indian Oil and Hindustan petroleum to import crude.
More From Firstbiz.