Twin strategies are on the government’s cards to ensure smooth flow of Iranian crude oil to India.
The government has approached Indian shipping companies to transport crude oil from Iran, as the European Union’s sanctions cast a shadow on the commodity. At the same time, Plan-B is to get crude oil on a cost insurance freight basis (CIF), whereby it would ask Iranian carriers to deliver the crude oil to India, a senior shipping ministry official said.
The Union government is mulling over the option of approaching Indian insurers to provide protection and indemnity (P&I) cover to domestic shipping companies.
Indian insurers do not provide P&I covers — a specialised policy. A senior GIC Re official said that they were aware of the sanctions but the government was yet to approach the designated national reinsurer. “Because of the sanctions, getting support for the vessels will be an issue as most of the P&I clubs will not be providing any cover after the sanctions come into force. If the government approaches us, we will look into the issue,” he said.
However, he added, it would not be an easy fix to the problem as such covers needs specialised capabilities and infrastructure.
A reinsurance broker said: “After the sanctions, P&I Clubs will not offer Iran any cover. So getting reinsurance support will be difficult. As Indian insurers do not have the technical capabilities in this area, fundamentally it will not be an easy thing to do.”
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Shipping Corporation of India, Great Eastern Shipping and Mercator are among the Indian shipping companies that have a fair share of the crude oil trade from Iran. “The Government is talking to Indian companies for transportation of crude. Indian flagged vessels are mostly engaged in coastal trade. From July, there would be a problem as companies will not have P&I cover and might not want to risk putting their tankers on trade,” said Anil Devli, chief executive officer, Indian National Shipowners Association.
For Indian vessels, the insurance is routed through P&I Clubs or International Group of P&I Clubs. There are 13 principal underwriting member clubs of the International Group of P&I Clubs, which account for more than 90 per cent of the world’s ocean-going tonnage.
Clubs cover a wide range of liabilities, including personal injury to people on board, cargo loss and damage, oil pollution, wreck removal and dock damage. Clubs also provide a wide range of services to their members on claims, legal issues and loss prevention, and often play a leading role in the management of casualties.