In the wake of US State Department renewing sanctions on Iran, the Indian government has said that it will not provide any sovereign guarantee to domestic refineries for crude oil imported from Iran.
In April, the government had proposed to set up an Rs 2,000-crores insurance fund to provide cover to domestic refineries which process crude oil from Iran.
The financial services department has communicated to the ministry of petroleum and natural gas that it has agreed to set up the pool. It is awaiting their contribution and response.
The insurance pool fund will be created by contributions from both insurance companies and the oil industry. The four PSU general insurers –New India Assurance, National Insurance, Oriental Insurance and United India Insurance will be the part of the pool.
Currently, Indian general insurers provide cover to oil refiners and then re-insure the risk with global re-insurers. But under the US and European sanctions, the global reinsurers provide re-insurance with sanction clause, which limits the amount to be paid in case a claim arises.
The government has clarified that the reinsurance part which has been taken from the UK and the US is only for the limited amount, not the entire value of the refinery. So, for that amount, government will cover it. For the rest of it, even today, there is no sovereign guarantee.