Media reports indicate that the union finance ministry plans to use half of a proposed Rs 40 billion fund for guaranteeing insurance companies who insure the import of crude oil from Iran.
It may be recalled that the union oil ministry and local insurers decided to contribute Rs 10 billion each to the proposed fund.
Indian refiners would be able to take up local insurance backed by Indian reinsurer General Insurance Corp (GIC), which can tap the government fund and sovereign guarantee if the finance ministry suggestion goes ahead.
Indian refining firms are unable to import oil from Iran as foreign reinsurance companies are not willing to provide reinsurance cover for import of crude oil from Iran following the sanction imposed by western nations.
This prompted two state-run refiners to halt imports from Iran since April. That helped cut India’s imports from Iran by more than half in June.
Washington and the European Union imposed sanction on Iran to dissuade the country from pursuing its nuclear programme.
Following this, Iran decided to accept payment in rupees for the oil it is exporting to India. India will soon start settling all its trade with Iran in rupees.