New Delhi, June 22: India plans to allow Iran to ferry crude oil in Iranian ships after the European Union's sanctions come into force from July, preventing domestic ships from bringing oil from the Islamic nation.
The move comes amid plans to reduce imports from Iran by 11 per cent to 15.5 million tonnes in 2012-13.
"We have requested the ministry of shipping to allow Iranian ships to ferry crude oil to Indian shores," petroleum oil secretary G.C. Chaturvedi said.
So far, Indian ships were transporting the crude while insurance was offered by European companies. But domestic shippers may not be able to transport the oil when the European Union's sanctions against Iran come into effect in July as they will not get insurance cover.
Chaturvedi said the oil ministry was also discussing with the finance ministry the scope for domestic insurance companies such as General Insurance and Oriental Insurance to cover ships carrying oil cargoes from Iran.
The refiners can, however, tap American insurance companies.
Washington had recently exempted India from Iran-related financial sanctions in exchange for significant cuts in India's purchase of Iranian oil.
"Right now, there are no problems in supply. These steps will be considered if there are any disruptions in the future. Sovereign guarantee would be the last resort," Chaturvedi added.
In 2010-11 and 2011-12, Indian companies imported 18.50 million tonnes and 17.44 million tonnes of crude oil, respectively.
Industry officials said the US pressure to reduce the use of Iranian oil continued and the country needed to keep exploring alternative sources.
Government data indicated that during 2011-12 supplies from Iraq and Kuwait rose significantly, while Saudi Arabia remained the largest supplier.
In fact, Iraq has now replaced Iran as the second-largest supplier.
Of the 171.41 million tonnes (mt) of crude oil imported in 2011-12, 32.63mt came from Saudi Arabia, 24.51mt from Iraq, 17.67mt from Kuwait, 17.44 mt from Iran and 15.79mt from the UAE.
Meanwhile, an oil ministry official said companies had begun rupee payments to Iran for crude oil with Bharat Petroleum Corporation recently making a payment of about Rs 3,000 crore.