Notwithstanding the tightening of sanctions by US and European Union (EU), India does not intend to halt imports of crude oil from Iran. Instead the government is working on a scheme to insure oil import shipments from the Islamic nation to maintain smooth supply of energy supplies and also expand trade in other commodities.

The Petroleum and Natural Gas Minister, Veerappa Moily had earlier this week stated that India had no intentions to put a halt to imports from Iran. Officials in the Petroleum and Natural Gas Ministry said that although imports from Iran had witnessed a dip as compared to last year, there is no move to completely phase out such crude oil imports.

The Petroleum Ministry, the Shipping Ministry and the Finance Ministry are holding consultations on establishing a special fund that would insure oil imports from Iran. It is learnt that the state-run national insurance companies, the Petroleum Ministry and the Oil Industry Development Board (OIDB) are working on a plan for the new fund to ensure that Indian oil companies continue to get safe shipments of crude oil from Iran. State-run Mangalore Refinery and Petrochemicals Limited (MRPL) is one of the biggest importers of oil from Iran.

“Any kind of permanent halting of oil shipments from Iran is not feasible at this point of time. The Iran-India trade relations apart from oil are on the rise. The Iranians have shown interest in import of various business commodities including agricultural products and any adverse decision on the crude oil front will jeopardise that great opportunity,” a senior Commerce Ministry official stated.

Figures from the Commerce and Industry Ministry show that India's crude oil imports from Iran fell by 24 per cent in the first 11 months as Indian companies continued to face insecurity on the insurance of shipments from the sanctions hit nation. India imported around 259,000 barrels per day (bpd) of oil from Iran, a decline of nearly 43 per cent from a year ago. The re-insurance issue has come back to haunt the refiners who are importing oil from Iran as insurance companies are reluctant to provide cover for such shipments.

In 2012 when a similar situation arose, the government had stepped in to provide insurance to local ships carrying Iranian oil. India is the second biggest importer of crude from Iran and has imported 271,200 barrels per day (bpd) oil from Iran between April and February period 2012-13 which is below the government’s target of 310,000 bpd for this fiscal year ending March 31. India has reduced Iran's role as one of the biggest supplies of crude oil a supplier and the imports came down to around 7.3 per cent in the period from last April to February, compared to 11 per cent last year. In order to compensate the decline in crude oil imports from Iran, India has stepped up imports from Latin American countries more than doubling them in April to February period accounting for about 17.3 percent of overall imports, up from about 9.5 percent a year ago.

A number of trade and business delegations including the Federation of Indian Exporters Organisation (FIEO) have made business trips to Iran and have returned back with lot of promise. In fact, the Commerce Ministry has also lined up a "India Show" in Iran during 2013 if all goes well.