Iranian Crude is Still Finding its Way to India, SCI Largely Unaffected by Sanctions

SINGAPORE (Dow Jones)–Shipping Corp. of India Ltd. (523598.BY), India’s largest shipping company by fleet size, doesn’t expect any significant impact on its financial performance this fiscal year due to restricted insurance coverage for carriers shipping crude oil from Iran, Chairman and Managing Director S. Hajara said Monday.

Due to the restrictions, the company is faced with the choice of either making up for any loss in coverage or reducing its dealings with Iran, as it may incur huge losses if its vessels aren’t insured and meet with an accident.

In February, SCI cancelled loading one of its tankers fixed for carrying crude from Iran for Indian Oil Corp. (530965.BY), raising concerns that supplies from the Islamic republic may drop sharply.

India is the world’s fourth-largest oil importer and one of Iran’s biggest customers for crude.

“There was a delay in providing clarification regarding availability of insurance cover from the Protection and Indemnity Club,” and the vessel was also running late beyond the time in which it should be ready at the loading port, so the shipment couldn’t be carried, Hajara told Dow Jones Newswires in an interview.

Around 90% of the world’s tanker insurers are based in the West.

Although shipments have declined, oil companies in India haven’t stopped importing crude from Iran, and SCI’s shipments are still covered on a voyage to voyage basis. Therefore, there wouldn’t be any significant impact on its revenue, he said.

SCI logged revenue of about INR20.2 billion ($375 million) in the first six months of the fiscal year ended Sept. 30.

SCI’s main concern has been about the insurance cover, Hajara said.

Tightening sanctions by the West on Iran to curb its nuclear program include a ban on many E.U. insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world from July.

Indian state insurers have agreed to provide cover of as much as $50 million to Indian flag carriers per Iranian voyage, according to some reports.

Hajara said he was hopeful that Indian state insurers would do more to offset the loss of insurance cover from European P&I clubs. The issue is still being deliberated with insurers in the country, he added.

Meanwhile, SCI, which has been expanding rapidly through acquisitions, isn’t planning to place any new ship construction orders this fiscal year, said Hajara. This decision was taken in light of the uncertainty prevailing in the shipping market as well as the weakening global economic outlook, he said.

SCI has 25 vessels on order which are scheduled to be delivered in phases from 2012 to 2014, he said.

SCI has a fleet of 77 vessels with a total capacity of 5.58 million deadweight tons.

-By Surabhi Sahu, Dow Jones Newswires