Secretary for India's Ministry of Petroleum and Natural Gas Vivek Rae made the decision in this respect after senior managers of the Indian refineries expressed concern about lack of sufficient cash to cover their oil imports from Iran, the Time of India reported on Friday.
The Indian government has said that it will offer 240 billion rupees (about $4.4 billion) insurance coverage to the importers of Iranian oil, the Time of India reported on Friday.
The Indian newspaper wrote that the US-led western sanctions against Tehran have created difficulties for the Indian oil refineries and that is the reason why the New Delhi Government intends to establish a special fund commissioned to insure the country's crude oil imports from Iran.
In March, the Indian government announced that "it plans to provide Indian importers of Iranian oil with their needed insurance services".
"According to the proposal, public sector insurance companies and the Oil Industry Development Board under the petroleum ministry would contribute money for the fund that would provide reinsurance for the state-owned insurers," Rae said at the time.
The measure is reportedly aimed at countering the effect of sanctions imposed by the European Union, banning the bloc's members from purchasing Iran's oil or extending insurance coverage for tankers carrying its crude. The EU bans entered into force on July 1, 2012.
"What will be the size of this fund, how much we are required to contribute, whether it is enough to cover reinsurance -these are the details that insurance companies have to work out," Rae added.
Indian refiners HPCL, Mangalore Refinery and Petrochemicals Limited (MRPL) and Essar are the main clients of Iranian crude oil.
Under pressure from the United States, the EU foreign ministers approved new sanctions against Iran's oil and financial sectors last January.
The sanctions, which prevent EU member states from purchasing Iran's oil or extending insurance coverage for tankers carrying Iranian crude, came into effect on July 1.
On August 1, 2012, the US Congress approved more illegal embargoes against Tehran, which seek to punish banks, insurance companies and shippers that help Tehran sell its oil.
