If the serious deliberations and meetings of like-minded people come to fruition, Indian maritime industry will soon have a Protection and Indemnity Club (P&I Club) of its own.
"It’s time and efforts are being made to form an India-focused P&I club," confirmed a source close to the developments.
"At a time when economic sanctions against Iran are threatening to take a heavy toll on Indian shipping, there is the imperative need to set up a club to cover the Indian tonnage. Towards this, we are just brainstorming with captains of the industry," he said, reluctantly, because, according to him, the efforts are yet to take any shape.
India is the world's fourth-largest oil importer and one of Iran's biggest customers for crude. Public sector oil majors like Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Mangalore Refinery and Petrochemicals import crude oil from Iran. Companies like Shipping Corporation of India, Great Eastern Shipping and Mercator have annual contracts with these oil companies for importing the crude. Usually, these lines take P&I cover mainly from European P&I clubs. The majority of P&I clubs that cover 95% of the world's tankers against pollution and personal injury claims are covered by the sanctions against Iran since they are based in the European Union or the USA.
Besides India, China and Japan are the two other largest importers of crude oil from Iran. However, unlike shipping companies in China and Japan, Indian companies are likely to be the most affected by the sanctions imposed on Iran, because they do not have recourse to local P&I clubs as those companies in China and Japan.
As existing clubs will not be able to give coverage for their vessels to Iran from July, it is believed that Indian shipping companies would find it difficult to transport Iranian crude unless alternative arrangements are made.
There were several attempts in the past to set up such a club, but nothing could succeed. The Michael Pinto Committee set up by the government in 1972 to assess the viability of having an India specific P&I club had ruled out the possibility.
"Given the low tonnage and complex forex rules, having a P&I Club was found to be not viable at that point of time. The situation has not changed much and it is not a feasible idea even today, argued a member of the Pinto Committee.
"As we already have a similar arrangement for smaller ships, where nearly 100 ships are successfully covered with fixed premium insurance, there is no reason why we cannot have a full-fledged P&I club," said another member of the team actively pursuing the dream of the club. This fixed premium insurance is nothing new and is widely prevalent abroad, he added.
"If we had a club today, our companies would not be at the mercy of the foreign P&I clubs which are denying us the insurance coverage," he added.
"It is high time that we have a self sufficient, supporting system where we do not have to bank on external agencies to give coverage to Indian tonnage," informed another member of the group, on condition of anonymity.
When asked about the form the club would take, he said: "Basically, it would be a pool, a kitty whereby shipowners on their own interest would contribute. If it leads to saving for Indian ship owners in terms of reduction in premiums, etc it would be for their own good."
"As we go ahead, we will have various options, for example, like mutuality or fixed premium approach.
"We will propose the plan, if it goes through we want to see that happen. Our motto is one thing: it is not impossible, but it is very difficult and challenging. If it happens, the country is not only going to benefit from it immensely but would place it on a level playing field along with other Asian countries of China, Japan and Korea," he concluded.