Nuclear accord could revive India-Iran shipping joint venture3 min read . Updated: 06 Apr 2015, 01:25 AM IST
Renewal would be major relief for India, which has struggled to find oil tankers, and Iran, which has been hit by Western sanctions
Bengaluru: A shipping joint venture (JV) with Iran that ferried crude oil to India for four decades until the July 2012 Western sanctions crippled its operations could get a new lease of life, after the Persian Gulf nation and global powers reached a nuclear agreement last week that will lead to lifting of these sanctions.
The framework agreement between Iran and global powers was signed on 2 April, exactly two years after India’s cabinet committee on economic affairs (CCEA) decided to wind up Irano Hind Shipping Co. P.J.S—a JV between Shipping Corp. of India Ltd (SCI) and Islamic Republic of Iran Shipping Lines (IRISL). Both are state-owned companies.
“With the changed situation, anything can happen," said a spokesman for Mumbai-based SCI. The matter is for the government to decide, he said. “The government has to take a call on whether to reverse its earlier decision to dissolve the company," he added.
If the venture gets a new lease of life, it would be a major relief for India, which has struggled to find oil tankers, and Iran that has choked under the sanctions.
SCI held a 49% stake in Irano Hind, which was formed in March 1975 on the basis of a bilateral pact between India and Iran. The JV firm owned crude oil tankers and bulk carriers.
Iran, though, was not keen on dissolving the JV and wanted to continue business with or without SCI, forcing India’s biggest ocean carrier to consider the option of selling its stake to the Iranian firm to exit the company. However, the process of valuing the shares for transferring it to IRISL was yet to be decided.
SCI, meanwhile, approached the government, seeking its direction on what to do. “The cabinet decision was for winding up the company. A change in plan to sell our stake and let IRISL continue alone would necessitate a fresh cabinet approval. We are yet to hear from the government on this," the company spokesman said.
“We are looking into the matter now that the scenario has undergone a drastic change with the signing of the framework agreement last week between Iran and western nations," said a spokesman for the shipping ministry. “Moreover, SCI was yet to exit from the JV company," he added.
“Terminating a joint venture is a painful process. The only reason we decided to end it was the Western sanctions," Arun Kumar Gupta, chairman and managing director of SCI, said in an earlier interview.
“Irano Hind Shipping was a well-run company which was paying regular dividends to us. The cabinet decided to wind up the company only because the sanctions imposed by the US and the European Union made it difficult for the JV operate its ships," the spokesman said.
India, the second biggest buyer of Iranian crude after China, has struggled to get tankers and insurance for transporting oil from Iran after the US and the European Union imposed sanctions on the Persian Gulf nation. The Western sanctions targeting Iran’s nuclear programme meant insurers based in Europe—who account for the majority of cover for the tanker market—cannot insure Iranian oil and other shipments, leading to the emergence of new, untested insurance providers.
India has approved two Iranian ship underwriters—Iran’s Kish P&I Club and QITA P&I Club—to provide insurance for tankers calling at Indian ports in a bid to continue sourcing crude from Iran.
Prime Minister Narendra Modi’s government, which has made energy security and supply a top priority, has aimed for a 10% reduction of its energy imports by 2022 and a 50% cut by 2030. India, the world’s fourth biggest oil buyer, imports 77% of its energy needs. Its energy import bill of around $150 billion is expected to double to $300 billion by 2030.