Rising insurance premiums, war-risk cover adding to India's oil import bill, says FM

Finance Minister Nirmala Sitharaman on Monday (June 15) said that rising crude oil prices are not the only concern for India, as higher insurance premiums and war-risk cover are also increasing the country's oil import bill.

"The three largest items that we import keep fluctuating because of war," the finance minister said, highlighting the impact of geopolitical tensions on India's import costs.

Sitharaman said India's challenge is similar to that faced by businesses, with import pressures increasing amid rising consumption and dependence on intermediary and complex products.

Her remarks come at a time when conflicts in key regions and heightened geopolitical risks have increased the cost of insuring ships and cargo moving through sensitive trade routes.

The additional burden of higher war-risk premiums and insurance costs has raised expenses for importers beyond the price of crude itself.

On the monsoon, the finance minister said it remains an annual challenge, with concerns over adequacy and uneven rainfall patterns. She said the government is preparing for a "not so good monsoon" scenario and has maintained adequate buffer stocks.

"No food shortage is expected due to sufficient buffer stocks, though farmer incomes may face stress this year," she said.

The minister also said fertiliser supplies for the Kharif season are adequately stocked and manageable. She added that funds would be required for fertiliser procurement for the Rabi season, with supplies expected to begin from November.

On capital markets, Sitharaman said the government and the Reserve Bank of India had held discussions that led to last week's announcement aimed at making India's bond markets a magnet for capital inflows.

"The withholding tax treatment being offered is a first step towards attracting more capital into bond markets," she said, adding that the current focus is on bonds but "this is not the end of the story."

The finance minister further said the RBI has allowed public sector undertakings to raise funds from overseas within a defined framework. She noted that the hedging framework for overseas borrowing was introduced at the RBI's instance and that PSUs raising overseas funds would not have to fully hedge currency and exchange-rate risks, giving them greater flexibility in accessing overseas capital.