Search the Internet          Tips  Sites: Finance, Investment

Insurance firms likely to take Rs 4-billion hit

Sidhartha and Pradeep Puri in New Delhi

General insurance companies are likely to take a hit of up to Rs 4 billion due to the cancellation of over 3,700 petrol pump allotments by Prime Minister Atal Bihari Vajpayee last Monday.

Petrol pump owners will therefore be able to cushion themselves against part of their losses through insurance claims.

While the four public sector general insurance companies are yet to firm up the extent of compensation to be paid to the owners of petrol pumps and LPG and kerosene distributorships, a top executive with one of them said the losses can touch Rs 4 billion, depending on the insured value.

Executives said typically the insurance premium is Rs 3 per mille (thousand) in the case of properties like petrol pumps.

They, however, clarified in some cases pump owners had also taken a silent risk cover which entitled them to a compensation in case the insured property was lying idle for a while.

However, there were no available estimates of the number of pump owners who had purchased such a cover. In addition, the stock lying at petrol pumps is also insured by insurance companies.

Insurers said traditionally a day's stock of petrol and diesel is readily available at all petrol pumps while in the case of LPG distribution outlets, the stock insured is higher.

A senior executive with a state-owned general insurance firm said the exact estimate of the loss to the insurance companies would be known only after a couple of months.

"At the moment we are watching the situation closely and will pay the claims only after the government and oil companies have completed the process of cancellation," he said, adding that no claims have been received so far by his company.

Last week, the government ordered cancellation of over 3,700 petrol, LPG and kerosene outlets after allegations of favouritism in allotments to Bharatiya Janata Party workers and their relatives came to light.

All allotments since January 2000 were cancelled on the instructions of the Prime Minister.

Allottees obtain stay orders

Allottees of petrol pumps and LPG agencies have started obtaining stay orders from various courts in the country against the cancellation of their allotments. The Delhi high court is scheduled to hear several such cases.

In the first such case, the additional district magistrate of Dimapur in Nagaland granted stay on the cancellation of a petrol pump to a scheduled tribe woman.

In another case, a court in Jodhpur said the petitioner should be given a personal hearing.

Powered by

ALSO READ:
More Money Headlines