Shipping company Mercator, which diversified into coal and offshore businesses, has been the lone Indian shipper that agreed to bring crude from Iran with state-backed insurance of $50 million. After the European Union imposed sanctions from July, shippers could no longer obtain the $1-billion cover they used to get before. The company expects the dry bulk sector to remain subdued while seeing the tanker sector recoup in the second half of 2013. Atul Agarwal, Mercator?s managing director, in an interview with FE?s Vaishnavi Bala said that the company will undertake another voyage in the next few days. Edited excerpts:

How does the tanker and dry bulk markets look, going ahead? Freight rates are still low.

The tanker business is performing better than the dry bulk sector. Dry bulk rates are depressed and are not likely to pick up for the next four-five quarters. It is very challenging. Now, with China growing at its slowest in three years, they are importing less iron ore. With that, there will be additional pressure on dry bulk carriers.

On the other hand, the tanker sector may see a turnaround in the second half of next year. A majority of the vessels that had been ordered over the past couple of years will be delivered by the first half of next year and there will be no fresh delivery after that. So, by the second half of 2013, the supply would have eased. We may buy second hand tankers if there are good opportunities in the market.

Mercator is the only shipping company that has agreed to bring crude from Iran. Why this decision?

We decided to go ahead with our voyage keeping in mind the national interest and the energy needs of the country. Right now, the only way that crude oil can be transported is through tankers. If the government stops Iranian crude imports, it would lead to higher diesel prices in the country, adding to inflation.

But the cover provided by United India Insurance is only $50 million…

Yes, that?s true. Before the sanctions were imposed, there was a cover of $1 billion, but my question is, do we really need $1 billion? Yes, definitely $50 million is very low and inadequate. But maybe we don?t need insurance of $1-billion per voyage. Having said that, I completely agree that the premium charged is very high, which is deterring shippers from taking the journey to Iran.

But shipping companies are reluctant to take voyages to bring crude because of the low cover. So what should the government do?

Indian National Shipowners Association (INSA) and Mercator have written to the government of India to request them to lower the premium and provide adequate cover. The government should also look at asking the oil and gas companies to share the premium. I think it is preposterous if the government is considering talking with Iranian insurers to provide part cover. That scenario is unlikely as it won?t be in any way beneficial to Iran.

Now we are having Iranian tankers bringing crude. Is there some kind of a risk involved there?

I think we are at a great risk because the government has relaxed rules for the Iranian ships to enter Indian shore. How much are they insured for, their condition, we do not know anything. We do not know whether Iranian ships operate under the global regulations. No one is questioning them.

Mercator?s first voyage took place this month. Are you looking to undertake another?

Our first voyage in which ?Omvati Prem? brought crude reached Indian shores in August and we successfully discharged cargo. We are now thinking of sending another voyage to Iran in a few days.

Mercator is seeing high growth in its coal business. How are you seeing the business this year?

We are happy with our coal business. It is contributing to a major part of our revenues now.

With Coal India?s production falling and India looking at high imports, we are expecting it to continue to grow at a fast rate. The coal mine, which we bought last year in Indonesia, has started production and we have made first shipment in this month. We had announced the IPO of the coal business last year, but we are keeping that on hold because of weak market conditions. We don?t expect it to happen anytime this year.