India's Iran oil imports far below levels last year -trade
* Iran imports seen at 190,000 bpd in year to end-March 2014 -sources
* New insurance fund may not spark import resurgence -sources
* Iran 9th biggest oil supplier in Aug versus 15th in July
NEW DELHI, Sept 20 (Reuters) - India's imports of Iranian oil shot up in August to more than four times the volume taken in July as one refiner resumed purchases after a four-month break, but the average annual pace of shipments is still far below last year's levels.
India's intake of Iranian oil to date in 2013 is down over 40 percent on the year because international sanctions aimed at curbing Tehran's nuclear programme have made it difficult to insure refineries and ships involved in the trade and forced some oil payments to be made in rupee.
Even though Indian oil minister M. Veerappa Moily says he wants Iranian oil imports near last fiscal year's rate of 260,000 barrels per day (bpd) - which he says would save $8.5 billion in foreign exchange and help curtail India's current account deficit - daily shipment rates are much lower than that.
Industry sources also told Reuters there would likely be no great import resurgence despite the government putting together a new reinsurance package for refineries processing Iranian oil.
India imported 151,000 bpd of Iranian crude in August versus 35,500 bpd in July, when only Essar Oil bought from Tehran, data compiled by Reuters from trade sources shows.
Iranian oil imports in August were about a fifth less than last year's 192,000 bpd, the tanker arrival data shows. Imports for January-August dropped about 44 percent from a year ago.
Other data provided by industry sources and Reuters calculations indicated that Indian imports from Iran will run about 190,000 bpd in the year to end-March 2014.
The U.S. and EU sanctions aimed at forcing Tehran to negotiate an end to its nuclear programme have more than halved its oil exports from about 2.2 million bpd and cost it billions of dollars a month in lost oil revenue.
Western powers believe Iran is developing nuclear weapons, while Iran says its programme is for power generation.
U.S. President Barack Obama may meet with Iranian President Hassan Rouhani next week after a "change in tone" between Iran and the West since Rouhani took office.
MRPL RESUMES SHIPMENTS
Only two refiners - Essar Oil and state-owned Mangalore Refinery and Petrochemical Ltd - bought Iranian oil in August.
MRPL, which used to be Iran's top Indian client, bought its first oil from the sanctions-hit nation since April, the data shows. MRPL resumed the imports after securing local reinsurance for claims up to 5 billion rupee ($79 million).
In addition, India is planning to provide a 10 billion rupee sovereign guarantee to back local insurance for refineries using Iranian oil, according to government sources.
The government guarantee is half of a package that would assure refiners running Iranian oil of about 20 billion rupee in insurance coverage.
An earlier plan of twice the amount had been considered, but a finance ministry official said the government felt the smaller package was adequate, declining to give further details.
With the new fund, local insurers will remove the sanctions clause from the policies covering the refiners.
MRPL and another state refiner, Hindustan Petroleum Corp Ltd , had halted Iranian oil imports in April, primarily over the insurance issue.
However, as they waited for the government plan to shore up the local insurers, some refiners determined that there are suitable substitutes for Iranian crude.
HPCL, for instance, has significantly raised imports of Iraq's Basrah oil to replace its lost Iranian barrels, and is not switching back this fiscal year.
"In our crude import strategy for this year we have not factored in Iranian oil imports," said an HPCL source.
Iran was ninth biggest crude oil supplier to India in August, improving its ranking from 15th place in July, but that was still down from sixth a year ago.
India imported about 52 percent more oil from Latin America in the first eight months of the year as its Iranian shipments dropped. Crude imports from Iraq over the same period increased nearly a quarter.
Overall, Asia's third-largest economy shipped in 26 percent more oil in August than a year ago, while imports for the January-August period rose about 12.4 percent, the data showed.
India and other buyers of Iranian oil - including China, Japan and South Korea - can win exemptions from U.S. sanctions by continually lowering their purchase volumes. India will be up for review of its six-month exemption in December.
($1 = 63.2650 Indian rupees)
(Editing by Tom Hogue)