UPDATE 1-India's HPCL may buy 6 mln bbls Iran oil if govt backs insurers
* Fire-hit Vizag refinery may reach full capacity by Feb
* Govt fund for local reinsurers could start this month
NEW DELHI, Nov 12 (Reuters) - India's Hindustan Petroleum Corp Ltd may import about 6 million barrels of Iranian oil by March 31 if New Delhi starts a fund to back local insurers for covering plants processing oil from the sanctions-hit nation, its head of refineries said.
HPCL halted Iranian oil imports from April due to problems getting coverage for refineries running Iranian crude because of EU sanctions banning European reinsurers from the business.
That forced India to consider a 20-billion-rupee ($320-million) fund to back local insurance companies willing to step into the gap.
The oil ministry has said the insurance problem will be resolved, HPCL's head of refineries B.K. Namdeo told reporters.
"This month, things could get formalised. For the remaining four months (of the fiscal year), we can get around 0.8 million tonnes from Iran," he said.
That would represent nearly 50,000 barrels per day (bpd) of Iranian oil shipments over the December-March period, about a quarter more than what India was taking over the first nine months of the calendar year.
But HPCL's resumption of the Iran oil imports would hinge on insurance coverage, and India's efforts since February to create the local reinsurance fund have so far yielded no results.
India's crude imports from Iran fell 40 percent over January-September of this year to about 194,000 bpd as some refiners cut purchases from Tehran while waiting for New Delhi to commit to the fund to cover plants processing the oil.
Mangalore Refinery and Petrochemicals Ltd also halted its import of Iranian oil for four months from April, resuming them in August.
To make up for lost Iranian barrels HPCL has raised imports from Iraq, Namdeo said. HPCL also buys about 50,000 barrels per day (bpd) from Saudi Arabia and 20,000 bpd from UAE, he said.
HPCL's decision to forego the Iranian barrels from April stood it in good stead as there was no question about its insurance coverage when an under-construction cooling tower at its 166,000 bpd Vizag caught fire in August.
The Vizag refinery is currently operating at 70 percent capacity and may reach full rates in the first week of February, Namdeo said.
HPCL has no plans to import fuel as supplies have been arranged from other plants to meet demand, he said.
HPCL also operates a 130,000 bpd plant in western Maharashtra state. It has a stake in the 180,000 bpd Bathinda refinery in northern India, which is operated by Hindustan-Mittal Energy Ltd, part-owned by LN Mittal.
Earlier on Tuesday, HPCL said its September quarter net profit fell 86 percent. ($1 = 63.2750 Indian rupees)
(Editing by Tom Hogue)