Financial Daily from THE HINDU group of publications
Tuesday, Mar 07, 2006
Financial Daily from THE HINDU group of publications Tuesday, Mar 07, 2006 |
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Govt Bonds Industry & Economy - Petroleum Government - Policy Oil bonds issue to be completed by March 15 Our Bureau
Easing pressure The bonds are meant to offset a certain portion of losses suffered by oil companies for petroleum products below cost price. To carry an average coupon rate of 7.3 per cent
New Delhi , March 6 Oil marketing companies may have some relief coming their way with the Government deciding to complete the Rs 11,500-crore oil bonds issuance programme by March 15. The first tranche of bonds amounting to Rs 5,750 crore would be issued on Wednesday, according to the Petroleum Minister, Mr Murli Deora. He was speaking to newspersons after meeting the Finance Minister, Mr P. Chidambaram, today. The second tranche for an equal amount would be issued soon thereafter. These bonds are meant to offset a certain portion of losses suffered by companies such as IOC, IBP, HPCL, and BPCL due to selling of petroleum products below cost price. So far, the Government had refrained from giving a specific timeframe by when the entire process of oil bonds issuance would be completed. The oil bonds would carry an average coupon rate of 7.3 per cent. There are three categories of bonds - those with a term of three years, six years, and nine years. While the three-year bond would carry a coupon of 6.7 per cent, the six-year bond would have a coupon of 7.3 per cent and the nine-year bond 7.6 per cent. In each tranche, oil bonds with tenure of three and six years would amount to Rs 2,000 crore each and those with nine years of maturity would be to the tune of Rs 1,750 crore.
Issues discussed
On whether the recommendations of the Rangarajan Committee and the issue of petroleum product pricing were discussed with the Finance Minister, the Petroleum Minister replied in the negative. He said that the discussions centred around the problems faced by the oil sector. Some of the issues discussed were problems of bleeding oil public sector undertakings, oil bonds, exemptions for pipeline projects, infrastructure status, and oil cess. As per industry estimates, the gross under-recoveries suffered by the oil marketing companies during the current fiscal are close to Rs 35,000 crore. Budget 2006-07 had increased the cess on domestically produced petroleum crude under the Oil Industries Development Act from Rs 1,800 a tonne to Rs 2,500. This increase is to be absorbed by the oil producing companies and would have no impact on retail prices of petroleum products. The demands made by the Petroleum Ministry include granting of subsidies to the oil sector from the Budget on the lines of food and fertiliser subsidies, service tax exemption for exploration and production activities, and that working capital for oil marketing companies should be OIDB (for reduced interest rate).
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