The Hindu Business Line : Govt to issue oil bonds for Rs 14,150 cr soon

For the kitty
The bonds are likely to carry a coupon rate of 7.5-8 per cent.
The RBI is giving finishing touches to the modalities of the bonds.

New Delhi , Aug 25

The Government will issue the first tranche of oil bonds worth Rs 14,150 crore out of a total of Rs 28,300 crore to State-owned oil marketing companies by the month-end.

The bonds are to compensate the companies for selling petroleum products below cost price.

They are likely to carry a coupon rate of 7.5-8 per cent, said Mr M.S. Srinivasan, Petroleum Secretary.

"We have given the Finance Ministry two options - either grant them statutory liquidity ratio (SLR) status or allow pension funds to invest in these bonds," he added.

The Reserve Bank of India is giving finishing touches to the modalities of the bonds; early next week, another round of meetings is expected between Petroleum Secretary and the Finance Secretary.

Mr Srinivasan said that he has already met RBI officials on the issue.

The Presidential assent to issue these bonds is awaited, he added.

Parliament had earlier approved issue of oil bonds worth Rs 14,150 crore as part of supplementary demand for grants.

Mr Srinivasan also said that the Ministry was open to the idea of the Rs 14,150-crore tranche being issued in two parts on a quarter-to-quarter basis. The Government had decided to issue oil bonds worth Rs 28,300 crore to oil marketing companies to partly compensate them for the losses on retail sales of petrol and diesel.

IOC and its subsidiary, IBP, are expected to get nearly 50 per cent of the bonds, while BPCL and HPCL will equally share the rest.

Last year, the companies were issued oil bonds worth Rs 11,500 crore with maturity of three, six and nine years and coupon of 7.33 per cent, 7.47 per cent and 7.61 per cent respectively.

Besides the oil bonds, the Petroleum Ministry is seeking excise duty cuts on petrol and diesel, Mr Srinivasan said.

The Ministry has asked the Finance Ministry to cut excise duty on petrol and diesel by a rupee.

"Currently, the average Indian basket has been below $70 a barrel this month.

"However, we have requested the Finance Ministry to look into the issue if the situation warrants."