The Hindu Business Line : First instalment of oil bonds expected on Oct 16

The state-owned oil marketing companies are set to get the first instalment of oil bonds worth Rs 5,000 crore on October 16 to offset losses suffered by them due to a cap on retail fuel prices.

While provident funds would be allowed to invest in the new bonds, the bonds will not enjoy the statutory liquidity ratio (SLR) status, which allows banks to treat investments as part of their reserve ratio.

A senior Petroleum Ministry official said that the second instalment of Rs 5,000 crore could be expected in November and a smaller amount of Rs 4,150 crore which is the last tranche could be given in December. He said that the Rs 14,150 crore bonds would cover revenue loss suffered by oil companies on oil product subsidies in the first half of the current financial year.

The Government has already obtained Parliamentary approval for bonds worth Rs 14,150 crore to be issued to state-run oil companies. The Government intends to issue bonds worth Rs 28,300 crore in the full year to provide financial support to the oil marketing companies who have taken a hit on their profits on account of selling petroleum products below cost price.

SLR status

The Petroleum Ministry was pitching for a SLR status for the oil bonds as that would have made the bonds tradable and oil-marketing companies could have sold these in the market to boost their profits. Any move to accord SLR status to the oil bonds would add to the liquidity as such, making the bonds attractive to potential investors. SLR is an amount that banks have to maintain in cash, gold or approved securities.

Asked as to why the bonds would be issued in instalments, the official said, "We don't want to crowd out the market with the bonds."

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