The Hindu Business Line : Ministry seeks revival of RBI’s special liquidity window for oil cos

New Delhi, Aug. 1 The Petroleum Ministry has sought resumption of the Reserve Bank of India’s special liquidity window to buy oil bonds from public sector oil marketing companies (OMCs).

Earlier this week RBI in its credit policy announced an end to Special Market Operations (SMOs) after oil prices had softened. Under the scheme, the RBI provides foreign exchange to OMCs in return for their oil bonds that enabled easing the liquidity crunch faced by such entities due to surge in global crude prices.

“We have taken up the matter with the Ministry of Finance,” Mr S. Sundaresan, Additional Secretary, Ministry of Petroleum and Natural Gas, told media persons here. The Ministry wants the scheme back in place by September end, when the next tranche of oil bonds (fourth quarter of the last fiscal and first quarter of this fiscal) is expected to be issued to OMCs which have to sell fuels at heavily discounted prices.

The oil companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – are faced with huge liquidity crunch due to selling auto and cooking fuels below the cost price. “There have been some reports of shortage of diesel and restrictions on issue of new LPG connections. This is essentially due to liquidity problems,” he said.

The issue had been taken up at the highest level and arrangements were being made to ensure adequate liquidity, he added.

Mr Sunderasan said the Ministry has also approached the Finance Ministry for raising borrowing limits of the three companies to ease the liquidity crunch. “Restoration of SMO status is vital for the financial health of the companies, which are facing severe liquidity crunch,” he said. The borrowing limit of Indian Oil Corporation needs to be raised by Rs 10,000-12,000 crore and that of Hindustan Petroleum and Bharat Petroleum by Rs 2,000-3,000 crore each.

Pandey takes charge

Separately, after taking over charge on Friday the new Petroleum Secretary, Mr R S Pandey, said that it is important to address the financial health of the public sector oil marketing companies. “It is a tough task of balancing the interests of consumers, the Government and oil companies in the wake of high crude oil prices.”

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