The Hindu Business Line : Oil retailers want PFs to invest more in their bonds

Fundline
Bonds of Rs 11,256.92 cr issued as under-recovery compensation for April-Sept 2007.
Amount expected to touch Rs 40,000 cr for current fiscal.

Richa Mishra

Advertisement

New Delhi, Feb. 24 Public sector oil retailers — Indian Oil Corporation, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd — want provident/gratuity and superannuation funds to invest more in special oil bonds. They contend that the yields from oil bonds are better than those from plain Government securities for such investors.

The Government issues oil bonds to public sector oil marketing companies (OMCs) to compensate them for their under-recoveries on domestic sales of petroleum products — petrol, diesel, cooking gas and kerosene. Talking about the advantages over the G-Sec yields, they said special oil bonds generally get liquidated at spread over the prevailing G-Sec yields, therefore, EPFO will earn better yields by investing in these bonds as against investments in G-Sec.

“Investing in bonds with non-SLR status would yield better returns than G-Sec investments made by provident funds. These bonds are approved Central Government securities,” Mr S.V. Narasimhan, Director (Finance), IOC, told Business Line.

Looking for more

He said: “PFs invest in our bonds, but we would like more such investments.” Currently, negotiations between the fund managers and the oil companies are going on, pertaining to quantum of investments and other related issues including cost.

The Government has made these bonds eligible for subscription by the Provident Funds. However, the quantum of investments varied from company to company. IOC has offloaded Rs 1,500 crore worth of bonds out of which a majority has been subscribed by LIC and PFs.

For the third quarter ended December 31, the oil companies are expected to get oil bonds worth about Rs 9,080 crore. While IOC will get Rs 5,099 crore oil bonds, HPCL will get about Rs 1,900 crore and BPCL about Rs 2,080 crore.

Compensation issue

Oil bonds worth Rs 11,256.92 crore have already been issued to the companies to compensate them for under-recoveries on selling petrol, diesel, domestic LPG and PDS kerosene in April-September 2007 period.

For April-September losses, IOC received Rs 6,362.25 crore worth of oil bonds, BPCL Rs 2,539.13 crore and HPCL Rs 2,355.54 crore worth of bonds carrying coupon rate of 7.95 per cent maturing in 2025.

For the full fiscal, the under-recovery is estimated at Rs 71,808 crore. The total bonds to be issued to oil companies are expected to be close to Rs 40,000 crore for the current fiscal.