Just a month after the Government had indicated at liberalising external commercial borrowings (ECBs) norms to allow state-owned oil companies to bring in greater capital inflows for containing current account deficit (CAD), the three oil majors - Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCl) and Hindustan Petroleum Corp (HPCl) - have assured the Finance Ministry that they would be together raising $3.75 billion through the ECB route to bridge the import-export gap by end of the current fiscal.
The three oil marketing companies (OMCs) and the Petroleum Ministry have been directed by the Finance Ministry to contain CAD mainly by raising additional funds via ECBs and by enhancing suppliers credit. These measures are part of large scale steps being taken by the Government to address the problem.
According to sources privy to the developments, the state-owned oil companies have projected to raise $3.75 billion through ECBs where IOC would be raising $1.75 billion, while BPCl and HPCl will be raising $1 billion each by March 2014.
In fact this amount may even go up as sources further said that the three OMCs have only given an indicative amount to the Finance Ministry as of now.
BPCl is said to have informed the Finance Ministry that the company would be raising funds through ECBs in two equal tranches of $500 million each by October 2013 and February 2014 respectively.
HPCl too would be doing so in two tranches of $500 million each. The first tranch is expected this month itself while the second tranch is expected in February 2014. Nation's biggest retailer IOC has indicated to North Block officials that it would be raising $1 billion by October or November 2013 as working capital, while the remaining $750 million would be raised by it as projects loan by the fourth quarter of the current fiscal, sources added.
At the same time, the Finance Ministry is learnt to have discussed with the Petroleum Ministry the issue of enhancing suppliers' credit time (related to the time required to pay the country from which oil is being imported). In a recent meeting between top officials of the two ministries, the Finance Ministry is said to have broached the possibility of increasing the suppliers' credit to at least 90 days from the existing 30 days. Enhancement of suppliers' credit is being seen by the Government as a measure to contain CAD.
However the Petroleum Ministry, which has received reservations from several Gulf nations (including Saudi Arabia, which is among the major suppliers to India) on enhancement of suppliers' credit time line, is learnt to have brought this to the notice of the North Block officials. Though some Gulf nations may agree to increase the suppliers' credit provided the quantum of oil imports is increased, a majority of nations are not so keen on it, sources in direct knowledge of the development, said. Subsequently, the Finance Ministry is likely to take up the matter with the Ambassadors of the Gulf nations and if required, may even send representations to them.
India is keen to curb its CAD, and Finance Minister P Chidambaram in a statement in Parliament on August 12 during the just concluded Monsoon session, had said that among other measures to contain CAD, state-owned oil companies would be allowed to raise additional funds through ECB, a move which would automatically increase capital inflows in the country.
He had said that with the fresh measures, “CAD will be contained at $70 billion, while the inflows will increase to a level that will be sufficient to finance the CAD. If it is contained at $70 billion, it will amount to 3.7 per cent of the gross domestic product (as against 4.8 per cent in 2012-13)”.