State-owned cos seek easier ECB norms to raise overseas funds

Govt is working towards making it easier for PSUs to issue quasi-sovereign bonds

Several state-owned companies have approached Finance Ministry seeking relaxation in ECB norms so that they can easily raise debt from overseas markets, which would help the government tide over forex problems.

"We will be holding meeting on August 12 and 13 to see what can be done to relax the External Commercial Borrowings (ECB) norms for corporates, including PSUs. A host of PSUs have approached for easing of norms," a top government official told PTI.

The government is working towards making it easier for PSUs to issue quasi-sovereign bonds so that foreign exchange can come into India.

"When we live beyond our means we have to depend on borrowing. The times are such that we have to depend on overseas funds. ECB is a better source of funding for the current account gap as it is long-term finance," he said.

The official further said the effects of liberalisation of foreign direct investment (FDI) in various sectors will take time to show in terms of quantum of funds coming in.

"The effects would only be visible after 4-5 years. It cannot be fast tracked. ECB funding is safe and for longer term. The money flow happens immediately," he added.

The domestic currency has weakened over 13% since April-end and touched record low of 61.21 to a dollar on July 8, mainly on account of widening Current Account Deficit (CAD) concerns and recent announcements of tapering of bond purchases by the US Federal Reserve.

The government is considering a host of measures to stabilise the rupee and attract foreign fund inflows.

"Quasi-sovereign issues are doable and therefore we intend to ask some public sector undertakings to go for quasi-sovereign issues...Depending on the balance sheet of PSUs and opportunities to raise money, we will raise money abroad because many of our PSUs have the capacity and a strong balance sheet to raise money abroad at this point of time," Finance Minister P Chidambaram had said last week.

As per the latest data available, Indian companies in raised $1.13 billion from overseas markets through external commercial borrowings and foreign currency convertible bonds in April, down 77.8% from a month earlier.

To attract FDI flows, government has liberalised ceilings in various sectors besides easing norms for foreign investors.

The CAD occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers. It touched a high of 4.8% of the GDP and has implications on exchange rate, inflation and growth.