RBI discusses ways with oil cos to manage dollar demand

With rupee hitting life-time low against US dollar, the RBI today discussed with state-owned oil firms ways to manage dollar demand in a bid to curb volatility in the local currency but no decision was taken.

State-owned oil firms are biggest buyers of US dollars, requiring $8-8.5 billion every month for import of an average 7.5 million tonnes of crude oil.

The RBI and oil firms discussed measures to control volatility and high fluctuations in the exchange rate but failed to arrive at any decision, sources privy to the deliberations said.

The central bank had last year suggested that refiners buy their dollar requirement from a single public sector bank to end speculation in rupee market caused by competitive quotes taken from multiple banks.

The measure was not implemented as oil firms pointed out that banks quote different rates and they were as per CVC's guidelines required to discover the best rate through competitive bids.

The oil firms had asked RBI to give a written order mandating a particular bank for dollar purchases so that they are insulated from CVC action but the central bank did not issue any such order, sources said.

An option being mulled is to provide refiners a separate window to meet their needs.

Rupee fell to record low of 61.2125 per dollar today.

Finance heads of oil companies met senior officials of RBI in Mumbai and discussed measures that could help arrest the free fall of the rupee. The rupee has fallen over 12% from April-end when it was 53.8 against the dollar.

Sources said oil companies explained to RBI their dollar requirement and that they inform the central bank 5 days in advance before dollar buying. No instruction on dollar purchase was immediately issued, he added.