The oil bonds to be issued next week by the Centre to the oil companies are likely to have a tenure of seven years and will carry a coupon of 6.95-7 per cent. | |
| These bonds will be marketable and could be traded in the secondary market. In the process, these bonds could be sold to banks which, in turn, will provide the necessary liquidity to oil marketing companies. However, they would be issued only after the necessary parliamentary approval. |
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| The Centre had on Tuesday decided to issue bonds worth Rs 10,000-12,000 crore to the oil marketing companies to subsidise the under-recoveries. |
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| These companies have been buying crude at international prices which have been sky-rocketing for a last few months. Since the prices in the domestic market are capped, the oil companies are not being able to recover the cost. |
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| The crude prices in the international market have gone up by 28-30 per cent since last June to a high of $70 per barrel. The under-recoveries of the oil companies have been estimated at Rs 40,000 crore. |
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| Apart from this, the government has also hiked the prices of petrol and diesel by Rs 3 and Rs 2 a litre, respectively. The prices of cooking gas and kerosene remain unchanged. |
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| Meanwhile, the government today raised Rs 8,000 crore from the market as part of its borrowing programme. While Rs 3,000 crore was raised through the auction of the 30-year government paper maturing in 2035 at a cut-off yield of 7.40 per cent, the 5.69 per cent 2018 paper was reissued to raise Rs 5,000 crore at a cut-off yield of 7.23 per cent. |
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| The market was expecting the cut-off on the 13-year paper to be around 7.15 per cent. The hike in the cut-off yield on the 13-year paper was attributed to a lack of keenness on the paper. |
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| Due to abundant liquidity, the RBI received bids worth Rs 7,535 crore for the 13-year paper and Rs 6,494 crore for the 30-year stock as against the notified amount of Rs 5,000 crore and Rs 3,000 crore, respectively. |
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| SLICK AFFAIR |
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| Oil bonds will be marketable and tradeable in the secondary market They could be sold to banks which will provide liquidity to oil companies |
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