RBI relaxes norms for oil companies

Investments by oil companies to unincorporated entities for overseas operations such as drilling and explorations will no longer require the permission of the Reserve Bank of India.

The RBI has allowed Navaratna public sector undertakings to invest in unincorporated entities in oil sector (such as exploration and drilling for oil and natural gas) under the automatic route.

Earlier, such investments required the prior approval of the RBI. An official of one of the public sector companies said they were yet to see what the new directive said, and the investments that would be exempted from the RBI approval.

However, the official indicated for E&P companies, payments to joint venture partners abroad need the RBI approval and the new initiative could ease the payment process for them to some extent that for E&P companies, payments to joint venture partners abroad need the RBI approval and the new initiative could ease the payment process for them to some extent. He, however, added that this might not have a significant material impact.

Navaranta PSUs had to get prior approval of the RBI to make investment in unincorporated entities. RBI has decided to liberalise procedure (for Navaratna PSUs) since investment proposals get already cleared by competent authorities including board of directors, Secretary's panel and Cabinet Committee on Economic Affairs (CCEA).

Bank can allow remittance towards investment in unincorporated entities by oil companies after ensuring the approval by competent authority is in place.

The state-owned companies like ONGC through ONGC Videsh Ltd (OVL), Oil India, Indian Oil Corporation and Hindustan Corporation are making investments, running into billion of dollars, in overseas oil and gas fields and downstream units to get secure access scarce non-renewable energy resources. These investments come with rights on sourcing oil and gas for use in India.