Indian Oil Exhausts Ecb Limit, Debt-Equity Ratio Touches 2:1

Indian Oil Corporation (IOC) has informed the government that it has exhausted its enhanced $3.5 billion external commercial borrowings (ECB) limit and would not be able to raise further loans in the international market since its debt-equity ratio has touched 2:1.

IOC, the sole canalising agency for petroleum imports, has cautioned that under the present circumstances it would be difficult for it to continue uninterrupted imports of petroleum products which may lead to serious disruption in supplies.

Calling for immediate remedial steps to tackle the ballooning oil pool deficit, which crossed Rs 15,500 crore on March 31, 1997, and which is growing at an alarming rate of Rs 800 crore every month, IOC has written to both the finance and the petroleum ministries that it is only a matter of time before domestic refineries, which are not getting their dues from the Oil Coordination Committee (OCC) that manages the oil pool account, start closing down gradually because of their inability to pay for their supplies of crude oil.

 

IOC is learnt to have informed the government that the $500 million raised by it recently in Singapore could be the last foreign loan arranged by it under the current difficult oil pool position. Foreign banks might not risk their capital till the oil pool situation improves.

This is confirmed by industry sources who say that even this time foreign banks had shown their reluctance to advance funds to IOC.

However, they had made it clear to IOC that with a debt-equity ratio of 2:1, they would not be further inclined to advance any more funds to it in future.

Industry sources are hopeful that the United Front steering committee, which is meeting on June 15, will be able to take a final decision on the petroleum price increase to put the oil economy on an even keel.

Though the issue was placed before the steering committee earlier on two occasions, a decision could not be reached because of differences among United Front constituents on methods to tackle the issue.

The Left Front, especially the Communist Party of India (Marxist), is the biggest opponent of the price-hike. It is of the opinion that any increase in the prices of petroleum products would hit the poor badly.

It wants steps like reduction in duties on petroleum products and return of Rs 4,000 crore that the finance ministry had taken out of the oil pool account in 1991, when the pool was surplus, to tackle the flow factor while leaving the stock factor to be taken care of at a later date.

The petroleum ministry, however, is in favour of the rainbow route incorporating multi-media options like a modest increase in the prices of some of the petroleum products like diesel, kerosene and liquefied petroleum gas, structural adjustments in the administrative price mechanism (APM), and marginal reduction in duties.