Ongc Raises $160m From Forex Deposits

The Oil & Natural Gas Corporation has secured a $160 million loan from the foreign currency non-resident (FCNR-B) deposits of a consortium of domestic banks at a marginally lower rate of interest than the cost of external commercial borrowings (ECBs).

The money will be used to fund short-term working capital needs in view of the Rs 280 crore a month outstanding from Indian Oil Corporation, pending since November 1996, against purchase of crude oil and liquefied petroleum gas (LPG).

The loan was raised at 100 basis points above the London inter-bank offered rate (Libor), currently at 5.6 per cent. The external commercial borrowings rate is around 7 per cent, say officials.

 

ONGC raised $25 million from ICICI Bank, $25 million from Bank of India, $100 million from Bank of Baroda and $10 million from Uco Bank.

The exchange risk in the loan is to be borne by ONGC, which will repay in about three years, according to sources.

This is one of the first few large market borrowings out of the FCNR(B) deposits of Indian banks availed by ONGC as an alternative to ECBs. Sources said ONGC had earlier approached the government for permission to raise ECBs, but the plan was dropped after domestic banks came forward to lend from their FCNR(B) deposits.

The corporation has been facing a resource crunch following the failure of Indian Oil to pay for the crude and LPG. Indian Oil has not been clearing its dues since the Oil Coordination Committee has not been able to pay the public sector company for the oil imports contracted.

The entire oil industry in the country is facing an unprecedented cash crunch following the mounting oil pool account deficit, which has already crossed Rs 15,500 crore.

The situation is not expected to improve till this deficit is wiped out, either through an increase in the prices of petroleum products or through a reduction in the subsidy on diesel and kerosene.

The government was expected to raise petroleum prices during the current recess in the budget session of Parliament, but the potentially unpopular decision has been postponed following the withdrawal of support to the Deve Gowda government by the Congress.