Petroleum Price Hike To Help Ioc Avert Financial Crisis

Indian Oil Corporation (IOC) yesterday said that the hike in the prices of petroleum products and the liberalisation package would help it overcome its financial hardships and avert a national oil supply crisis.

In its first official reaction to the announcements by the petroleum minister Janeshwar Mishra, IOCs marketing director, Subodh Mittal said that the issuance of Rs 10,000 crore special government bonds to the company would tremendously help revive our finances.

Mittal said that the Oil Coordination Committee (OCC) owed Rs 11,000 crore to IOC. Additionally it had run up borrowings of about Rs 15,000 crore.

The decision to issue special bonds equivalent to the cumulative outstandings of the oil companies till June 1997 would not only help IOC regain its high credit rating but also eliminate any fears of an oil supply crisis from November onwards. With the corporation having nearly exhausted its external commercial borrowing limit of $ 3.5 billion it could have faced problems while importing crude, he added.

 

Recovery of pending dues from the government would also help IOC to invest more in its ongoing and proposed Ninth Plan projects. IOC has investment plans of Rs 30,000 crore during the Ninth Plan period, besides projects in hand worth Rs 10,000 crore. Mittal refused to comment on future price trends for diesel, which the government had decided to peg to the import parity prices. Normally international prices for diesel and furnace oil stay firm in winters, he stated.

Anyway the diesel prices in India will depend on the international market trends and the rupee-dollar exchange rate. The petroleum ministry is still working on the mechanism for monthly review of prices, he said. The corporation has plans to import about 17 million tonnes of diesel during the current fiscal, most of it during the second half of the year, in tandem with the demand pattern in the country, he said. He said that diesel consumption was estimated to have gone up by about 9.6 per cent during the first four months of the current financial year.

The ex-storage price of high speed diesel (HSD) has gone up by a massive 27.38 per cent from Rs 6574.87 per kilo-litre to Rs 8374.87 per kilo-litre as a result of the price hike of Rs 1.80 per litre decided by the Union cabinet on Monday, in a bid to wipe out the Rs 8310 crore subsidy on it during 1997-98.

The corporation sources admitted that IOC was not in a position to continue imports with the $ 3.5 billion limit, of which $ 3.26 billion was exhausted, mainly on account of the subdued international oil market. Prices have started firming up again, he added.

This coupled with mounting OCC dues and rising market borrowings, the corporation was finding itself in a tight position to meet investments, he said, adding that Mangalore Refineries Private Limited (MRPL) and Cochin Refineries Limited (CRL) also owed IOC over Rs 500 crore towards crude supplies.

IOCs dues with the OCC rose from Rs 1361 crore in March 1995 to Rs 3471 crore in March 1996 to over Rs 11,000 crore till date. The government is issuing bonds worth Rs 10,000 crore to IOC.

Asked about the payment of balance dues, Mittal hoped the OCC would work out the details and the money accrued from the price hike would be used to clear the dues.

He said the new package would help IOC in the future to the extent of getting its dues cleared by OCC on time, which would serve to fund investments.