IOC’s forex debt crosses $5bn, seeks monthly doles
New Delhi   27-Aug-2011

Flagship refiner-marketer IndianOil's foreign currency borrowings have crossed $5 billion, even as the company is bracing for running up a loss of Rs 92,700 crore in 2011-12 on selling motor and kitchen fuels at government-capped prices.

The company's rupee borrowings too have swelled from Rs 52,743 crore in March to Rs 70,000 crore in June. The company has been borrowing money to meet its funds requirement for daily operations, particularly for buying crude. Company chairman R S Butola recently told the board that losses on petrol alone are estimated at Rs 2,740 crore in 2011-12. This will have to be absorbed by the company since technically the government does not decide the price of petrol and will not compensate for the loss.

Faced with increasing cost of servicing this debt, the company has requested the oil ministry that the government pay the subsidy amount every month rather than every quarter. These payments from the finance ministry have been irregular or coming at the fag end of a quarter. In July, the IndianOil floated its first 10-year overseas bond offering. The $500 million offer drew bids worth four times, or $2 billion, of the float size from more than 200 investors.

The government at present gives cash to the state-run oil marketing companies to make up a little over one-third of their losses on selling diesel, kerosene and cooking gas at artificially low prices set by the government. The remaining burden is shared by the oil marketing companies and government oil/gas producers. Some burden is passed on to consumers by raising product prices.

Due to the irregular compensation from the government, the total borrowing of the three state-run oil marketing companies has jumped by over Rs 22,555 crore in the first five months of the current fiscal to Rs 119,282 crore at present from Rs 96,727 crore at the end of March.

According to the oil ministry's presentation made to its Parliamentary Consultative Committee on Friday, increased borrowings have pushed up their interest cost from Rs 614 crore in 2003-04 to Rs 4,655 crore in 2010-11.

In 2011-12, this burden may cross Rs 6,000 crore. The companies are losing Rs 235 crore per day on selling diesel, cooking gas and kerosene at government-controlled rates.