New Delhi: A day after relaxing overseas borrowing norms for oil companies, the government on Thursday said state-owned fuel retailers will have to complete $10 billion external commercial borrowing (ECBs) within a year and they would not be required to hedge the exposure.
“OMCs will borrow $10 billion with a maturity of 5 years in a phased manner, with an initial tranche of $4 billion followed by two tranches of $3 billion each, all borrowing completed in a period of one year from now,” Finance Ministry said. Oil marketing companies will not be required to hedge their exposure, it said. Till now OMCs were not allowed to raise ECB for working capital needs on a long-term basis. They could raise a maximum of one-year overseas loan by way of buyers credit, repay it within 12 months and raise it again thereafter.
Move may not curb Re slide
Liberalising foreign borrowings for oil firms to raise to $10 billion will not have a “material” impact on arresting the slide of the rupee, Bank of America Merrill Lynch said. “Liberalisation of public sector undertaking oil companies ECBs up to $10 billion is not very material,” it said. The RBI “cannot afford” opening a special swap window for oil importers as is being speculated, it said.
The brokerage explained that pre-committing $8 billion a month for it over and above the $25-30 billion lost in interventions since April will push the overall forex reserves below the critical eight-month import cover mark. It can be noted that such a window was last opened in August 2013, during the last episode of a slide in rupee. It was followed up with an NRI bonds issue, which successfully arrested the slide as the diaspora put in $26 billion.
Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) will be allowed to raise overseas funds with a minimum average maturity period of 3 or 5 years under the automatic route. The RBI also lifted the individual borrowing limit set at $750 million under the external commercial borrowing (ECB) framework. With oil prices climbing to four-year high and the rupee plunging to new lows, imports have come costlier. Oil companies now need a higher working capacity to meet their monthly import requirements.
