Oil bonds fail to sizzle mart

Very less appetite for special oil bonds as they don't have SLR status.

The government's oil bonds are finding no takers in the corporate debt market. According to market players, Bharat Petroleum Corporation, one of the recipients of the special oil bonds, decided to sell them in the market last week.

However, there were no bids owing to the depressed debt market conditions and the lack of liquidity experienced by banks.

Sources added that there is very less appetite for these bonds as they do not carry statutory liquidity ratio (SLR ) status.

The bonds which has the SLR status could be bought for maintaining the statutory RBI requirement of maintaining 25 per cent SLR. It is a prudential requirement to safeguard the liquidity status of banks.

The special bonds are aimed at compensating public sector oil companies for under-recoveries in their domestic LPG and kerosene sales through the public distribution system.

The government had last week issued the bonds. While IndianOil received bonds worth Rs 3,449 crore, BPCL and Hindustan Petroleum got bonds worth Rs 1,100 crore and Rs 1,200 crore, respectively.

Meanwhile, the oil companies have appealed to the income tax department for waiver of around Rs 100 crore interest for short payment of advance taxes in 2001-03.

As per sections 234(B) and 234(C), a company is required to pay interest on additional taxes if the actual payment is more than the estimates submitted to the department in the beginning of the year.

Another appeal has also been made for the current year as they had submitted a conservative estimate in the beginning of the year. The oil companies feel that the tax amount may go up after they have been compensated by the government.

The companies are of the view that they were not sure to what extent they would be compensated by the government. These companies are understood to have assured the government that they would pay the advance tax in the fourth quarter unlike the last three quarters when there had been no substantial payments.

This has been due to the losses incurred by them in importing crude oil. While they paid high prices for the imports, they could not increase the retail oil prices in the domestic markets.

Part of the shortfall in the total direct tax collection by the government this year has been due to this reason.

The government had to revise its estimates of corporation tax collections for the year 2005-06 to Rs 83,000 crore from Rs 1,10,573 crore. While it was earlier assumed that direct taxes would grow by 32 per cent, the actual growth has been 19 per cent.