Govt issues oil bonds

The finance ministry has issued '5 per cent Oil Companies' Government of India Special Bonds, 2009, for liquidating outstanding claims of oil companies aggregating to Rs 348.63 crore against the erstwhile oil pool account.

The bonds were issued on Tuesday on a par to the Oil and Natural Gas Corporation Limited (ONGC) for Rs 257.6 crore and Oil India Limited (OIL) for Rs 91.03 crore.

The investment in these bonds would not be reckoned as an eligible investment for the purpose of statutory liquidity ratio (SLR), an official press release issued today said.

The bonds will be transferable and eligible for market ready forward transactions. The bonds, however, will not be an eligible underlying security for ready forward transactions with the Reserve Bank of India (RBI). ONGC and OIL will utilise these bonds to clear royalty arrears to oil-producing states for the April 1, 1998 - March 31, 2002 period.

Of the Rs 348.63 crore arrears, Gujarat will receive Rs 175.91 crore and Assam Rs 146.7 crore. The other beneficiary states are Andhra Pradesh, Arunachal Pradesh and Tamil Nadu. The government had earlier announced a new scheme in which royalty on crude oil was specified on an ad valorem basis.

This provides for the linkage of royalty with the market price of crude oil.

However, for the period April 1, 1998 to March 31, 2002, when administered pricing mechanism (APM) in the oil sector was being dismantled in phases, royalty was calculated based on the crude price envisaged to be paid to ONGC and OIL.