Rs 5,750-cr oil bonds for petroleum PSUs

The government today sought parliamentary approval for a second batch of supplementary demands for grants of Rs 9,080 crore, of which Rs 5,750 crore are proposed to be allocated to oil marketing companies through oil bonds. This is to cover the under-recoveries of the oil firms from the sale of petroleum products.

The petroleum ministry had proposed that oil bonds worth Rs 11,500 crore be issued to the oil marketing firms. The smaller size of the issue can partly be attributed to softening of international crude oil prices and the firms reporting marginal profit from the sale of petrol and diesel during the last three weeks.

Finance ministry officials said the petroleum ministry's demand was based on "broad estimates". "We have asked them to look at the estimates again. If there is a need, we will increase the issue size later in the year," an official said.

The petroleum ministry, which had earlier projected the under-recoveries from the sale of petrol, diesel, LPG and kerosene to be nearly Rs 40,000 crore, has scaled down its estimates to Rs 35,552 crore.

While the Centre will release the funds (Rs 5,750 crore) once Parliament approves the proposal, the oil marketing firms will be asked to reinvest the money in government securities.

The interest rate and the tenure of the bonds are yet to be decided. The petroleum ministry has proposed that the bonds carry a 7 per cent interest and have a seven-year tenure.

The second batch of supplementary demands for grants will involve a net cash outgo of Rs 1,965.13 crore. The proposals include an additional subsidy of Rs 700 crore for decontrolled fertiliser (Rs 400 crore) and nitrogenous fertiliser (Rs 300 crore). Approval for transferring Rs 200 crore as assistance to states from the National Calamity Contingency Fund has also been sought.

Another Rs 116 crore, involving cash outgo, is proposed to be allocated for the revival of public sector companies. The government also intends to reimburse Rs 255.67 crore to Cotton Corporation of India cotton purchased through the price support system. Another Rs 103.50 crore will be allocated to State Trading Corporation towards reimbursement of losses incurred in trading of various commodities.

The government has also provided Rs 250 crore to IDBI Ltd for the Stressed Asset Stabilisation Fund, to where the bank's non-performing assets have been transferred.

The Centre has also allocated Rs 695 crore to Delhi Metro Rail Corporation, of which Rs 195 crore are additional equity, while the rest will go towards meeting additional expenditure and matching credit received from Japan Bank of International Cooperation. The allocation to IDBI and DMRC will be cash-neutral.