Govt to issue Rs 5,750 cr oil bonds today

The Union cabinet will issue oil bonds worth Rs 5,750 crore on Monday to subsidy-hit public sector oil companies. Last month, Rs 5,750 crore of bonds were issued to state-owned oil behemoths.

"Oil bonds worth Rs 5,750 crore will be issued on Monday. As per the earlier plan, the cabinet is completing the distribution amounting to Rs 11,500 crore in two equal tranches," M S Srinivasan, secretary, ministry of petroleum and natural gas, said today.

Union petroleum minister Murli Deora said subsidies could not be withdrawn because of the government's social commitment.

"About the Rangarajan committee report, Deora said, "I have discussed it with Prime Minister Manmohan Singh and Finance Minister P Chidambaram. No decision has been taken so far.

Our demand is that the government should bear higher subsidy burden. If food and fertilisers can get huge subsidies, then why cannot petroleum sector?"

In this financial year, oil marketing companies such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indo-Burma Petroleum (IBP) have registered losses. Total under-recoveries of oil marketing companies stood at Rs 20,146 crore in 2004-05, which is expected to grow to Rs 39,704 crore in the current year.

Oil bonds will carry a fixed coupon rate to be determined on the basis of prevailing market rates on government securities. Of the bonds issued earlier, Rs 2,000 crore of bonds had a maturity of three years, another Rs 2,000 crore had a maturity of six years and the remaining Rs 1,750 crore had a maturity of nine years.

Deora added oil companies and the ministry would take immediate steps to curb adulteration of petroleum products.

"The difference in the price of subsidised and free priced products is a primary driver for adulteration, but oil companies need to have stringent systems to counter such activities," he added.