The Reserve Bank of India is not looking at conducting special market operations for oil marketing companies (OMCs) for now, unless they come under “extraordinary stress”, analysts said.
“These facilities were provided to OMCs because of the difficulties they were facing to raise foreign exchange earlier. SMO was an extraordinary thing. Now, the exchange rate is good and oil prices have come down sharply,” said a banking industry official.
RBI had restarted buying oil bonds from three state-owned OMCs under its special market operations from November 26. It had last bought oil bonds from the companies in July. Under the arrangement, RBI bought oil bonds from these companies and issued them dollars to import oil.
The last time RBI purchased oil bonds was on January 2. Global crude oil prices on New York Mercantile Exchange have fallen $7.05 a barrel since January to $37.55 a barrel Tuesday, and have been trading in a narrow band of $35-$40 a barrel.
“The import costs of these companies have come down significantly,” said the official. When the SMO was restarted in November, crude prices were hovering over $50 a barrel. “Market conditions have been stable and there is slack in oil demand recently, so there were no oil bond deals under SMO with RBI,” said a dealer at a state-owned OMC.
Strengthening in the rupee against the dollar has also helped oil importing companies. The rupee has appreciated by Rs 2 against the dollar since December and was trading at Rs 48.80 a dollar today.
In December, the central bank had bought Rs 10,325 crore worth of oil bonds from Hindustan Petroleum Corporation, Bharat Petroleum Corporation and Indian Oil Corporation.
Though RBI may start offering dollars to oil marketing companies only if they come under severe stress, the companies’ dealers are pinning hopes on a new set of SMO from this month.
“We are waiting for RBI to buy such oil bonds soon, as we have received fresh tranche of oil bonds. Maybe somewhere in February, we will have some deals with RBI,” said a company official at a state-owned oil marketing company.
Until now this financial year, government has issued Rs 65,900 crore of oil bonds and another Rs 10,000 crore of oil bonds will be issued by March.
