Global crude oil prices have dropped 14 per cent in less than a fortnight, but the three public sector oil marketing companies (OMC) could still end up borrowing more in the domestic market and put further pressure on liquidity.
With the three OMCs still saddled with under-recoveries, estimated at Rs 820 crore a day, they have no option but to use bank credit lines in the coming days as they have run out of their stock of oil bonds.
"The liquidity conditions were much better in June or even in early July when the oil companies were using the (Reserve Bank of India's) special window to sell the bonds. Now that they are back, there is more volatility and this has strained the liquidity," said an executive involved with State Bank of India's treasury operations.
The impact of their entry into the markets was on display in the foreign exchange market on Thursday when they managed to push the rupee back to over 42 against the dollar after it touched 41.84 in morning trade.
"The softening of global crude oil prices will ease the pressure on us. But that does not necessarily mean less borrowing requirements. The gap between cost and recovery remains huge. So the need for borrowings also remains high," a senior IndianOil executive said.
Global crude oil prices have eased from over $146 a barrel in early July to around $125 a barrel. Oil companies could benefit if the price of Indian basket remains below $125 a barrel, compared to $125.45 a barrel on Wednesday.
With the government not giving them flexibility to raise the retail prices of cooking and auto fuel, the three public sector companies
