\nOil companies raise their dollar requirements from both foreign and domestic banks. They also spend their rupees to buy dollars from the money market. They typically require around $1 billion a week (at the current crude oil price of around $90 a barrel) to meet the country\u2019s oil import requirements. India imports over 70 per cent of its oil needs.
\nNow, these companies are finding access to funds all but impossible. \u201cDomestic banks have stopped lending to us,\u201d said a senior Indian Oil Corporation (IOC) official on condition of anonymity. \u201cWe can still buy dollars from the market provided we have the money to buy them,\u201d he added.
\nBanks, however, also stopped dollar loans to the oil marketing companies a month ago, the IOC official added. An executive from Bharat Petroleum (BPCL), India\u2019s second-largest importer, confirmed this.
\nIOC is the country\u2019s largest crude oil refiner and marketer of petroleum products, and spends around $3 billion buying crude oil every month. The company has borrowing of over Rs 60,000 crore on its books, around 20 per cent of which is dollar-denominated as on September 30, 2008.
\nThe company has been borrowing Rs 6,000 crore to Rs 7,000 crore more every month since July this year to keep functioning. BPCL\u2019s borrowing currently stands at around Rs 23,000 crore, about 20 per cent of which is dollar-denominated at the end of the second quarter ended September 2008. The total borrowings of IOC, Bharat Petroleum and Hindustan Petroleum are currently over Rs 1,00,000 crore as on September 30, 2008.
\nKPMG Advisory\u2019s Executive Director Arvind Mahajan thinks there is still a lot of money in the system but banks are not willing to lend. \u201cThere is a lack of trust in the market,\u201d he said.
\nThe oil companies\u2019 credit crunch has worsened because overnight borrowing (or \u201ccall\u201d) rates \u2014 the other funding route \u2014 touched 16 per cent last week.
\nThe borrowing of the oil marketing companies are high because the government is still to issue bonds that partly help bridge under-realisations from market sales.
\n\u201cIf we do not get new bonds, October 31 could be the last day we will import crude oil,\u201d the IOC official said. IOC alone is yet to receive Rs 34,000 crore worth of bonds, which has increased its borrowing and interest burden.
\nThe government is likely to issue the bonds under the supplementary demand for grants once Parliament meets on October 17.
\nHowever, BPCL\u2019s finance director SK Joshi is confident that the government, which owns majority stakes in these companies, will not allow them to reach crisis point. \u201cThe government is completely aware of the situation,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"