NEW DELHI, July 31 (UPI) -- NEW DELHI, July 31 (UPI)--India's petroleum ministry has asked the government to issue statutory liquidity ratio bonds to oil marketing companies for under-recoveries.
The petroleum ministry has suggested to the finance ministry that interest bearing statutory liquidity ratio bonds should carry appropriate premium over G-Sec yields with eligibility for investment by Provident Fund trust to enable resale of bonds at par as well as to create demand in the bond markets.
"As per current estimates, the finance ministry would be issuing bonds to the tune of $25.66 million for the first quarter of the current fiscal. These bonds are likely to be issued this month after the approval of parliament in the current session, "the ministry said.
The proposal from the petroleum ministry is a result of the experience of Indian Oil Corp., when it tried to sell three and nine year special bonds issued last year. The government had issued bonds worth $5.3 billion to oil market companies to offset the huge under-recoveries faced by the public sector enterprises. IOC's efforts to sell these bonds through book building route showed that they were at huge discount, The Hindustan Times newspaper reported Monday.
The petroleum ministry has now urged the finance ministry to make these bonds eligible government security for the purpose of investment by provident trust. This had become a pressing issue, as the borrowings raised to finance under recoveries have to be liquidated to reduce borrowing cost, which is higher compared to yields on these bonds, a local media report said.