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OMCs get Rs 7,000 cr to cover Q4 losses

07 Jul 2011 Evaluate

Oil marketing companies (OMCs) have received a cash subsidy of about Rs 7,000 crore to cover losses incurred in the last quarter of 2010-11. These firms will get another Rs 13,000 crore in two tranches on July 12 and July 19. The actual payment of cash compensation for the fourth quarter of the last financial year (already accounted in fourth quarter results) would help these firms improve liquidity and bring down borrowings to Rs 100,000 crore.
 
The borrowings of the three OMCs had touched a record high of around Rs 120,000 crore since May, on account of rising under-recovery, or revenue loss, from subsidized sale of three products diesel, kerosene and domestic liquefied petroleum gas (LPG) cylinder. High borrowings at a time when interest rates have also risen by 100 basis points over the last year have exposed these companies to high interest costs. Indian Oil incurred interest costs of Rs 2,670 crore in the previous financial year and this year, the cost is likely to be even higher.
 
The borrowings of Indian Oil Corporation, the country’s biggest oil marketer, had touched a record of nearly Rs 69,000 crore. Post receiving of subsidy, the company’s borrowings will come down to Rs 59,000 crore by the month-end. Bharat Petroleum and Hindustan Petroleum will also see their borrowings come down substantially this month.

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