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Indian Oil Company is being
forced to mortgage its assets to avert a cash crunch created by the
sharp rise in oil prices.
State-owned India Oil Corp last week called for a
shareholder postal vote on the measure, under which it plans to double
its borrowing limit to Rs800bn (€11.8bn, $18.6bn) and to secure
this by mortgaging its assets.
“Global oil prices have witnessed [a] sharp rise over the last few
years and are still at very high levels,” IOC told shareholders in a
notice for the postal ballot. “The funding requirements of the company
have increased substantially.”
The move is one of a series of
steps being taken by India’s three state-owned fuel pump operators,
which also include Bharat Petroleum and Hindustan Petroleum, to plug a
growing hole in their accounts from government fuel subsidies.
“They are facing an acute cash crunch,” said Dikshit Mittal,
research analyst at Religare, a brokerage in Delhi. “They can’t sustain
themselves at these levels. Something will have to be done.”
Petrol
station franchisees in the state of Maharashtra, which includes Mumbai,
reported on Thursday that Bharat Petroleum was introducing rationing
for individual petrol stations to try to limit consumption and stem the
cost of the subsidies.
Bharat Petroleum said no measures had been
introduced but said it had made a series of proposals to the Ministry
of Petroleum, which it declined to disclose.
There were also
reports that the three state-owned fuel marketing companies were
delaying new liquid petroleum gas connections to households.
Religare’s
Mr Mittal said that with oil prices at their current levels, the cost
of the fuel subsidies was beyond even what the government could afford.
In
the financial year to the end of March, when the crude oil price in
India averaged $85, the country spent Rs400bn on fuel subsidies – about
1 per cent of gross domestic product.
PetrolWorld 220508 Source: FT
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