With Oil India (OIL) too planning to set up an overseas company,the government has decided to tell all public sector companies planning to bid for overseas coal or oil assets that will have to depend on case by case backing of foreign exchange support.
With the reserves of foreign currency assets dipping to $260 billion as on June 7,the finance ministry has reasons to be cautious.
At a meeting convened by PMO recently the companies were told they should not expect to raise money on tap from the overseas market as IIFCL does.
The proposal to let state-run enterprises raise resources through long-term bonds from abroad with a government sovereign guarantee will be difficult to carry through,these companies were informed.
The finance ministry shot down the proposal of allowing the state-run enterprises to move ahead on the IIFCL route as they feel it makes better sense to help the PSUs create special purpose vehicles on the lines of ONGC-OVL to acquire coal assets abroad, an official who attended the meeting told The Indian Express.
SAIL chairman CS Verma said,We too support the suggestion made by the government that raising resources from abroad as IIFCL has done will not work for us. This is why we have created the International Coal Ventures Limited (ICVL) just as OVL was created.
Verma added out that the government could consider supplementing the forex reserves of these companies in cases where their own balance sheet seemed weak.
ICVL formed in 2007 has a resource base of about Rs 10,000 crore and its promoters like Coal India,NTPC Limited,NMDC Limited,SAIL and Rashtriya Ispat Nigam can pump in more money to execute viable acquisition proposals,Verma pointed out.
The yet to be formed Oil India arm could also have similar cash resources as its seed capital.