IOC demand to suspend oil supplies to MRPL rejected

The IOC has exhausted the external commercial borrowing limit of $3.5 billion and is yet to get paid Rs 10,000 crore from the OCC. Its borrowings, which was Rs 14,200 crore as of March, has touched Rs 16,000 crore.

If supplies to CRL and MRPL were to be curtailed, production of petroleum products at their refineries with annual refining capacity of 7.5 million tonnes and 3 million tonnes would come to a grinding halt. A fall in domestic output would have led to increased imports. Since fund availability with IOC for imports is only uptil July, the sole option with the government would have been demand management – that is, rationing of petroleum products.IOC has been requesting CRL and MRPL to clear the outstandings through market borrowings since the two have better debt-equity ratio. With a debt-equity ratio of 2:1, the IOC is not in a position to get loans at better interest rates.

CRL officials have said that they are considering raising a Rs 100-crore loan as per the advice of DSP Financial and I-Sec. They said that the non-payment of Rs 224-crore to IOC is a consequence of CRL not getting Rs 359 crore which is owed by the OCC. “Since there were no short-term avenues to bridge the working capital gap, CRL was forced to defer payments to IOC,” he said.

The MRPL, a joint venture of Hindustan Petroleum and the Aditya Birla group, has informed the IOC that it would pay up the dues only after the OCC clears its arrears with MRPL. Its outstandings to IOC – Rs 412 crores as of October 1996 – will aggregate to Rs 514.8 crore by the month-end.

It is worth mentioning that the downstream refining and marketing companies have borrowed as much as Rs 22,000 crore as of March 1997.