Chidambaram: Strong logic
New Delhi, Sept. 30: Ahead of the oil ministry’s fuel conservation drive tomorrow, finance minister P. Chidambaram today suggested that state-owned oil firms be encouraged to finance imports through overseas borrowing to help reduce the current account deficit (CAD).
Stating that only $3.75 billion of the total oil import bill of over $160 billion is proposed to be financed through external commercial borrowings (ECBs), Chidambaram said the possibility of “increasing the ECB mode of financing should be explored”.
The government has set a target to bring down CAD, which touched a record high of 4.8 per cent of the gross domestic product last fiscal, to 3.7 per cent in the current financial year.
State-owned Indian Oil Corporation has already said it would raise funds in two tranches of $1 billion each in the third and fourth quarters of the current financial year.
HPCL and BPCL will raise foreign loans worth $500 million by October 2013.
Oil minister Veerappa Moily will launch tomorrow a six-week fuel conservation drive to taper demand and cut the oil import bill by $2.5 billion.
He had outlined the initiative as well as other measures in a letter to Prime Minister Manmohan Singh and Chidambaram on August 30, saying the move will help to save $20 billion in foreign exchange outgo.
Terming Moily’s claim of cutting 3 per cent in the oil import bill through conservation as “ambitious”, Chidambaram said the oil companies should be “encouraged to import crude from Iran in greater quantities.
“While it is recognised that a conservation campaign may result in some reduction in petro-product consumption, the estimates of savings projected at 3 per cent, over and above the proposed crude imports cut, appear to be ambitious,” Chidambaram said.
The sanctions of the Western countries have blocked all payment routes to Iran, forcing India to pay in rupees through a Uco Bank branch in Calcutta.
Buying more oil from Iran will mean India will have to pay more in rupee than the dollar it has to pay to other sellers.
The finance minister said implementing the ethanol blended petrol programme in line with the CCEA’s decision to ensure 5 per cent blending in petrol with ethanol will help to ease the burden.
Moily’s measures include asking state-owned oil firms to keep crude imports at 2012-13 level of 105.96 million tonnes that will save $1.76 billion in foreign exchange.
The mega fuel conservation campaign — to limit the consumption growth to last year’s 4.1 per cent level — is projected to help save another $2.5 billion and prop up the rupee, which has slid sharply against the dollar this fiscal.
Moily has also said he will travel by public transport every Wednesday, beginning October 9.