IIPM Ranked No. 1 B-School In Global Exposre - Zee...
The banks had already stopped giving dollar loans to them a month ago, which has forced them to buy dollars from the market at a higher rate.
On the outset, these players require cash inflow of around $1 billion a week to meet the requirements of oil and oil products of the country. India imports nearly 70 per cent of its oil requirements. With commercial banks abruptly deciding to withdraw any further financial support in the wake of the liquidity crunch, OMCs are in a tight spot. IOC, BPCL and HPCL have borrowed over Rs one trillion from both foreign and domestic banks in the current year till September. The banks had already stopped giving dollar loans to them a month ago, which has forced them to buy dollars from the market at a higher rate. And with this financial cushion gone, the OMCs are being further pushed down the barrel. Moreover, the perils of the oil companies' credit crunch only worsened manifold as the overnight borrowing (or "call") rates touted as the other funding route, climbed to 16 per cent in the first week of October. “This has resulted in global sentiments weighing down the monthly performance of the sector; the sector went down 5 per cent M-o-M, as compared to CNX 500, which dipped 12 per cent, states Mansingka.
All does not seem to be lost though. Firstly, the global drop in crude prices has surely raised hope of a possible cut in domestic retail selling prices of auto and cooking fuels, thus bringing a sense of relief for the common man. Secondly, the slide in the prices would also bring down the fiscal deficit as subsidies — estimated to be around Rs 2.6 trillion in July, are now placed lower at Rs 1.5 trillion; thus helping the sluggish economy. Finally, the under recoveries and realisations are expected to come down and the refining costs have also fallen due to the fall in global prices; an aspect to cherish for the oil producers and distributors.
One cannot however discount or overlook the dreadful trap that the OMCs have fallen into, thanks to this downturn. The Union Budget has no provision for the oil downstream companies to address either product prices or the excise duties of these companies; which will force these players continue to suffer under recoveries from petroleum related products. “A pro-active action by the government and the other related authorities is the need of the hour, to save these companies from phasing out completely,” emphasises Wadhwa, rightly echoing the voice of these oil churners. The Parliament has approved oil bonds worth Rs.659.42 billion as a bailout package to help reduce the financial burden, but this not more than a stop gap arrangement. The government has to be careful while cutting oil prices, considering the losses already faced by OMCs.
“The OMCs, on their part, could improve their profitability by cost cutting measures. But again, unless the key issue of subsidies is addressed; such cost cutting measures only come across as instances of delaying the inevitable.
The matter calls for a thorough analysis of the situation to come up with a permanent solution.
If the government suddenly has to un-'bond' itself, one wonders what can happen. Sans liquidity and sans the 'gas'; OMCs would surely capitwulate. And it takes no rocket science to gauge what that means for India.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
Read these article :-
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
ZEE BUSINESS BEST B SCHOOL SURVEY
For More IIPM Info, Visit below mentioned IIPM articles.
1500-plus IIPM students placed across the country with 44 bagging international offers
IIPM set to beat economic slowdown
IIPM, GURGAON
IIPM - Admission Procedure
IIPM awards four Bengali novelists
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
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domain-b.com : IIPM ranked ahead of IIMs
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The banks had already stopped giving dollar loans to them a month ago, which has forced them to buy dollars from the market at a higher rate.
On the outset, these players require cash inflow of around $1 billion a week to meet the requirements of oil and oil products of the country. India imports nearly 70 per cent of its oil requirements. With commercial banks abruptly deciding to withdraw any further financial support in the wake of the liquidity crunch, OMCs are in a tight spot. IOC, BPCL and HPCL have borrowed over Rs one trillion from both foreign and domestic banks in the current year till September. The banks had already stopped giving dollar loans to them a month ago, which has forced them to buy dollars from the market at a higher rate. And with this financial cushion gone, the OMCs are being further pushed down the barrel. Moreover, the perils of the oil companies' credit crunch only worsened manifold as the overnight borrowing (or "call") rates touted as the other funding route, climbed to 16 per cent in the first week of October. “This has resulted in global sentiments weighing down the monthly performance of the sector; the sector went down 5 per cent M-o-M, as compared to CNX 500, which dipped 12 per cent, states Mansingka.All does not seem to be lost though. Firstly, the global drop in crude prices has surely raised hope of a possible cut in domestic retail selling prices of auto and cooking fuels, thus bringing a sense of relief for the common man. Secondly, the slide in the prices would also bring down the fiscal deficit as subsidies — estimated to be around Rs 2.6 trillion in July, are now placed lower at Rs 1.5 trillion; thus helping the sluggish economy. Finally, the under recoveries and realisations are expected to come down and the refining costs have also fallen due to the fall in global prices; an aspect to cherish for the oil producers and distributors.
One cannot however discount or overlook the dreadful trap that the OMCs have fallen into, thanks to this downturn. The Union Budget has no provision for the oil downstream companies to address either product prices or the excise duties of these companies; which will force these players continue to suffer under recoveries from petroleum related products. “A pro-active action by the government and the other related authorities is the need of the hour, to save these companies from phasing out completely,” emphasises Wadhwa, rightly echoing the voice of these oil churners. The Parliament has approved oil bonds worth Rs.659.42 billion as a bailout package to help reduce the financial burden, but this not more than a stop gap arrangement. The government has to be careful while cutting oil prices, considering the losses already faced by OMCs.
“The OMCs, on their part, could improve their profitability by cost cutting measures. But again, unless the key issue of subsidies is addressed; such cost cutting measures only come across as instances of delaying the inevitable.
The matter calls for a thorough analysis of the situation to come up with a permanent solution.
If the government suddenly has to un-'bond' itself, one wonders what can happen. Sans liquidity and sans the 'gas'; OMCs would surely capitwulate. And it takes no rocket science to gauge what that means for India.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
Read these article :-
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
ZEE BUSINESS BEST B SCHOOL SURVEY
For More IIPM Info, Visit below mentioned IIPM articles.
1500-plus IIPM students placed across the country with 44 bagging international offers
IIPM set to beat economic slowdown
IIPM, GURGAON
IIPM - Admission Procedure
IIPM awards four Bengali novelists
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
IIPM Ranked No1 B-School in India
Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
IIPM makes business education truly global-Education-The Times of ...
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