Long-awaited Re­form: Ex­ecs

The Economic Times - - Econ­omy -

Modi felt that since the price of re­fined prod­ucts had been dereg­u­lated, state firms should have more free­dom in pur­chas­ing crude oil. Oil in­dus­try ex­ec­u­tives said this was a long-awaited re­form. They said state firms such as In­dian Oil, Hin­dus­tan Petroleum and Bharat Petroleum have been sti­fled by the an­ti­quated norms and ten­der­ing sys­tem for spot pur­chases. This puts them at a dis­ad­van­tage com­pared to pri­vate re­fin­ers such as Reliance and Es­sar as well as in­ter­na­tional com­pa­nies. Com­pa­nies are now em­pow­ered to evolve their own poli­cies for buy­ing crude oil. “We now have the much-needed flex­i­bil­ity to ne­go­ti­ate. In the oil mar­ket, you need the free­dom to take quick de­ci­sions to cap­ture good op­por­tu­ni­ties,” a di­rec­tor at a state-run com­pany said. The Union cab­i­net ap­proved a rec­om­men­da­tion of the Four­teenth Fi­nance Com­mis­sion (FFC) to give more fis­cal room to states sub­ject to them meet­ing some con­di­tions. The com­mis­sion had sug­gested ad­di­tional head­room to a max­i­mum of 0.5% over and above the nor­mal limit of 3% in any given year to the states that have a favourable debt-GSDP and in­ter­est pay­ments-rev­enue re­ceipts ra­tios in the pre­vi­ous two years to meet spe­cific de­vel­op­ment needs. This win­dow is avail­able over the five-year award pe­riod of the com­mis­sion end­ing 2020. It will give states room to raise ad­di­tional funds for their de­vel­op­ment needs.

The states will also need to have zero rev­enue deficit in the year they want this ad­di­tional room and the pre­ced­ing years, which will en­sure funds are used for de­vel­op­ment needs.

There will not be any fis­cal im­pli­ca­tion for the Cen­tre but “the state will get ad­di­tional space to raise bor­row­ings, which may re­sult in much-needed gov­ern­ment ex­pen­di­ture for cap­i­tal projects/in­fra­struc­ture,” the gov­ern­ment said in a state­ment. The Cabi­net Com­mit­tee on Eco­nomic Af­fairs (CCEA) also cleared con­ver­sion of Bank of Bar­oda’s .₹ 29.91 crore work­ing cap­i­tal loan to An­drew Yule into eq­uity, which clears the way for dis­in­vest­ment of the Kolkata-based com­pany.

Shares of the com­pany closed at .₹ 24.50, up 12.90% on the BSE.

The con­ver­sion of loan to eq­uity would help lower debt- ser­vic­ing costs, re­sult­ing in im­proved prof­itabil­ity and liq­uid­ity of An­drew Yule in the com­ing years, a gov­ern­ment state­ment said. The CCEA also ap­proved a .₹ 1,622-crore high­way in Kar­nataka un­der the flag­ship Na­tional High­ways Devel­op­ment Pro­ject (NHDP).

The cab­i­net ap­proved an in­crease in fund­ing sup­port for ex­ports to Iran to .₹ 3,000 crore through the Ex­port Devel­op­ment Fund ( EDF) of the Exim Bank from .₹ 900 crore ear­lier.

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