To lessen pressure on the country’s current account deficit (CAD) the government-owned oil companies have been asked by the Union government to fund their foreign acquisitions entirely with foreign debts instead of using their own cash reserves or taking domestic loans.
The government said that by doing so the companies don’t spend India’s foreign exchange reserves and put more pressure on the current account deficit.
Acting upon the government’s advise, now the State-run ONGC and Oil India are actively considering raising only dollar loans to fund over $5 billion acquisition of stakes in a gas-rich Mozambique block, government and industry officials said.
In the past, the companies have drawn from their own reserves for part of acquisition costs. ONGC Videsh announced acquisition of a 10 per cent stake in Mozambique block for $2.64 billion last month after it purchased a 10 per cent stake in same block jointly with Oil India for $2.475 billion in June.