over the period, virtually, they have got free funds,” said Kanabar.
State-run oil marketing companies IOC, HPCL and BPCL that are in financial difficulties because of selling diesel, LPG and kerosene below market price, will be allowed to raise ECBs. IOC has been allowed to raise $1.7 billion, while BPCL and HPCL can raise $1 billion each. Fuel retailers have also been allowed to raise another 0.25 billion through trade financing options. According to an oil industry executive, oil marketing companies are unlikely to find the expanded ECB window very attractive at this juncture, considering that their borrowing levels are already quite large with the current servicing costs being as high as Rs 8,000-9,000 crore per annum. However, they may opt for using the facility to swap a part of high-cost domestic loans with overseas debt.
The CAD projection for FY 14 by the minister is more optimistic than those of independent analysts. Crisil, for instance, had put the figure at 4.5% of the GDP. The RBI has, in the first quarter review of macroeconomic monetary developments, said the CAD might have widened again in Q1FY13 after the moderation to 3.8% of the GDP in the previous quarter due to a widening of the trade deficit attributable to a sharp increase in good imports. It, however, expressed the hope that, going forward, the current account would show improvement thanks to the likely decline in demand for imported gold after the tariffs were hiked. “While the CAD may fall in 2013-14, risks to CAD financing have increased with firming up of US yields that caused global bond sell off and capital outflows from EMDEs, including India,” the central bank had noted. In line with this forecast, the merchandise trade data for July released on Monday said gold and silver imports stood at $2.97 billion in the month, down from $4.4 billion in the same period last year.
Last year, the CAD stood at a record $88 billion or 4.8% of the GDP but capital flows through various means were such that after bridging the deficit, $3.8 billion was added to the