The board, which has representation from Ministry of Finance (MoF) and Ministry of Commerce and Supplies (MoCS), approved the recapitalization proposal of the management, citing that the existing capital base of the corporation was too low to match up with its turnover, which stands almost at Rs 100 billion a year.[break]
“We are tabling the proposal at the upcoming annual general meeting on Friday for endorsement. Once approved, we will formally knock the government´s door for the execution of the plan via MoCS,” said NOC acting Chief Suresh Kumar Agrawal.
However, sources disclosed the corporation was not seeking the re-injection of capital for the purpose, but pushing the government to convert its outstanding loans liability to shares.
“Hence, the recapitalization plan aims merely at cutting the NOC´s loans liability, which presently stands at Rs 26.87 billion, and improve its financial outlook,” said a senior official at the MoCS.
Provisional financial records of the corporation show, the NOC incurred a loss of Rs 10 billion in 2011/12, jacking up its cumulative loss to Rs 24 billion as of mid-July 2012. This has further depleted its net worth, pushing it down to negative by Rs 12.70 billion.
If the government okayed the proposal, officials claimed it will significantly lower the cost of transactions (for NOC) and fuel as well.
For servicing its interest alone, which stands at Rs 176 million a month, the corporation has presently been compelling consumers to pay Rs 1.70 more for each liter of petroleum products. “We can instantly lower this charges levied to consumers by Re 1 per liter,” said a NOC official.
However, top officials at the MoF said that the proposal being pushed by the corporation was too ambitious and difficult to execute.
“Foremost difficulty is that the government has neither discussed nor given any indication that it is willing to convert its loans into shares,” said a senior MoF source.
Besides, he added that the total credit of the government to the corporation stands at Rs 12.64 billion, and not Rs 18.50 billion -which NOC is seeking for under its recapitalization plan.
“It is true the corporation has additional loans worth Rs 12.13 billion loans that are guaranteed by the government. But we cannot ask those lenders to convert their credit into share,” said the MoF official.
Given these facts, the MoF officials ruled out chances of NOC´s plan of being implemented anytime soon.
However, NOC officials did not agree with the MoF´s view. Their argument is that as the corporation took loans of Rs 12.13 billion from Employee Provident Fund (EPF) and Citizens Investment Trust (CIT) just because the government did not raise local fuel prices, it was the government´s responsibility to repay them.
“Personally speaking I am not convinced this effort will solve our financial problems, for we will continue to have outstanding loans of Rs 8.37 billion even after the conversion of those loans into shares,” said Agrawal.
Besides, the government has not yet taken any step to enforce a mechanism that will allow NOC to adjust domestic oil prices in line with the international trend.
“We can fortify NOC´s position only if the government injected fresh capital. It must allow us to consistently adjust oil prices in line with the international price movement,” Agrawal added.
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