Hedging on fuel: Bank overdrafts will cost Rs 250 million to STC
21 April 2011
The State Trading Corporation (STC) has used loans and bank overdrafts to finance the Rs 4.7 billion losses from hedging on the performance of petroleum products. Interest payable on these transactions amounted to Rs 250 million.
Bank loans and overdrafts made by STC to fund losses incurred upon exercise of hedging on oil products will certainly have an additional cost to the corporation. Interest payable to the five banks that have financed these losses amounted to just under Rs 250 million.
At STC, it is believed that this is a very good deal received usual bankers of the corporation. Being a trading institution, the largest local market, the STC has already benefited from extremely favorable credit lines from its bankers.
It is precisely these credit lines that were used to pay dealers of petroleum products. Thus, the total cost of the exercise of hedging does not exceed the threshold of Rs 5 billion.
Furthermore, the Minister of Industry and Commerce, Showkutally Soodhun said last Tuesday in response to an inquiry from an opposition member Kee Chong Li Kwong Wing, that TCC had already repaid what he owed traders of petroleum products in July 2009. In this case, a sum of Rs 4.7 billion.
The consumer pays him since July 2009, an additional charge on each liter of fuel sold at the pump to finance the repayment of debts of the STC. This charge was Rs 3 per liter until it happens to Re 1 for diesel and Re 1.25 for gas last March 29. The announcement was made in Parliament by Finance Minister Pravind Jugnauth, while responding to the Private Notice Question (PNQ) focusing on the high cost of living.
If November 30, 2010, the Minister Soodhun announced that the late withdrawals would take place in April 2012, however, when the parliamentary session of Tuesday, April 19, he returned to this statement. Stating this time he could not give a date following the decision of the Minister of Finance to reduce the burden on oil products.
According to information gathered by lexpress.mu with the current harvest rates, consumers will be taxed for another 40 months to recover the remaining Rs 1.2 billion, or Rs 30 million per month.