NEW DELHI : The Union Cabinet on Thursday decided to issue oil bonds worth Rs. 11,500 crore in two equal tranches to restore the oil marketing companies' financial health.

Union Minister and Cabinet spokesperson, Priyaranjan Dasmunsi, said the first tranche would be issued immediately. It would be in the form of non-SLR tradable special securities carrying fixed coupon rate. The second would be on terms as the first one.

The move would help the oil firms overcome their deficits, arising out of continuing mismatch between international oil prices and spiralling domestic retail prices of various oil products. It also means that the Government is trying to avert a hike in oil prices.

The coupon rate would be determined on the basis of the prevailing market rate of interest on Central Government securities with comparable residual maturities on the date of issue of the bonds, payable six monthly.

The decision goes against the recommendations of the Rangarajan Committee. The panel, in its report submitted last week, was against issue of such bonds.

The Cabinet also gave its nod for signing a preferential trade agreement (PTA) with Chile.

A Rs. 884 crore scheme for the modernisation of the police forces in the seven Union Territories got the Cabinet's nod.

The scheme will be implemented over five years beginning 2006-07.

Under the scheme, assistance will be provided for a wide range of activities including procurement of night vision devices, bomb disposal equipment, bullet proof vests, modern weaponry and bullet-proof and mine-proof vehicles to improvement of equipment for intelligence gathering and better traffic management.

Rifle Act replaced

The Cabinet also gave its nod to replace the 64-year-old Assam Rifle Act with a new legislation to ensure that it was in tune with the modern day needs of the Central paramilitary force.

It also cleared a proposal to take over the Tripura Engineering College at Agartala as a fully funded institute of the Central Government and convert it into a national institute of technology with deemed to be university status.

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