The Reserve Bank of India or RBI's recent measure to allow oil companies to directly buy dollars from the central bank in a bid to support the rupee is not a long-term solution, former ONGC chairman RS Sharma told NDTV.
"Recent measures by the RBI to address FX (foreign exchange) requirement of OMCs (oil marketing companies) is only a temporary measure and the government needs to bring in structural reforms to address the issues in oil & gas sector,"Mr Sharma said.
Thrust should be given to boost domestic production so that dependence on imports is reduced, he said.
On Wednesday, the RBI said it would provide dollars directly to state-run oil companies to procure crude. Oil companies buy crude with the greenback and exchange rate volatility affects them adversely.
"This is a very effective step I can say from managing the short-term exchange rate scenario. If you look at the oil companies' point of view they will end up paying higher exchange rate for their oil procurements. So I feel these sort of ad hoc measures are only going to solve the problems only in the short-term, it is not a long-term solution," Mr Sharma said.
Mr Sharma said that the oil and gas sector had been asking for a dollar window for a long time and rued over the fact that policy makers had to wait for a crisis like situation till they acted.
The rupee has fallen nearly 20 per cent in the last three months and hit an all-time low of 65.85 on Wednesday.