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Wednesday, Dec 10, 2003

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BPCL policy for crude risk management soon

Archana Chaudhary

Mumbai , Dec. 9

BHARAT Petroleum Corporation Ltd is all set to put in place its risk management policy for crude oil imports.

Company officials are working on forming the policy for hedging commodity risks that will soon be presented to the board of directors for approval.

The policy will be in place before the end of next quarter.

"The policy will be introduced within the next 3-4 months and will encompass trades in all oil products," Mr S.K. Joshi, Executive Director, BPCL, told Business Line.

BPCL was the first oil PSU to import crude on its own after Indian Oil Corporation ceased to be the canalising agent for imports for oil PSUs.

The company had earlier indicated that it would increase its reliance on imported crude as against purchases from ONGC.

Imported crude formed only 28 per cent of the total throughput in BPCL's Trombay refinery in 1999-2000. In 2000-01, the ratio went up to 32 per cent while in 2001-02, it was up to 41 per cent.

With lower crude availability from Mumbai High, coupled with the supply needs of Kochi Refineries and Numaligarh Refinery, which entered the BPCL stable in March 2001, BPCL has been slowly increasing its dependence on imports.

The RBI had on September 2, 2000, granted permission to oil sector companies with a physical underlying exposure to oil prices to make use of risk management tools.

At present, Reliance Industries is the only Indian company that hedges crude transactions.

Among PSUs, Indian Oil Corporation and Oil and Natural Gas Corporation have been permitted to put up oil trading and risk management desk.

BPCL put in place a foreign currency risk management policy two months ago.

According to a senior official, forex risk management is a precursor to hedging commodity risks.

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