Business Daily from THE HINDU group of publications
Wednesday, Jun 04, 2008
ePaper | Mobile/PDA Version | Audio
Business Daily from THE HINDU group of publications Wednesday, Jun 04, 2008 ePaper | Mobile/PDA Version | Audio |
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Money & Banking
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Forex Industry & Economy - Petroleum Corporate - Derivatives Markets Oil refining firms get more leeway
Our Bureau Chennai, June 3 Oil refining and marketing companies have been given more leeway through a series of notifications made today by the Reserve Bank of India. They will now be allowed to hedge their domestic purchases of crude oil. They also get a bigger budget for making overseas investments in their sectors. The RBI’s notifications give effect to the announcement made in the Credit Policy statement in April 2008. In a notification on liberalising overseas investments of companies in oil/energy/natural resources sector, the RBI has allowed companies to invest in excess of 400 per cent of their net worth with prior permission. The existing rules allow companies to invest up to 400 per cent of their net worth under the automatic approval route. On hedging of crude oil purchases, the notification pointed out that, hitherto, only crude oil purchased internationally by refineries was allowed to be hedged. Although domestic purchases were linked to international prices, the hedging of price risk was not permitted. Now this is allowed, subject to there being underlying contracts. The hedging can be done on overseas exchanges and markets. The RBI has permitted domestic oil refining companies to hedge their commodity price risk up to a level of 50 per cent of the volume of actual imports during the previous year or 50 per cent of the average volume of imports during the previous three financial years, whichever is higher. Banks have been asked to ensure that that board of directors of the concerned oil refining companies have approved policies which define the framework within which derivative activities are undertaken and that there is specific sanction for this activity. More Stories on : Forex | Petroleum | Derivatives Markets | RBI & Other Central Banks
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