HEDGING OF DOMESTIC PURCHASES OF CRUDE OIL AND SALES OF PETRO- PRODUCTS ALLOWED

As per the prevailing trade practices, indigenous produced crude oil is purchased at international prices by the refineries. However, hedging of price risk on domestic purchases of crude oil is not permitted. In order to enable domestic crude oil refining companies to hedge their risk exposures, it has been decided to permit them to hedge their commodity price risk on domestic purchase of crude oil and sale of petroleum products on the basis of underlying contracts linked to international prices on overseas exchanges / markets. The hedging will be allowed strictly on the basis of underlying
contracts.