TaxTMI 
TaxTMI 
Risk Management and Inter-Bank Dealings - Commodity Hedging Exposures of domestic oil refining and marketing companies
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompanies Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to Regulation 6 of Notification No. FEMA.25/RB-2000 dated May 3, 2000, as amended from time to time, in terms of which residents in India are permitted to enter into a contract in a commodity exchange or market outside India to hedge price risk in a commodity, subject to terms and conditions. Further, in term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heir commodity price risk exposure dynamically, as announced in the Annual Policy Statement for the Year 2008-09 (para 129), it has been decided to extend the following facilities: A. Hedging of domestic purchases of crude oil and sales of petro-products: As per the prevailing trade practices, indigenously produced crude oil is purchased at international prices by the refineries. However, hedgin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imports during the previous year or 50 per cent of the average volume of imports during the previous three financial years, whichever is higher. Contracts booked under this facility will have to be regularized by production of supporting import orders during the currency of hedge. An undertaking may be obtained from the companies to this effect. 3. The hedging has to be undertaken only through AD....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omestic crude oil companies should have put up the list of OTC transactions to the Board on a half yearly basis, which must be evidenced by the AD Category - I bank before permitting continuation of hedging facilities under this scheme. 5. The AD Category - I banks should also ensure "user appropriateness" and "suitability" of the hedging products used by the customer as laid down in Para 8.3 of....