The notification, issued yesterday evening, says such facilities will, however, be subject to detailed RBI guidelines. The objective of the hedging facility is to enable Indian oil companies access to international commodity exchanges and compete in international markets.
While other companies have been allowed to hedge commodity price risks since September 1998, the facility was denied to oil companies. The government says it has reviewed the position and also decided to allow the oil companies to become eligible for hedging.
The immediate provocation for the move comes in the wake of the hardening of oil prices in international markets. The decision by the finance ministry follows recommendations by an empowered committee set up by the petroleum ministry on the suggestions of a parliamentary standing committee two years ago.
It is expected that the move will help Indian companies in their procurement of oil from the Gulf, the biggest supplier of crude to India. More than half of India