The Hindu Business Line : RBI lets firms hedge exposure to metals

Mumbai June 1 The Reserve Bank of India on Thursday notified that domestic producers and users of aluminium, copper, lead, nickel and zinc had been permitted to hedge their price risk by taking hedge positions in international commodity futures exchanges.

This follows the RBI announcement as part of Annual Policy Statement 2007-08 recently.

Hedging will be to the extent of the average of the purchases/sales in the previous three financial years or previous years' turnover whichever is higher.

ATF hedge

The RBI has also permitted users of aviation turbine fuel (ATF) to hedge their domestic purchase exposure through over-the-counter (OTC) products. This is a result of representation made by domestic users that ATF or its close substitutes are not listed on any futures exchange, domestic or international. Hedging exposure of ATF indirectly in crude oil, heating oil etc may not give a perfect hedge.

The RBI has authorised certain banks to grant permission for hedging to producers and users.

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