RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001

May 10, 1999 A.D. (M.A. Series ) Circular No.13

To,

All Authorised Dealers in Foreign Exchange

Dear Sirs,

Hedging of Commodity Price Exposure on International Commodity Exchanges

Attention of authorised dealers is invited to paragraph 3C.11 and Annexure II to Chapter 3 of Exchange Control Manual (ECM) containing guidelines for accessing International Commodity Exchanges for hedging commodity price exposure.

2. It has now been decided that Reserve Bank would consider requests from Indian corporates to:

(i) use Over The Counter (OTC ) futures contracts based on average prices,
(ii) cancel an option contract by entering into an opposite transaction with the same broker,
(iii) use products involving simultaneous purchase and sale of options provided there is no net receipt of premium either direct or implied, and
(iv) hedge exposures to bullion prices arising from export commitments in the London Bullion Market (through London Bullion Market Association approved brokers) besides recognised international exchanges.

3. The consequential Manual amendments will be issued separately.

4. Authorised dealers may bring the contents of this circular to the notice of their concerned constituents.

5. The directions contained in this circular have been issued under section 73 (3) of the Foreign Exchange Regulation Act,1973 ( 46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully,
B. MAHESHWARAN
Chief General Manager