Commodity Online
NEW DELHI: In its annual review of the credit policy announced on Tuesday, the Reserve Bank of India has promised a windfall for the Indian commodity industry.

India Inc, especially the airline sector, has welcomed the RBI’s move to expand hedging tools and its decision not to increase interest rates.

According to the policy, Indian producers can now hedge against volatility in the prices of aluminum, copper, lead, nickel and zinc on international commodity exchanges and airlines can hedge against jet fuel price changes.

While expanding the range of hedging tools available to the market participants as also facilitate ‘dynamic’ hedging by the residents, the RBI, besides enhancing the limit for forward contracts on non-deliverable basis by exporters and importers to 75 per cent from 50 per cent, also decided to allow resident individuals to book forward contracts without production of underlying documents up to $100,000 per year and these can be freely cancelled and rebooked.

This apart, the RBI has also enhanced the ceiling on aggregate overseas investment by mutual funds to $4 billion from $3 billion.

Forward contracts entered into by residents for hedging overseas direct investments would be allowed to be cancelled and rebooked. SMEs would be permitted to book (and also cancel/rebook) forward contracts without underlying exposures or past records of exports and imports through authorised dealers with whom the SMEs have credit facilities. A working group is to be set up on currency futures.

Private carrier Kingfisher Airlines welcomed the RBI announcement to allow hedging fuel in global markets and said it would help the aviation industry control costs.

“The decision (by RBI) will enable us to lower costs. It means we can buy our fuel from anybody and hedge it. However the stand-alone monopoly of oil firms would also have to be addressed,” Kingfisher Airlines chief Vijay Mallya told mediapersons.

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