Commodity Hedging by Entities in the Special Economic Zones A.P.(DIR Series)Circular No.44 (November 12, 2002) - RBI - Reserve Bank of India
Commodity Hedging by Entities in the Special Economic Zones
A.P.(DIR Series)Circular No.44 (November 12, 2002)
RESERVE BANK OF INDIA A.P.(DIR Series)Circular No.44 November 12, 2002 To All Authorised Dealers in Foreign Exchange Madam/Sirs, Commodity Hedging by Entities in the Special Economic Zones Attention of authorised dealers is invited to paragraph 6 of Notification No.FEMA25/RB-2000 dated 3rd May, 2000 and paragraph A.6(i) Part A of the enclosure to A.P. DIR(Series) Circular No.19 dated January 24, 2002. 2. The Notification referred to above has since been partially modified vide Notification No.FEMA-66/2002-RB dated 27th July 2002 (copy enclosed) and accordingly, it has been decided to grant general permission to entities in the Special Economic Zones (SEZs) for undertaking hedging transactions in the international commodity exchanges/markets to hedge their commodity price risk on import/export, provided, such transactions are undertaken on "stand-alone" basis. By "stand-alone" it is meant that units in the SEZs would be completely isolated from financial contacts with their parent or subsidiaries in the mainland or within the SEZs as far as their import/export transactions are concerned. 3. Authorised Dealers may bring the contents of this circular to the notice of their concerned constituents in the SEZs and allow such transactions to be undertaken under the terms and conditions set out in the Annexure. 4. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Yours faithfully, Grace Koshie Chief General Manager ANNEXURE [A.P.(DIR Series) Circular No.44 Guidelines/Terms & Conditions for undertaking hedging transactions
RESERVE BANK OF INDIA Notification No.FEMA.66/2002-RBl dated 27 July 2002 In exercise of the powers conferred by clause (h) of sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (Act 42 of 1999) and in partial modification of its Notification No.FEMA.25/RB-2000, dated May 3, 2000, the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Foreign exchange derivative contracts) Regulations, 2000, as amended from time to time, namely : 1. (i) These Regulations shall be called the Foreign Exchange Management (Foreign exchange derivative contracts) (Second Amendment) Regulations, 2002. (ii) They shall come into force from with effect from their publication in the Official Gazette. 2. In the Foreign Exchange Management (Foreign exchange derivative contracts) Regulations, 2000, in paragraph 6, the following proviso shall be added, namely : 'Provided that a unit in the Special Economic Zone (SEZ) may, without prior approval of the Reserve Bank, enter into a contract in a commodity exchange or market outside India to hedge the price risk in the commodity on export/import, subject to the condition that such contract is entered into on a "stand-alone" basis. Explanation : - The term "stand-alone" means that the unit in the SEZ is completely isolated from financial contracts with its parent or subsidiary in the mainland or within the SEZ(s) as far as its import/export transactions are concerned.' Sd/- |