Hedging of Price Risk in Commodities


A person resident in India is permitted to enter into a contract in a commodity exchange or market outside India to hedge price risk in commodities imported / exported, domestic transactions, freight risk, etc. There are two channels through which residents can undertake hedge i.e. .Authorised Dealers' Delegated Route and Reserve Bank's Approval Route. With a view to achieving greater clarity on the rules / guidelines governing hedging of commodity price risk, clarifications on process and various operational issues relating to commodity hedging are given below:
Commodity Hedging

Who can hedge?

What are the hedging facilities available to oil companies?

Which are the entities permitted to hedge oil price risk?

What are the commodities, other than petroleum and petroleum products, purchased domestically which could be hedged in international exchanges?

What are the hedging facilities permitted for entities in Special Economic Zones (SEZs)?

Freight Hedging

What is a freight derivative?

Which are the entities permitted by RBI to hedge freight risk?


Source: RBI


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