Govt allows SEZ units to hedge risk without prior RBI approval

NEW DELHI: The government has allowed units in in Special Economic Zones to hedge their risks in export and import of commodities without prior approval of the Reserve Bank of India.
Necessary amendments have been made in the Foreign Exchange Management (Foreign Exchange derivative contracts) Regulations for this purpose.
"A unit in the Special Economic Zone 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," a notification issued by the Government said.
The term "stand-alone" would refer to a unit in the SEZ which 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.
The amendments have been made in the paragraph six of the regulations. Until now units in SEZs were required to seek RBI approval for hedging their risks.
Sources said the move was part of Commerce Ministry''s efforts to provide fiscal incentives to units in SEZs and make these zones more attractive for investors.