Nearly a year after RV Gupta Committee's report on commodity futures, the RBI gave the much-awaited nod in September by releasing a set of guidelines entitled `Hedging of Commodity Exposure on International Commodity Exchanges'.

Gearing up to assist a few top 10-15 corporates that are keen on hedging their risks in the highly volatile global markets are foreign banks, domestic forex traders, representatives of brokers and trading members of foreign commodity exchanges.

These guidelines though have opened up a whole new era for corporates to hedge their risks ofbuying raw materials from the international arena, seem to "lack clarity and are too restrictive", say bankers and representative of foreign commodity brokers. Accordingly, they feel it will be inevitable for the RBI to review the first set of guidelines with possible expansion of the scope of these guidelines.

Currently, majority of big corporates are already hedging their requirements in the international markets through overseas offices or associates. And because of the restrictive character of the guidelines, it remains to be seen how many of these corporates would really take the advantage of the new avenue for international hedging.

Both, the authorised dealers (including forex dealers and banks) and their corporate clients, are currently studying the RBI guidelines. If the corporates are able to meet RBI's requirements, it is likely that international hedging by Indian corporates will become a reality by December 1998.

Given India's annual international trade of over $70 billion (duringApril-June 1998 India's imports were placed at $9,889 million and exports at $7,489 million), the resultant risks are immense and therefore the scope of commodities hedging is wide. "We are excited at the scope of opportunities that would now be available," said Jamal Mecklai, managing director, Mecklai Financial & Commercial Services Ltd, a leading forex dealer.

Mecklai, who was one of the members on the seven-member RV Gupta committee, recently set up Mecklai Metals, an exclusive commodities trading arm. In India, Mecklai Metals represents the UK-based Billiton Metals Ltd and a member on the London Metals Exchange (LME).

"We are currently negotiating with couple of more brokers engaged in trading in other commodities on global commodity exchanges."

Even the foreign banks who have set up exclusive commodities desk in India are excited about the possibility of business the new guidelines opens up. Included in the list of foreign banks competing to offer international hedging expertise to theircorporate clients are: Bank of Nova Scotia, ABN Amro Bank and Banque Nationale de Paris and few others. Says ScotiaMocatta's, a metal firm owned by Bank of Nova Scotia, associate director, base metals Vikram Dhavan: After setting up our commodities desk in January 1998 we have been engaged in educating our corporate clients through corporate-specific presentations.

In the second phase, which begins now, we would ensure that our clients start taking advantage of the RBI's permission to hedge on the international commodity exchanges by mid-November. We intend to become a one-stop agency both for the government (for consultation) and even for corporates (for expertise)."

"With our offices spread in London, Toronto, New York, Hong Kong, Singapore, Sydney, India and Middle East and representatives in China and South Africa, SoctiaMocatta is a truly global metals dealer", claims Dhavan.However, a representative of ABN Amro Bank's feels: "The first set of RBI guidelines is a learning stage for all of us --the central bank, the authorised dealers and the corporates. The first application that would be forwarded to the RBI will prove how practical the guidelines are."Among the issues that need more clarification from the RBI are: