Crude and petroleum products will not be eligible for this facility at present. Detailed guidelines will soon be issued by RBI.

The government has taken the decision in consultation with the union ministry of food and consumers affairs which is the nodal ministry for forward trading in the country. The nodal agency Forward Markets Commission is also under this ministry.

According to the decision the access to recognised international commodity exchanges should be through brokerage firms which are the clearing members of exchanges. All standard exchange traded futures, option contracts (purchases) will be permitted. The tenure of the contract will normally be restricted to six months beyond which RBI's approval would be necessary.

This will step will enhance the competitiveness of Indian companies to hedge their input and product prices in international commodity exchanges. It would greatly increase the ability of Indian companies to compete in world market and put them on a level-playing field.

So far the sustained and rapid increase in the country's export earnings remained a sine qua non to embark on a high growth trajectory. Further the access to imported materials at competitive prices has become crucial for export growth.

Speaking to The Financial Express, the secretary for consumer affairs, NN Mookerjee said that earlier many domestic companies had written to the food ministry to allow them to hedge in global exchanges for metals. The department reviewed the representations on case-by-case basis and came to the conclusion that hedging in global exchanges should be allowed. Moreover, this was in pursuance of the government policy of gradually liberalising the commodity sector and allowing futures trading.

Already the international futures trading exchange for pepper at Kochi has been functioning successfully. This has encouraged the government to set up another international futures trading exchange which will be for castor oil at Mumbai. This centre will start functioning by the end of this year after the bye-laws for the exchange and clearing house are finalised. In March this year, the government has permitted domestic futures trading in jute goods in Calcutta. Domestic futures in cotton is slated to flag off in Mumbai in next month.

At present, domestic futures are allowed in gur, hessian, potato, pepper, turmeric and castor seeds.

Mookerjee stated that though the food and consumer affairs ministry finalised the proposal for allowing domestic companies to hedge in global commodity exchanges, the finance ministry had to give the final clearance as foreign exchange component was involved in the process. RBI was also consulted in this connection and RBI will continue to play an important role.