FIEO seeks govt intervention to settle derivative losses

Export organisation Federation of Indian Export Organisations (FIEO) has sought government intervention for amicable settlement of thousands of crore of losses suffered by exporters on account of derivatives trade.

"The government needs to instruct banks through RBI to solve this issue on the basis of no-profit no-loss basis," it said adding, "wherein the exporters would be made to pay back whatever profits, if any, accrued to them through the forward contract and further the banks should not claim any loss out of it."

This could be made valid for those forward contracts entered into between April 2007 and June 2008, FIEO said in a letter to Finance Minister Pranab Mukherjee.

Many exporters lost substantially in derivatives products offered by financial institutions as they hedged their risk in the wake of appreciation of rupee, it said.

"The loss suffered by small and medium enterprises itself is over Rs 2,000 crore," it said adding many exporters are on the verge of closing their businesses.

Exporters had booked forward contract expecting that rupee would appreciate in 2008, as economists, political leaders and everyone were of the view that the domestic unit would touch Rs 38 a dollar by the end of December 2007, it said.