Very recently, the MCX India has decided to allow trading on ATF or Aviation turbine fuel futures trading on its bourses.
It seems that the FMC or Forwards market Commission has given the nod to the MCX Exchange for allowing the much awaited trading on ATF futures. It will be a landmark decision as previously there was no trading available in the Indian capital markets for hedging away the risks in the ATF or fuel sector. Hence, the airline companies in India used to hedge their positions and requirements on overseas commodity exchanges but it use to come at a high brokerage cost and also forex risk.
Now with the onset of ATF Futures being allowed trading on Indian MCX Commodity Exchange, the ailing aviation sector companies can now opt for local hedging that too without any forex risk. Though it is not clear whether the trading will be against the dollar in which the ATF fuel is charged, or will it be in Indian Rupees, but chances are that the trading will be opened in INR.
Joseph Massey, Managing Director of Multi Commodity Exchange said that the exchange has decided to launch a contract for trading in ATF.
The recent spurt in the prices of ATF has made panic in the logistic sector and this move is likely to offer air carriers a domestic platform to hedge against the spiraling fuel prices.
The ATF contracts on MCX Commodity Exchange will be launched in the next week, as per the news.
However, trading in its futures contract may take some time to start, as MCX would launch it only after studying the current environment.
But will the aviation companies jump on to this ATF trading? Unfortunately, these companies have no experience or expert resources to get into hedging contracts. Hiring someone with a good enough experience will mean paying them a hefty salary. Then comes the question of their skills and performance.
Experts in aviation industry believe that futures trading of ATF would help set a benchmark for the fuel's prices, which at present is arrived at after negotiations between airlines and oil marketing companies.
| PSU oil firms recently raised ATF prices by over 9 per cent in line with the rise in international crude oil rates. In Mumbai, the price has been hiked by Rs 5,276 per kl to 60,467.58 per kl effective from April 30 midnight. In the past, Air India is said to have burnt its fingers in Hedging contracts on overseas exchanges on ATF futures and other financial instruments. It will be interesting to see how the airline companies will respnd to the introduction of ATF Futures on the MCX Commodity Exchange. | Table of Contents |
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