Mumbai: The Multi Commodity Exchange (MCX) is all set to launch Aviation Turbine Fuel (ATF) futures contracts early next month, which is expected to help refiners and airlines facing trouble in a turbulent oil market, a top company official said.
“We have received permission from the Forward Markets Commission (FMC) and will firm up plans shortly to launch ATF futures contracts. We are in touch with leading airline companies for hedging,” MCX’s Managing Director, Joseph Massey, told PTI.
Oil refining companies and airlines are presently hedging in MCX crude oil contracts which has a 90 per cent co-relation with ATF futures, Massey said.
A relentless rise in crude oil prices combined with uncertainty surrounding its supply, has pushed air-carriers into a tricky situation.
The Indian aviation sector, especially airlines, suffers from a sure and steady supply of fuels. MCX has spotted this need and decided to launch ATF futures that are expected to benefit both oil refining companies and airlines, company officials said.
The country is seeing a major spurt in air traffic, both domestic and international. As a result, there has been a steady rise in fuel demand and refiners need an assured supply to cater to the growing demand. Airline companies are also looking at hedging on long-term contracts with refineries.
Today, in the absence of such futures contracts, aviation companies are forced to buy in the spot markets that often may not turn out to be a commercial proposition.
The ATF oil futures will enable refinery companies to plan production programmes and accordingly their positions.
As for refineries and oil companies, it is quite likely that soaring crude oil prices might dent their bottomlines though not their toplines.
Aviation Turbine Fuel (ATF) or jet fuel is a specialised type of petroleum-based fuel used to power aircraft. It is generally of a higher quality than fuels used in less critical applications such as heating or road transport.
ATF is clear to straw-coloured and is a blend of hydrocarbons, a product of petroleum refining which belongs to the middle distillate group.
In some regions, lower quality specification kerosene or a dual-purpose grade is produced and used as a domestic heating fuel, especially in Asia and notably in Japan and Korea.
In India, the kerosene market is divided in three segments of public distribution system (PDS), industrial kerosene and aviation turbine fuel (ATF).
India turns out 78,05,000 tonnes of ATF. The country is self-sufficient in production of these products with exports of 36,62,000 tonnes.
Indian oil companies produce enough kerosene and ATF to meet domestic demand. Besides, these oil companies do the pricing of ATF and industrial kerosene from time to time and thus there is a close parity with the international crude oil prices. ATF sales accounted for around 3.5% of total sales of petroleum products.