The Hindu Business Line : MCX hopes airlines will use its ATF futures

The current spurge in crude oil prices has impacted the operational costs. In this context, the launch of ATF futures at MCX has welcomed by the industry.

M.R. Subramani

Chennai, Aug 4 With aviation turbine fuel (ATF) futures clocking a turnover of Rs 524 crore in July, the Mumbai-based Multi Commodity Exchange hopes that domestic airlines will use the futures to hedge their price risk in the fuel and safeguard themselves from volatility of international prices.

According to Mr Sumesh Parasrampuria, Chief Business Officer, MCX, the board of Spice Jet has approved hedging by the airlines in ATF futures. “However, they are waiting for the opportune moment,” he said.

The AFT futures were launched last month and since then, MCX has seen good volumes. “The contract is witnessing an average daily volume of more than Rs. 56 crores in value terms and over 75,000 barrels in terms of volume,” Mr Parasrampuria said.

ATF, also known as refined kerosene, is a specialised type of fuel used to power aircrafts. It is generally of a higher quality than fuels used in less critical applications such as heating or road transport. It is a blend of hydrocarbons that 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 – notably in Japan and Korea. In India, the kerosene is used in three segments - public distribution system for people below poverty line, industrial kerosene and ATF.

Industry Benefactor

According to Mr Parasrampuria, about 35 per cent of the operational costs incurred by the aviation industry is for ATF. The current spurge in crude oil prices has impacted the operational costs. In this context, the launch of ATF futures at MCX has welcomed by the industry.

Asked if the futures price on MCX reflected the global rates, he replied in the affirmative. “Asian market takes a cue from the Singapore market which is the Benchmark market in Asia. MCX ATF contracts are settled taking TOCOM settlement price as the reference prices. The ATF contracts on MCX are moving in tandem with international prices, reflecting the global dynamics and hence facilitating price discovery,” he said.

Helping refiners

Though Mr Parasrampuria did not give details on the exact number of participants in the AFT futures, he said the response has been good and it would be too early to pinpoint a figure on the participation. However, ATF futures would help refiners protect their margin, while helping consumers control their operational costs, he said.

Currently, August, September, October, November and December contracts are available for trading. On Monday, ATF futures opened 3.6 per cent lower at Rs 7,450 a barrel. August futures were down a tad at Rs 6,401.

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