Commodity exchanges will soon get to trade in airline turbine fuel (ATF), apple, weather and milk futures with the market regulator SEBI-appointed Commodity Development and Advisory Committee giving its nod for derivatives trading in these select commodities.
Once approved by CDAC, exchanges have to take market participants’ feedback for framing the contract specification and submit it with SEBI for final approval.
Narendra Wadhwa, President, Commodity Participants Association of India, told businessline that SEBI had approved 90 non-price sensitive commodities for derivatives trading and the CDAC has been considering one after another depending on the respective users’ interest.
The aviation industry has been hedging on WTI (West Texas Intermediate) and Brent crude oils as there were no specific ATF contracts were available for trading, he said.
Given the soaring demand and volatile ATF prices, the aviation industry was keen on the launch of futures contract on this commodity to hedge their risk, particularly when MCX has a very liquid contracts on energy basket, said Wadhwa.
Two new futures
National Stock Exchange recently launched two new cash settled energy futures contracts on WTI Crude Oil and Natural Gas which have gained good traction.
Besides, the new launches there is strong demand from the industry to lift the ban on seven commodities — paddy (non-basmati), wheat, chana, mustard seeds, soyabean, crude palm oil and moong to boost investors’ confidence, he said.
The demand for futures on fresh milk and milk powder also came from the industry as India is one of the largest producers and exporters of fresh milk. India contributes 24 per cent of global milk production.
The country’s milk production increased 61 per cent in last nine years to 221 million tonnes in 2021-22 against 138 mt in 2013-14, according to PIB’s Research Unit. India’s dairy products exports have nearly doubled to ₹4,700 crore last year compared to ₹2,400 crore in 2021. This is a significant jump from ₹1,200 crore in 2015.
Uttar Pradesh, Maharashtra, Himachal Pradesh, Madhya Pradesh, Punjab, Rajasthan and Tamil Nadu are the primary milk producing States. While the world’s milk production currently is growing at 2 per cent, India’s growth rate is over 6 per cent.
Indian dairy industry has been robust with multiple players including Amul, Aavin, Mother Dairy, Orissa State Cooperative Milk Producers Federation, Dudhsagar Dairy among others.