SME Times is powered by   
Search News
Just in:   • Mahindra unveils all-new Thar SUV  • 'Need for fiscal stimulus for exports sector'  • ICICI Bank raises Rs 15k cr through QIP of equity shares  • Thai Airways reports $900mn loss for 2020 1st half  • Arunachal CM launches entrepreneurship plan to boost economy 
Last updated: 11 Jul, 2020  

Petrol.9.thmb.jpg Petrol, diesel futures trading to start soon on exchanges

   Top Stories
» 'Need for fiscal stimulus for exports sector'
» Rupee to remain steady on stimulus hopes
» Responsibilities have grown with faceless approach: FM
» Rs 100L Cr to be spent on 7K infra projects: Modi
» Exports contraction narrowed to (-)10.12 pc in July
SME Times News Bureau | 11 Jul, 2020
Market regulator Securities and Exchange Board of India (SEBI) may soon allow futures trading in auto fuels petrol and fiscal giving an opportunity to bulk consumers of these petroleum products to hedge their risks from a volatile market where there is a sudden spurt in prices.

Sources said that petroleum ministry has approved the plan to allow trading of petroleum products in the derivative market and the commodity exchanges would be able to launch petrol and diesel futures soon after SEBI releases its final regulations in this regard.

Futures are financial contracts which help the buyer to purchase a commodity, or the seller to sell the commodity, at a predetermined future date and at a predetermined price. In the case of petrol and diesel, the derivative product would involve buying a specified quantity of the at a specified price with delivery set at a specified time in the future. In a rising market where prices of fuel is going up, the futures product would protect the participant from losing out as the financial product would hedge the risk and ensure uniform pricing of the commodity.

"It is a good development as it will allow industrial and bulk consumers of the two petroleum products to hedge their risks. But in current market conditions, in the absence of a big pick up in demand oil prices are either stable or falling, hedging would work against the interest of participant as it would add up to the cost of hedging," said an oil sector analyst asking not to be named.

Currently futures trading is allowed in crude oil giving opportunity to refiners to hedge their risks against frequent price fluctuations. The addition of petrol and diesel with give them another instrument to hedge their refining margins.

Sources said that as current market conditions may not be conductive for a futures market in petroleum products, it may wait before intruding the new product in the market.

Petrol and diesel futures in any case will not benefit retail customers as the quantum of fuel used by them would be low. SEBI may allow derivative products with a floor of say 100 litre of petrol and diesel. This will be too high a level for retail customers to participate in the futures market.

Futures contract in petrol and diesel are expected to be ideal for refiners, transport companies, petrol pump owners, etc. who are exposed to daily price fluctuations in the petroleum products. Railways, aviation, fleet owners and industrial consumers could also take benefit from the product.

In India a part from volatility in international markets, petrol and fiscal prices are also impacted by frequent changes in government duties, both at central and state levels, on the two products. The futures contract can help against these unforeseen price increased too.
Print the Page
Add to Favorite
Share this on :

Please comment on this story:
Subject :
(Maximum 1500 characters)  Characters left 1500
Your name:

  Customs Exchange Rates
Currency Import Export
US Dollar
UK Pound
Japanese Yen 58.85 56.85
As on 16 Aug, 2020
  Daily Poll
COVID-19 has directly affected your business
 Can't say
  Commented Stories
» Starting an import export business: Basic guide for beginners(2)
» Importance of technology in Indian agriculture(1)
» One time loan restructuring(1)
» Improve MSME footprint in aspirational districts: Gadkari(1)
» Govt, RBI discussing on allowing co-op banks to lend under ECLGS(1)
About Us  |   Advertise with Us  
  Useful Links  |   Terms and Conditions  |   Disclaimer  |   Contact Us  
Follow Us : Facebook Twitter