NEW DELHI: 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.
