Electricity derivatives mark next phase of India's power market reforms: SEBI Chairman

Mumbai, July 18 (IANS) Electricity derivatives will help participants plan more effectively by managing price uncertainty, mitigate revenue risks, and attract investment in the power sector, SEBI Chairman Tuhin Kanta Pandey said on Friday.

The National Stock Exchange of India (NSE) hosted a bell-ringing ceremony to formally mark the launch of Monthly Electricity Futures Contracts under the Commodity Derivatives segment and the new spot market dashboard.

The product aims to bring much-needed hedging and price visibility for participants in India’s growing electricity sector.

“They mark the next phase of India’s power market reforms. A deep and liquid electricity derivatives market will be essential for a reliable, sustainable, and investor-friendly power sector,” said Pandey on the occasion.

Ashish Kumar Chauhan, MD and CEO, NSE, stated that “This launch marks a turning point in India's electricity market”.

“It aligns our financial markets with international best practices while addressing the specific needs of our domestic power sector. With the help of SEBI, CERC, and multiple market participants, this product will serve as a risk-management tool for India’s energy consumers and suppliers,” he noted.

Additionally, Chauhan added that the product saw robust participation in its initial week of commencement at NSE.

As of July 17, 20,822 lots were traded cumulatively from July 14, across three contract months — August, September, and October, wherein the total traded value crossed Rs 450 crore.

For the contract month of August, till July 17, 20,421 lots were traded with prices ranging from Rs 4,356/MWh to Rs 4,364/MWh.

The Electricity Futures contracts are cash-settled, available in a lot size of 50 MWh, and listed for current plus three future months. The settlement is based on a volume-weighted average price of the Day-Ahead Market (DAM) across all three power exchanges.

The product is currently exempt from transaction charges until December 31, 2025, to encourage early participation, according to the NSE.

Jishnu Barua, Chairman, CERC, highlighted that “Electricity derivatives have been under discussion for over a decade, and this product brings financial innovation aligned with the needs of DISCOMs, industrial users, and renewable generators”.

“Supported by over 15 years of functioning physical power exchanges, this futures product helps hedge risk, deepen markets, and encourage informed investment planning,” he added.

--IANS

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