SEBI Chairman Tuhin K Pandey states electricity by-products symbolize reforms in the sector

SEBI Chairman Tuhin K Pandey states electricity by-products symbolize reforms in the sector

They will bring much-needed hedging and price visibility for participants in India's growing power industry

The Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey, has stated that electricity derivatives will help participants plan more effectively by managing price uncertainty, mitigate revenue risks and attract investment in the sector.

He was speaking at the program hosted by the National Stock Exchange of India (NSE) to launch the 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.

Tuhin Kanta Pandey stated, "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.”

Ashish Kumar Chauhan, MD and CEO of the National Stock Exchange, remarked, "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.”

Chauhan stated that the product witnessed robust participation in its initial week at the National Stock Exchange (NSE).

Recently, 20,822 lots were traded cumulatively from 14 July to October, with a the total traded value exceeding Rs.450 crores. For the contract month of August, till 17 July, 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 three months. The settlement is based on a volume-weighted average price of the Day-Ahead Market (DAM) across all three power exchanges.

As per the NSE, the product is currently exempt from transaction charges until 31 December to encourage early participation.

Jishnu Barua, Chairman of the Central Electricity Regulatory Commission (CERC), highlighted, "Electricity derivatives have been under discussion for over a decade. The product brings financial innovation aligned with the needs of DISCOMs, industrial users, and renewable generators."

He added, "Supported by over 15 years of functioning physical power exchanges, this futures product helps hedge risk, deepens markets and encourages informed investment planning.”