The National Stock Exchange (NSE) announced that it plans to launch monthly electricity futures contracts within the next two to three weeks, following formal approval from the Securities and Exchange Board of India earlier this month.
Electricity futures are cash-settled agreements that allow buyers and sellers to lock in prices for electricity to be delivered in a future month. In a market known for volatility and limited transparency, the new product is being positioned as a tool to bring price discovery, hedging opportunities and, potentially, consumer empowerment to India’s fragmented power sector.
“Consumers currently have no real participation in price discovery,” said Sriram Krishnan, Chief Business Development Officer at NSE. “You don’t have the freedom to choose your electricity tariff. That basic right—the right to decide—is missing.”
The contracts, structured on a monthly basis, are designed to enable eligible participants—including trading members, power generators, large corporate buyers, and financial institutions—to hedge their exposure to fluctuating electricity prices. Retail investors will also be able to participate through registered brokers, subject to the exchange’s risk norms and disclosures.
The minimum trading lot is 50 megawatt-hours (MWh), equivalent to 50,000 units of electricity. While individual order sizes are capped, traders may accumulate larger positions through multiple trades, consistent with established risk controls.
India’s electricity markets are currently governed by state utilities and long-term power purchase agreements, leaving little room for consumer choice or real-time pricing. Experts say this move may help create a more dynamic market ecosystem, especially as renewable energy sources gain momentum.
Mr. Krishnan suggested that electricity futures could serve a dual purpose: allowing buyers to hedge against price surges and enabling capital formation for renewable energy and grid infrastructure. “If the spot price rises above your futures price, you pocket the difference,” he explained. “That’s a direct way to offset real electricity costs.”
While the immediate impact may be limited to institutional players, the long-term vision is more ambitious. By introducing market-based tools for energy pricing, the NSE hopes to catalyse broader reforms in a sector long mired in regulatory constraints, cross-subsidies, and legacy inefficiencies.
India has pledged to achieve net-zero carbon emissions by 2070 and is investing heavily in clean energy projects. Market instruments like electricity futures could help align financial flows with that goal.
“Globally, these kinds of products are commonplace,” Mr. Krishnan said. “It’s time India caught up.”
