SEBI Gives NSE In-Principle Approval to Launch Electricity Futures

The National Stock Exchange (NSE) has received in-principle approval from the Securities and Exchange Board of India (SEBI) to introduce electricity futures. The development was confirmed by NSE management during a post-results conference call. The exchange noted that the contract structure is still being discussed with SEBI.

Short-Term Financial Contracts

The proposed electricity futures will be financial derivatives settled in cash. These are expected to be short-term contracts, likely monthly or half-yearly. This differs from global markets, where electricity derivatives often run on a yearly basis.

Background and Regulatory Clarity

This follows SEBI’s February 2025 communication to exchanges regarding the framework for electricity derivatives. This was based on an understanding reached between SEBI and the Central Electricity Regulatory Commission (CERC). Under this arrangement, SEBI will oversee financial derivatives, while CERC will regulate physical delivery-based forward contracts. The division of responsibility was confirmed by a Supreme Court ruling in 2021.

Read more: Electricity Derivatives Launch: Top Exchanges Approach SEBI to Seek Approval!

Exchanges That Have Applied

In March 2025, NSE and the Multi Commodity Exchange (MCX) submitted applications to SEBI for electricity futures. The contracts are part of a larger plan to build market instruments that help power buyers and sellers manage price fluctuations.

Work in Progress

NSE stated that the launch requires additional capacity building. This includes internal system readiness and other operational preparations. The exchange has a large settlement guarantee fund and other infrastructure in place, but further development is needed before rollout.

Separately, NSE is expanding its co-location capacity. It plans to add 300 racks by Q1 FY26 to address pending applications. A larger expansion of 2,000 racks is also planned over time, with an estimated cost of ₹520-550 crore.

Conclusion

The electricity derivatives product is still under development. Timelines for launch will depend on final regulatory approvals and operational readiness. Upon their introduction in India, these tools will enable more effective price risk hedging for participants in the power market, including buyers, sellers, and producers.

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