The National Stock Exchange of India (NSE) is set to transform the Indian power market with the launch of Electricity Futures contracts on July 14, 2025. This marks a major milestone for the country’s commodity derivatives landscape, introducing a new tool for managing electricity price risk and deepening market liquidity.

What Are Electricity Futures?

Electricity futures are standardized, cash-settled derivative contracts that allow participants to lock in the price of electricity for a specified month in the future. Importantly, these contracts do not involve the physical delivery of power; instead, they are settled financially based on benchmark electricity prices, primarily the Day-Ahead Market (DAM) prices published by the Power Exchange of India Ltd (PXIL) and other approved exchanges.

Key Features of NSE Electricity Futures

FeatureDetails
TypeMonthly cash-settled futures (no physical delivery)
Trading Unit50 MWh per contract
Tick Size₹1 per MWh
Maximum Order Size2,500 MWh (50 contracts)
Contract TenureContracts available for current and next 3 months (rolling)
Trading HoursMonday–Friday, 9:00 am to 11:30/11:55 pm (adjusted for daylight saving)
SettlementCash, based on volume-weighted average DAM prices
MarginsMinimum 10% or as determined by SPAN
Position LimitsMembers: 30 lakh MWh or 20% of market-wide open position; Individuals: 3 lakh MWh or 5%
Daily Price Limit6% initial, expandable to 9% as per SEBI rules
Fee WaiverZero exchange transaction fees for the first 6 months post-launch

Why Is This Important?

For Businesses:

  • Hedging Price Volatility: Power generators, distribution companies, and large industrial consumers can now hedge against unpredictable electricity prices, securing cost certainty for future operations.
  • Budgeting and Planning: By locking in prices, businesses can better forecast and manage their energy costs, which is crucial for sectors with high electricity consumption.

For Investors and Traders:

  • New Speculative Opportunities: Investors can take positions on the future direction of electricity prices without dealing with physical delivery or operational complexities.
  • Diversification: Electricity futures add a new asset class to the Indian derivatives market, enabling broader portfolio diversification.

How Are Contracts Priced and Settled?

Here is how the contracts are priced and settled:

  • Benchmarking: Final settlement price is determined by the volume-weighted average of DAM prices from PXIL and other approved exchanges over the contract month.
  • No Physical Delivery: All contracts are cash-settled, making participation simple for both hedgers and speculators.

Special Launch Offers

  • Zero Exchange Fees: To encourage early adoption, NSE is waiving transaction charges for the first six months (until December 31, 2025). 
  • Regulatory Backing: The product is fully approved by SEBI, ensuring a secure and regulated trading environment.

Who Can Trade?

The eligibility criteria is as follows:

  • Eligible Participants: Any SEBI-approved trading member, corporate buyer, generator, trader, or financial institution can participate.
  • Retail Access: Retail investors can also participate, provided they do so through registered brokers and within specified position limits.

Final Thoughts

NSE’s electricity futures offer a powerful new way for businesses and investors to manage risk and participate in India’s rapidly evolving energy sector. With robust regulatory oversight, liquidity incentives, and zero exchange fees for early adopters, this is a significant leap forward for the Indian commodity derivatives market.