Sebi chief Tuhin Kanta Pandey just dropped a bold fix for India’s power sector. Here's what it is

SEBI Chairman Tuhin Kanta Pandey on Thursday endorsed electricity derivatives as a vital tool to manage price uncertainty, stabilize revenues, and attract long-term investment into India’s power sector. Speaking at the launch of NSE Electricity Futures in Mumbai, he called the move a “major step” in aligning India’s energy markets with global standards.

“The electricity derivatives, starting with monthly futures, will provide a transparent and regulated platform to hedge against price volatility,” Pandey said. “This stability is important for power generators to continue expanding infrastructure to meet India’s growing power demands.”

The monthly futures contracts—launched on July 14 and modeled on global energy commodities like coal and natural gas—are designed to be high-volume, low-speculation instruments. Unlike other commodities, electricity cannot be easily stored, requiring a real-time balance of demand and supply. Until now, India’s market has lacked forward-pricing tools, relying mostly on physical contracts and spot transactions.

Pandey explained that the absence of derivatives has long been a structural gap in India’s power sector. Power producers, for example, have had limited ability to lock in prices or plan cash flows. With derivatives, generators can now secure future selling prices and protect against sudden price swings.

The initiative reflects a coordinated push by the Ministry of Power, SEBI, and the Central Electricity Regulatory Commission (CERC) to modernize India's energy markets. Global benchmarks in the EU and U.S. already use similar instruments to ensure price stability.

NSE Managing Director and CEO Ashish Chauhan reported strong early interest in the new contracts. “As of today, 20,822 lots have been traded since July 14 across August, September, and October contracts. The total traded value has already crossed ₹450 crore,” he said.

Pandey cited IEA data projecting that 85% of global electricity demand growth through 2027 will come from emerging economies—led by India. With generation expected to hit 1,824 billion units in FY25, volatility is inevitable. “Electricity derivatives will help us manage that risk,” he said.