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Informist, Friday, Dec. 19, 2025

 

By Pallavi Singhal

 

NEW DELHI - The National Commodity and Derivatives Exchange Ltd. is targeting the launch of India's first weather derivatives ahead of the monsoon season, marking a significant step towards market-based hedging of climate risks for farmers and allied sectors, Managing Director and Chief Executive Officer Arun Raste told Informist.

 

NCDEX, he said, has signed a Memorandum of Understanding with the India Meteorological Department and is working with Indian Institute of Technology, Bombay, to develop rainfall-based derivative products using long-term historical data and real-time weather information. A first product demonstration developed with IIT Bombay is scheduled shortly, after which the exchange plans to approach the Securities and Exchange Board of India for regulatory approval, he said in a telephonic interaction.

 

"This partnership with the India Meteorological Department opens the door to a new era in commodity markets," Raste said. "With climate volatility increasingly affecting productivity and incomes of farmers, these instruments can provide a market-based solution to weather risk."

 

The exchange will initially focus on rainfall-linked contracts aligned with crop cycles, with the scope to expand into temperature-based indices if the first set of products gain traction, Raste said. Weather derivatives, unlike traditional agri-futures, are expected to attract a wider set of participants beyond farmers, including fast moving consumer goods companies and other businesses whose demand is sensitive to monsoon outcomes, he said.

 

Raste said the collaboration with the weather bureau will allow it to develop derivatives based on robust and credible datasets, addressing long-standing concerns around reliability of weather indices. Earlier, private forecaster Skymet had provided data for the Indian Rain Index and Indian Monsoon Index, but these indices were not updated after that arrangement ended.

 

"This strategic alliance lays the critical groundwork for the launch of India's first weather derivatives--a long-anticipated market instrument designed to help farmers and allied sectors hedge against climate-related risks such as erratic rainfall, heatwaves, and unseasonal weather events," the exchange had earlier said in a release when it signed the Memorandum of Understanding with the weather bureau in July.

 

Mrutyunjay Mohapatra, director general of Meteorology at IMD, had then said the collaboration would extend the use of scientific weather data into financial markets. "Through this collaboration with NCDEX, we are extending our scientific capabilities into the financial domain, allowing weather data to become a powerful instrument of economic stability and market innovation," he had said.

 

Raste said NCDEX's engagement with IMD and IIT Bombay was aimed at ensuring that weather derivatives are grounded in sound science rather than speculation. "When you have 50–100 years of rainfall data and expert institutions working on the models, you can juxtapose historical patterns with current realities more realistically," he said.

 

If approved by the regulator, the weather derivatives could be launched before the 2026 monsoon, positioning NCDEX as the first Indian exchange to offer such products as part of its broader push to expand beyond traditional agri-commodity contracts.  End

 

Edited by Vandana Hingorani

 

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