New Delhi, July 2, 2025 : Starting July 14, the National Stock Exchange (NSE) will begin trading electricity futures in India, a move set to transform how power is bought and sold in the country. The aim is to help power companies, distributors, and large industrial consumers lock in electricity prices ahead of time, protecting them from unexpected price increases.

Electricity futures are contracts where buyers and sellers agree today on the price of electricity to be delivered in the future. Until now, most power deals in India were either long-term contracts or short-term purchases through spot markets. Futures give companies more flexibility by allowing them to plan and manage costs more effectively.

This launch comes at a crucial time. Many state electricity distribution companies (discoms) are struggling financially, with unpaid bills running into thousands of crores. These futures contracts will help discoms reduce their financial risks by letting them fix prices in advance, instead of being caught off guard by sudden spikes in the spot market.

Each electricity futures contract on NSE will cover 50 megawatt-hours (MWh) of power. The contracts will be settled in cash, meaning no physical delivery of electricity will take place. Prices will be based on the average electricity rates seen in real-time markets. NSE will initially offer contracts for the current month and the next three months.

To boost trading, NSE will not charge any transaction fees for the first six months. It has also introduced a liquidity scheme to encourage brokers and traders to participate. Selected participants, known as market makers, will receive financial incentives to ensure there is enough buying and selling activity in the early days of trading.

This step is part of a broader push by the government and regulators to modernize India's electricity market. The Securities and Exchange Board of India (SEBI) recently allowed both NSE and another exchange, MCX, to start electricity futures trading. This is expected to bring more transparency and stability to the power market.

Experts believe this is good news for power companies, renewable energy developers, and even investors. By locking in future prices, they can reduce the uncertainty in their revenue and spending plans. Over time, the exchange may introduce longer-term contracts and other financial tools to make the market even more flexible.

Globally, electricity futures are already used in countries like the U.S., Europe, and Australia to help manage power price risks. Now, with this launch in India, the NSE hopes to offer the same benefits to Indian companies and strengthen the energy sector overall.

As the July 14 launch date approaches, the spotlight will be on how quickly these contracts gain popularity and whether they can truly help fix some of the financial problems faced by the power sector. If successful, electricity futures could play a key role in India’s path to a cleaner and more reliable energy future.