NCDEX, IMD ink pact to launch India's first weather derivatives

The National Commodity and Derivatives Exchange Ltd (NCDEX) on Thursday said it has inked an agreement with the India Meteorological Department (IMD) that will lay critical groundwork for launching India's first weather derivatives.

This Memorandum of Understanding (MoU), signed on June 26, 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, NCDEX said in a statement.

With this partnership, NCDEX will develop a rainfall-based derivative product, among others, using historical and real-time datasets sourced from IMD.


"While our endeavour is to launch it early so that stakeholders benefit. We will need time for developing a product considering southwest and eastern monsoon cycles and then test our hypothesis before we submit it for regulatory approval and it is difficult to give any concrete timeframe at this juncture," NCDEX Managing Director and CEO Arun Raste told PTI.

The weather product to be developed under this collaboration will enable seasonal and location-specific derivative contracts and will advance expertise on weather-related risks across agriculture, transportation, and allied industries.

"This partnership with IMD opens the door to a new era in commodity markets. Weather derivatives have long been a foundational need towards building a climate-resilient rural economy. With climate volatility increasingly affecting productivity and income of farmers, these instruments provide a market-based solution to weather risk," Raste said.

The collaboration will support capacity-building, joint research, and training programmes for stakeholders, including FPOs, agri-traders, policy think tanks, and analysts.

"IMD has always played a vital role in supporting agriculture and disaster resilience. Through this collaboration with NCDEX, we are now extending our scientific capabilities into the financial domain, allowing weather data to become a powerful instrument of economic stability and market innovation," IMD Director General of Meteorology Mrutyunjay Mohapatra said.