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

The National Commodity and Derivatives Exchange Ltd (NCDEX) announced on Thursday that it has signed an agreement with the India Meteorological Department (IMD) to establish the foundation for launching India's first weather derivatives.

This Memorandum of Understanding (MoU), signed on June 26, aims to create a long-awaited market instrument designed to help farmers and related sectors hedge against climate-related risks, such as unpredictable rainfall, heatwaves, and unusual weather conditions, according to a statement from NCDEX.

Through this partnership, NCDEX will develop a rainfall-based derivative product, among others, utilizing historical and real-time data sourced from the IMD.

NCDEX Managing Director and CEO Arun Raste informed PTI, "While our goal is to launch this product soon to benefit stakeholders, we will need time to develop it, considering the southwest and eastern monsoon cycles. We must also test our hypothesis before submitting it for regulatory approval. Therefore, it is challenging to provide a specific timeline at this point."

The weather products developed under this collaboration will enable seasonal and location-specific derivative contracts, enhancing expertise on weather-related risks across agriculture, transportation, and related industries.

"This partnership with the IMD marks the beginning of a new era in commodity markets. Weather derivatives have long been essential for creating a climate-resilient rural economy. As climate volatility increasingly impacts the productivity and income of farmers, these instruments offer a market-based solution to weather risks," Raste stated.

The collaboration will also support capacity building, joint research, and training programs for stakeholders, including farmer-producer organizations (FPOs), agricultural traders, policy think tanks, and analysts.

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