The National Commodity & Derivatives Exchange Limited (NCDEX) signed a Memorandum of Understanding (MoU) with the India Meteorological Department (IMD). The collaboration aims to launch India’s first weather derivatives to help farmers and allied sectors hedge against climate-related risks like erratic rainfall, heatwaves, and unseasonal weather events.
Key Objectives of the MoU:
- Develop rainfall-based derivative products and other weather-related market instruments.
- Use historical and real-time datasets provided by IMD for building accurate, location-specific contracts.
- Support seasonal and geography-specific derivative contracts for sectors such as:
- Agriculture
- Transportation
- Allied Industries
- Conduct capacity-building, joint research, and training programmes for stakeholders including:
- FPOs
- Agri-traders
- Policy think tanks
- Analysts
About Weather Derivatives:
- Weather Derivatives are financial instruments that help hedge against losses arising from adverse weather conditions.
- These products will be:
- Statistically accurate
- Based on IMD’s quality-verified datasets
- Useful for risk management in weather-sensitive sectors.
Significance of the MoU:
- Enables the development of a first-of-its-kind market tool for climate risk management in India.
- Promotes climate-resilient agriculture and inclusive financial protection for farmers and weather-dependent industries.
- Aligns with India’s goal of improving weather-based financial instruments and agri-risk mitigation infrastructure.
About NCDEX:
- Incorporated: 23 April 2003 | Commenced Operations: 15 December 2003
- Regulated by SEBI under the Securities Contracts (Regulation) Act, 1956.
- India’s largest agricultural derivatives exchange.
- Offers:
- Commodity futures
- Options in goods
- Index futures
- First Indian exchange to operate from a Tier-IV Uptime-certified data centre.
- Offers clearing & settlement, repository services, and e-auction platform through its group companies.
- Core mission: Price discovery, risk management, and connecting farmers to markets for inclusive agrarian growth.
About India Meteorological Department (IMD):
- Established: 1875
- Mandate Includes:
- Collecting meteorological data and providing real-time weather forecasts.
- Issuing early warnings for:
- Cyclones
- Dust storms
- Heatwaves & cold waves
- Heavy rain and snow
- Providing weather-related statistics for agriculture, irrigation, aviation, and other sectors.