Electricity futures to remain tool for hedging: Sebi chief

As the Indian markets open up for electricity derivatives, Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India (Sebi), on Friday said that the regulator has taken steps to ensure that these contracts remain a tool for hedging rather than undue speculation.

- KHUSHBOO TIWARI

Speaking at the launch of electricity monthly futures at the National Stock Exchange (NSE) in Mumbai, the Sebi chairman highlighted that safeguards have been put in place to ensure that electricity derivatives remain true to their intended purpose. Electricity futures are financial contracts that allow participants to lock in the price of electricity for a specified future month without involving any physical power delivery.

"Electricity has been categorized as a high-volatile commodity, thereby attracting a high initial margin requirement. This will discourage undue speculative activity. Additional margins may be imposed in times of heightened volatility," said Pandey.