Weather futures at NCDEX on anvil

It requires a lot of processes. Besides, we will need approvals from bodies like SEBI, so it may be difficult to specify a timeline for the rollout - Arun Raste, MD & CEO, NCDEX, tells Bizz Buzz

Enhanced List

• Govt on March 1 included weather, cement for derivatives
• Expanded list of derivatives now has 104 items
• These include commodities related to farming and dairying such as garlic, apple, etc

Srinagar: The National Commodity and Derivatives Exchange (NCDEX), a leading commodity exchange, is working on a weather futures index, which will soon be unrolled.

“It requires a lot of processes. Besides, we will need approvals from bodies like Securities & Exchange Board of India, so it may be difficult to specify a timeline for the rollout,” said Arun Raste, Managing director & CEO, NCDEX.

It may be mentioned here that the central government on March 1 included weather, cement, and skimmed milk powder in the list of entities permitted for derivatives.

For a country where half the population is dependent on agriculture, the weather futures would be a big boon, Raste said. He was talking to Bizz Buzz on the sidelines of a national conference on horticulture in Srinagar, which was organized by the Confederation of NGOs for Rural India (CNRI), the World Cooperation Economic Forum, the Sher-e-Kashmir University of Agricultural Sciences and Technology of Kashmir, and the ICAR- Central Institute of Temperate Horticulture.

“Weather derivatives are risk management tools against inclement weather conditions that enable companies, involved in any product dependent on weather, to manage the impact of unfavorable weather conditions on their businesses,” Raste said. The businesses and livelihoods of the people involved in farm inputs, farm equipment, food trade, and of course farmers.

Farmers can use weather derivatives to hedge against poor harvests caused by failing rains during the growing period, excessive rain during harvesting, high winds in case of plantations, or temperature changes in case of greenhouse crops, he said.

While businesses may have property-casualty insurance policies to cover physical damage caused by relatively rare weather-related events, such as a windstorm or hail, these insurance policies will not cover economic losses if customers aren’t able to show up due to heavy rain, or if crops fail to thrive in hot weather, says Investopedia.com.

The expanded list of derivatives now has 104 items. These include such commodities related to farming and dairying as garlic, apple, processed products of bamboo, processed products of timber, skimmed milk powder, white butter, and cashew.