NCDEX Unveils First Weather Derivative on Mumbai Monsoon, What Do You Need to Know?

According to the agricultural commodity exchange, the goal of the product is to bring monsoon variability from an unpredictable threat into a quantifiable, manageable, and tradable risk within a regulated environment.

In order to give farmers and companies a regulated instrument to protect against monsoon volatility, the National Commodity and Derivatives Exchange (NCDEX) announced on Wednesday that it will introduce the nation’s first exchange traded weather derivatives contract on May 29, according to PTI.

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The Indian Institute of Technology Bombay (IIT Bombay) and the India Meteorological Department (IMD) collaborated to create the RAINMUMBAI contract, which has been approved by the Securities and Exchange Board of India (SEBI) and makes use of rainfall data from the IMD.

“For centuries, India has dealt with the unpredictability of the monsoon. RAINMUMBAI provides a regulated, scientific instrument for all parties to manage this uncertainty,” NCDEX Managing Director and CEO Arun Raste stated in a statement, PTI adds further.

NCDEX claims that RAINMUMBAI was developed for a wide range of stakeholders, such as farmers, construction firms, power utilities, banks with agricultural loan portfolios and logistics providers. According to the exchange, the product has a risk management function that complements conventional systems like insurance and government aid programs.