As per today’s ET edition (Sep 23, 2022), Niti Aayog is working on draft recommendations for introduction of water futures in India among others. Water futures, part of commodity derivatives, helps water users such as agriculturists, governments, water intensive sector players etc. in water price discovery and hedging price risk arising from climate change.
Btw, Water futures started in USA in Dec 2020 – NQH2O futures trading on CME (though illiquid with scarce trading volume*). Though there are counter arguments there to ban these water futures**.
NQH2O futures are cash settled contracts (i.e. no physical settlement of water) based on the Nasdaq Veles California Water Index which tracks the spot prices (VWAP) of water rights transactions (leases and sales) across the five largest and most actively traded regions in the state of California. One NQH20 futures contract size is 10 acre foot. One can trade futures up to 2 years (i.e. 8 consecutive quarterly contracts)
The index is calculated once a week (every Wednesday based on prior week transaction prices) and priced in U.S. Dollar per Acre Foot ($/AF). An acre foot is the volume of water required to cover one acre of land (43,560 square feet) to a depth of one foot, which is equivalent to 325,851 gallons. The current YTD change in index is +70%, reflecting ongoing drought in the golden state.
* Why is Water Illiquid? – The NQH2O Water Index Futures
** Bill to ban trading in water futures and Petition to CFTC