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The Sunshine industry

Global warming and erratic weather have made forecasting an important business. In such a climate, private weather companies are making merry, sending out instant alerts to farmers through SMS and voice mail. Aditya Ghosh elaborates.

india Updated: Mar 28, 2009 23:06 IST
Aditya Ghosh

Anandrao Naikwadi (45) hates automated SMSes, but there’s one he desperately looks forward to — an automated forecast from a private weather station in the vicinity. One such message, warning him of a prolonged hot, dry spell saved 30 per cent of his potato crop last year. And that of his fellow farmers in Kher tehsil in Pune with whom Naikwadi shared the information.

A few hundred kilometres up north in Nasik, J.M. Khilare was not so lucky. His area did not have a weather station to send him an SMS alerting him to excess rains in the next few days, and he lost his entire grape crop. Since then he has been trying desperately to find a company to install a station to warn him of the vagaries of weather that have become the bane of rural India.

Uncertain weather has played havoc with agriculture in recent years. A long heat spell led to a new pest which destroyed 70 per cent of the potato crop in Maharashtra this year. Untimely rain destroyed coffee plantations in Karnataka in 2007 and 2008. In 2007, the paddy crop in Haryana was wiped out after erratic weather led to the surfacing of the brown plant hopper pest after 24 years.

Since 2006, two weather risk insurance companies, the government-run Agriculture Insurance Company (AIC) and ICICI Lombard, have stepped in to the insure farmers from the vagaries of the weather. In the two years they have been around, 12.77 lakh farmers have sought weather risk insurance by paying a cumulative premium of Rs 247 crore and received around Rs 132.2 crore in compensation.

“The weather has become extremely erratic, and it is showing in our balance sheet,” says M. Parshad, chairman, AIC. “But we have to cover more and more crops, because without the insurance, farmers will have a tough time.” “Though we are bullish on this insurance product, we have not made any money in the past two years. It has all been payouts,” says Pranav Prashad, head, rural and agriculture business group, ICICI Lombard.

This is not how it was meant to be. “We developed a weather-based index because yield-based indices for crops invariably involved a delay of six months in payouts,” says K.N. Rao, deputy general manager, AIC, who handles weather insurance. Now the Central and state government subsidise the sum insured, meeting the gap between actual premium and sum assured. In
2007-08, the total sum assured by AIC was Rs 1,700 crore, for a premium of Rs 138 crore paid by farmers. The difference was paid by the government.

This model was recently studied and commended by a team from the International Fund for Agricultural Development, a UN body. “Commercialisation is inevitable and is not hurting the farmers, with the government subsidy for insurance premiums,” says Jamie Anderson, one of the team members.

Network problems
The country’s outdated weather network poses additional problems to insurer and farmers alike. While unavailability of historic data escalates premiums, the poor network of weather stations often hinders compensation as experience on the
ground and data at the central weather station a few hundred kilometres away do not match.

With only 650 or so stations, the Indian Metereological Department (IMD), is ill equipped to predict or record such erratic weather patterns. “We need at least 6,000 automated weather stations, one for every block and perhaps more, and 25,000 automated rain gauges to have any representative data about weather, develop our insurance schemes better and help farmers get compensation,” says Parshad.

In 2007-08, the Centre sanctioned a modernisation plan of Rs 950 crore, under which 550 weather stations, 55 Doppler radars
and 3,600 rain gauges will be installed across the country. But even that will not be enough, say met department top brass. “Regional changes are so palpable that every district needs at least four stations, which means a total of around 25,000 stations. One automated weather station costs Rs 1.5 lakh; then there’s maintenance, which is substantial. It can only be done in a phased manner. We also need to find a faster medium to communicate forecasts since newspapers are 12-16 hours late,” says R.V. Sharma, deputy director, western region, IMD.

Private weather stations have successfully filled this gap. There are 1,200 private weather stations across the country today; 600 more are expected to come up by July this year, set up almost entirely on the insistence of insurance companies who pay a hefty fee to access the data recorded by them. For example, in Pune district, insurance companies have set up four weather stations in strategic locations so that the distance between each is no more than 20 km.

Private privileges
Despite this, the IMD remains the primary authority in the area of weather forecast — data from private weather stations needs to be calibrated and certified by the IMD to be accepted. The IMD also boasts of historical data, although the utility of such data is diminishing. The IMD scores in one other regard — cost. For an insurance company, an annual contract with a private station would cost 10-15 times what the IMD charges.

Private players, on the other hand, are far better where services are concerned. Farmers are no longer forced to crowd in front of television sets for weather bulletins or depend on newspapers. Text messages are delivered to mobile phones within a radius of 20 square kilometres by an automated system connected to a computer network. This network is linked directly to satellite, which in turn gets the data from the weather station.

Services are getting further customised, with companies evolving competitive strategies. Recent plans include automated
voice calls and SMSes in local languages. “We have developed a web-based crop monitoring and forecasting module for specific crops. Also, we work with ground-level NGOs, cooperatives and extension service providers to disseminate information to farmers personally or through a newsboard at the block-centres,” says Anuj Kumbhat, chief executive of Weather Risk Management Services which offers technical support to weather insurers.

Now you also have advanced weather stations being imported which can record wind speed and direction, leaf wetness, soil moisture and sunshine hours. “These parameters have become increasingly important, particularly for high-value crops,” says Kumbhat.

The weather business can only grow in the climate of uncertainty, say experts and companies investing in private weather stations. “Apart from farmers, tourism, transport and construction companies are showing interest in buying data. We have about 60 automated weather stations ready for installation,” says Srinivas Rao, vice-president, National Collateral Management Services Ltd, a private sector company with the largest network of 422 weather stations in the country.

The network of weather stations will become wider as the weather becomes more unpredictable. “We are looking at 600 million farmers in the country, 60 per cent of whom are rain-fed,” says Kumbhat, adding, “The coverage of farmers has just started. And every small or marginal farmers can be included.”

For Ramesh Pawde, who owns an acre of land in Pune district, the insurance has become essential. “I cannot afford to suffer due to such frantic climate changes, I cannot predict anything anymore. I have to depend on the SMS that Anandrao gets. Because I do not have a mobile,” he said.