New Delhi: Anyone who can accurately predict the weather stands to make a lot of money. A graduate of the Indian Institute of Technology, Kanpur, Sonu Aggarwal, and his colleague, Anuj Kumbatt—the duo met at ICICI Lombard, where they were working at the time—think they can.
The company, Weather Risk Management Services (WRMS), is working on a model that won’t just help farmers by telling them what weather lies in store, but also companies in businesses such as food processing, insurance or commodities trading.
The latter can use any model that accurately predicts weather to make better decisions, while trading in weather derivatives—financial instruments such as futures and options that are usually used to mitigate risks of crop failure—which, given the fact that India has just banned derivatives trading in rice and wheat, could still be some time coming.
WRMS, now three years old, has set up weather sensors, the eyes and ears of its trade, in Uttar Pradesh; information from these are fed to Internet-enabled kiosks run by ITC Ltd. Some 2,500 farmers use this information.
Now, WRMS has been funded, in part by the Ford Foundation, to install more weather sensors in Rajasthan, Maharashtra, Andhra Pradesh and Chhattisgarh. “We chose these states to have a wide range of climatic conditions to test how efficiently the sensors work,” said Kumbatt.
By the end of this year, these sensors—200 of them—and part of a pilot project to test both sensors and the company’s software, will be in place.
Ajit Kanitkar, a programme officer at Ford Foundation, said he was convinced that the project would help farmers. “That’s the reason we are helping them,” he added.
The sensors (or agro-sensors, as they are called) are rectangular boxes mounted on poles; each box has electronic measurement devices, essentially circuits comprising chips and sensors, that record six parameters: temperature, humidity, soil temperature, hours of sunlight, the dew point and rainfall.
Weather sensors form the basis of all weather measurement systems. WRMS’ sensors cost Rs40,000 each, half that of India Meteorological Department’s automatic weather sensors. “Our strength lies in being able to use cheaper—yet effective—materials,” said Kumbatt, “and we have applied for an Indian patent on the technology we are using.”
Data from the sensors is collected through satellite and crunched by an algorithm developed by Kumbatt and Aggarwal.
The output of this algorithm is the input for the decision support system (DSS) that the duo has rigged up. DSS is the part that really matters to farmers, food-processing companies, insurance firms and traders in weather derivatives.
By logging into the company’s website, farmers can not just receive detailed weather forecasts, but also estimates of sowing success.
“With this (information), the farmer can know how much of wheat to sow, or what are the risks of sowing, say maize, given certain weather conditions,” said Kumbatt. WRMS will have to sell its model to insurance firms in India that are not great fans of climate models; they prefer models that address individual farmers.
Frito Lays, part of PepsiCo, and a potato-chip manufacturer, has a weather insurance scheme for potato farmers in Maharashtra. “We have our own method of assessing risk, and this assessment is based on data from local weather stations, and farmers’ experiences with weather variation,” said Samir Nagrani, the company’s operations manager.
He clarified that Frito Lays did not depend on climate models.
Climate models usually gave district-specific data. However there’s a lot of weather variation within districts “and (this) leads to crucial difference in weather estimates,” said L. Krishnakumar, a climatologist at the Indian Institute of Science, Bangalore. There are some weather predicting models in use that are used by general insurers who provide weather insurance to farmers.
ICICI Lombard, which pioneered weather insurance in India has an in-house model. “Ours is an index-based insurance,” said Pranav Prashad, head, rural and agri business at ICICI Lombard. The insurer’s index is based on 30-year rainfall data and complemented by farmer surveys.
When rainfall patterns deviate from the index, the firm pays out claims to farmers who have been affected either by drought or floods.
ICICI Lombard sells its insurance package in nine states covering 14 crops. Iffco-Tokio General Insurance, another general insurer, also sells weather insurance.
Meanwhile, a risk-management firm, RMSI, has recently launched an India Earthquake Model to measure seismic risk. “On the basis of our model, we can give estimates on the risk-worthiness of a plot of land or a building in India,” said director of RMSI Roger Arnemann.
Reinsurers across the world, said Arnemann, base their estimates on climate models, rather than localized weather estimates. With risk-management techniques becoming more sophisticated, and the financial stakes becoming higher, WRMS’ weather forecasting model may yet find takers.