26-05-2025
- Business
- Business Recorder
Climate hits the pivot — the way forward in agri risk management
The devastating storms that wreaked havoc across Punjab on May 24, 2025 are a blunt reminder of our agriculture sector's vulnerability in the wake of intensifying climate crises. The extensive damage to crops, high-value irrigation systems, and power supply infrastructure highlights the pressing need for a concerted effort towards building a robust agricultural risk management framework.
This disaster was not a standalone event, as it is linked to a systemic worsening of the national climate in recent years. 2022 saw calamitous floods that inundated vast belts of Punjab's agricultural land, while the 2024 heatwave severely impaired seedling emergence across a range of vulnerable Kharif crops, including sesame, which holds rising potential for export to China.
These recurring weather hazards have exposed the fragility of our preparedness to anticipate and effectively cope with adversity. One fundamental gap lies in the absence of a comprehensive, transparent, and technology-enabled insurance framework, which is customized to overcome the climate vulnerabilities of our agricultural sector.
Seeking interventions for structured risk management reforms has become increasingly crucial with the evolution of industrial agriculture that the country has seen over the last half a decade. These corporate farms, with valiant investments in technology and scale, bear an excessively high exposure to potential climate-related losses, which requires urgent attention to sustain investment momentum in this emerging sector.
One tested solution lies in replicating cutting-edge insurance systems that have successfully worked in the west. These systems are privately owned but rigorously overseen and subsidized by the government to ensure uptake, transparency, and efficient processing of claims.
The US government's Federal Crop Insurance Programme (FICP) is a working demonstration of a delivery model that augments the perks of private sector efficiency with government sponsorship and oversight. FCIP leverages a network of actively regulated private insurance companies authorized by the United States Department of Agriculture's Risk Management Agency.
The programme offers a range of insurance products, which include coverage against multiple perils, including crop losses due to bad weather. There are separate policies, other than the ones offered under FCIP, which offer comprehensive insurance against damage to farm property, infrastructure, and irrigation systems. The government often subsidizes on average up to 60% premiums which has encouraged widespread uptake and resulted in significant loss mitigation. Use of satellite-based remote-sensing analytics combined with extensive in-situ weather monitoring has enabled insurance providers to minimize delays and disputes, and reinforce participation.
Likewise, the Australian government supports a private sector-led drought insurance programme, which uses undisputed weather indices instead of traditional actuarial frameworks, to determine payments or regulate disbursements.
This allows the farmers to quickly reinvest and bounce back from climate shocks. Similar to the US model, this programme also involves use of multiple-source sensor data to enable quick and transparent claim processing. In other words, according to the Department of Primary Industries and Regions, the Australian government's support includes programmes that offer funding and resources to help with drought preparedness and resilience.
Furthermore, to act as a unified voice for successful risk mitigation, the industrial agriculture companies should organize into a dedicated association or a collaborative platform. This would enable coordinated interactions with authorities and other stakeholders to advocate and undertake pressing risk management reforms. Such an outlet would also ensure that the evolving needs of these large-scale farms are adequately represented and the risks arising from their scale and process complexity are hedged.
This writer's own losses in the May 24 storm which include damage to center pivot system, farm power supply infrastructure, and standing crops are an agonizing testament to the dangers of climate risks, which have led to setbacks with lasting financial consequences.
The recent devastation in Punjab emphasizes the criticality and urgency of these and other measures, which are aimed at integrating resilience and protecting crops, machinery, infrastructure, and human life from the recurring climate offensive.
Development of a comprehensive and transparent risk management framework, enabled by proactive and generous government backing, reorientation of private insurers toward adoption of fact-finding technology, and a unified industry voice, is indispensable to the sustainability and modernization of our agricultural ecosystem.
(The writer is the CEO and Founder of an industrial agriculture company, which specializes in technology-driven desert agriculture on a corporate scale)
Copyright Business Recorder, 2025
