Satellite Remote Sensing For Farm Monitoring
There are no safe businesses, without sounding too philosophical, it’s an inadvertent truth that there is no guarantee in life. Every business has pros and cons in varying degrees of confidence and pragmatism lies in saving for the rainy day quite literally when it comes to agriculture.
Every aspect of life was badly hit in the Kerala floods of 2018 with just the primary damage estimated at Rs 20,000 crore by the authorities. The actual loss is not even estimable and the cascading effects like soil erosion will probably be known only a decade later.
Agriculture losses crossed Rs 1356 crore and crippled the state’s agriculture production, especially of rice for at least a year. With crop loss being the first level of damage, the rippling effects on the other business in the agricultural sector are incomputable.
Satellite Remote Sensing in Agriculture — Not a Distant Dream
As extreme weather becomes more frequent causing several uncertainties, there isn’t much one can do about that, but one can provide for the storm on the horizon.
There are several new and sophisticated techniques of mitigating the risks and forecasting crop yields that can help banks in safe recovery of their funds and in provisioning for bad debts alike.
One of these is remote sensing, where typically satellites are used to help make early predictions of yield across a range of crops. Remotely sensed imagery presents a cumulative picture of weather, climate data and cropping frequency and successful or otherwise report of farming.
Satellite imagery enables direct crop monitoring on a continuous basis over areas the size of villages, districts and states.
Droughts, floods, hurricanes and storms, and all such natural phenomena affect a wide range of environmental factors and all activities related to agriculture, vegetation, human and wild life, debilitating local economies and thereby national economy.
These phenomena impact not just the farmers but several other related industries like suppliers, traders, and tertiary industries.
The risk mitigation lies not only in predicting the bad weather conditions and providing for shelters, warehouses and transportation and essentially being prepared for the worst but also in prevention through early warning systems, monitoring and preparation of contingency; and ensuring that mitigation activities are proactively planned and executed with near accurate damage assessment and generous relief management.
Remote sensing techniques make it possible to obtain and distribute information rapidly over large areas by means of satellite sensors.
Loan Waivers — Disillusion For the Economy
Besides natural phenomena disrupting the loan repayment capacity, several other factors affect bad debts in agricultural loans; Livelihood expenses and lack of exposure to sound management techniques are some of the factors that can influence the repayment capacity of farmers, inadequacy of collateral security, misunderstood terms and schedules of repayment, lack of follow up measures are some manageable and reducible forms of defaults.
Moreover, expectation of loan waiver is the new emerging infestation that is plaguing the agricultural industry in India. Repeated loan waivers have slackened many a farmer’s desire and will to repay loan.
This added pressure on financial institutes, already struggling with corporate bad debts disaster, is a vicious cycle with banks shirking from granting loans and farmers running to the non-institutional lenders and falling into the trap of larger debts.
In light of ex-RBI Governor, Raghuram Rajan’s advise against farm loan waivers, several bankers confirmed that there was a rising trend amongst farmers refusing to clear dues estimating the default rate to as high as 50% in some states last year post the announcement of loan waivers in 2018.
“Does it reach farmers who actually need it?” was a very well made argument by Raghuram Rajan.
Also, loan waivers are usually selective; only certain loan types, categories of farmers or loan sources experience the benefit. Bad crop or weather may not be the only evils cursing the farmer and a blanket waiver might not answer the root causes such as fragmented land holding, depleting water table levels, deteriorating soil quality, rising input costs, low productivity.
With loan waivers, we are overriding these causes that need to be addressed. Unwarranted evasion of loan payment can thus be called out by continuous monitoring of crop and any early signs that can be remediated in time.
Loan waivers are also said to ‘entail a moral hazard — even those who can afford to pay may not, in the expectation of a waiver, as such corrodes credit discipline.’
Just recently a lot of media reports commented on the RBI’s recent priority sector lending (PSL) norms for foreign banks in India.
As per the policy, from fiscal year 2018–19, foreign banks with more than 20 branches in India will have to allocate a portion of their loans to small and marginal farmers as well as micro-enterprises.
However, foreign banks have expressed their reluctance on the matter citing reasons of unfamiliarity with the sector and stressed assets apprehension.
Remote Farm Monitoring — Necessitated by Ever-Changing Financial Policies
The impact of priority sector loan targets on banks’ credit risk management strategies in India has been commented upon by the International Monetary Fund (IMF).
And though the International Monetary Fund (IMF) also expressed their skepticism over this added role of the public sector in the financial system and advised the RBI to review its PSL policy to allow for greater flexibility, bank debts will be at increased risk necessitating banks assess and evaluate each application they receive more diligently than before.
With their rudimentary appraisal mechanism of foot soldiers visiting the farms and homes, the process is highly labour extensive and physically exhausting with all the manual interventions and costs associated with it.
Needlessly so, if you can appreciate the FarmGuide’s farm monitoring techniques that can produce historical information of the geo-controlled farms that provide all data of cropping frequency and past cultivation and soil quality.
These could be data gems enabling bankers’ assessment farm quality and farmers credibility in case of crop failure for all the sundry reasons.
The previous comatose silence between loan disbursement and final repayment stage where the farmer could debunk or repay is further a sword hanging on the banker’s neck.
It needn’t be so, a continuous supervision and account of the farm at regular intervals ensures early warning in case of a default making recovery assessment easy.
