India

India is undergoing vast and rapid urbanisation, with the country’s urban population set to account for 75 percent of India’s GDP by 2020. The importance of India’s urban centres and the need for adequate security to ensure the benefits of urbanisation are safely realised is underlined further by the Modi administration’s Smart Cities initiative. However, the impacts of climate change – in India and regionally – make this challenging, while the process of urbanisation is increasing vulnerability for people and businesses to extreme weather events. Key Observations  According to a recent assessment by the United Nations’ Global Environmental Outlook (GEO-6), an estimated 1.02 billion people – 82 percent of the population – are exposed to environmental hazards.  Coastal and rural communities are most exposed to the impact of environmental hazards, though urban areas are at increasing risk, where negligent building standards and substandard planning compound the hazards posed to personnel.  While the Indian government has introduced numerous positive measures to boost urban resilience, deepening climate change is set to present a serious challenge to growth and development.  Businesses operating in India need to bolster resilience to operational and physical risks to ensure business continuity. There is need not only for preparedness, but a requirement to forecast in order to understand how the many forces developing India’s economic future interact with other prevalent trends, including migration, energy and food security. Mitigation measures are fourfold; gauging exposure, building resilience and ensuring continuity, responding and recovering.

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According to figures published by the World Bank in 2015, annual flooding across India is anticipated to become 30 percent more severe in magnitude by 2030. Every region across India is expected to experience greater rainfall in the next 15 years, with each region prone to between 5-10 more days of “extreme precipitation” annually. Moreover, heightened drought conditions brought about primarily as a result of temperature increases in the coming years pose a serious threat to crop yields, dams and other infrastructure.

Figure 1. Geographical spread of areas prone to natural hazards (drought, flooding, earthquakes, cyclones) in India (Source: Maps of India, 2016)

Natural hazards have had both an extensive human and economic cost across South Asia per year (see Fig. 2). According to data compiled by the Centre for Research on the Epidemiology of Disaster (CRED), more than 1,000 people died by flooding and attendant hazards, such as landslides, in India in 2015, notwithstanding the thousands killed by flood-related diseases. While there is no evidence of a growing trend in year-on-year flood deaths, such fatalities are highly likely to persist. Flooding compounds the risks posed by poor levels of sanitation. Water-borne diseases, including cholera, gastroenteritis, and diarrhoea – many of which are communicated via floodwaters – kill some 1,600 people a day. The figures are similar in other South Asian countries, including Pakistan, where 40 percent of all annual deaths are attributed to waterborne disease. At the other extreme, drought, especially in recent years, is associated with approximately 2,500 deaths per year. While the number of deaths associated with drought and extreme heat is markedly lower than that of flooding, figures published by the government indicate that drought has caused more than 20,000 deaths in India since 1992, with deaths broadly increasing in recent years. Pacific Islands

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Figure 2. Impacts of natural hazards in Pacific Islands, South-east Asia, South Asia, North-east Asia, Australia and New Zealand in 2015 (Source: Centre for Research on the Epidemiology of Disasters, 2015)

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Both hazards also have a major financial impact. According to the UN Office for Disaster Risk Reduction (UNISDR), the cumulative costs of natural disasters in 2015 were estimated to be USD 9.6 billion, notwithstanding consequential losses, with flooding accounting for USD 7 billion worth of losses. With UNISDR anticipating an intensification of natural hazards in 2016-7 owing to escalating climate change, the attendant financial impact of natural disasters, not least the human toll, is set to increase exponentially.

Smart Cities initiative draws resilience concerns The Modi administration’s Smart Cities and Make in India initiatives will lead to the expansion of urban areas countrywide, leaving greater numbers of people and organisations vulnerable to environmental hazards. As the April 2015 Nepal earthquake demonstrated, environmental hazards are acutely felt in large cities, where densely populated and poorly constructed high rise residences bear the brunt of the damage. Accordingly, with growing urbanisation comes increasing risk. As part of a plan to accommodate the growing urban population, boost the economy and attract foreign investment, the Ministry of Urban Development intends to create 98 Smart Cities across India. While there is no universally accepted definition of a Smart City, the government notes that each will contain core infrastructural elements including assured water and electricity supplies, universal access to sanitation and affordable housing, efficient urban mobility and transport links, environmental sustainability, IT connectivity, access to health and education, as well as good governance and security. At face value, the Smart Cities initiative will likely pique the interests of foreign investors. Multiple business opportunities abound for foreign companies, notably in providing the proposed cities with amenities, including energy, telecommunications and wireless technologies, required to fulfil the Smart City specification. Indeed, Germany, the US, Spain and Singapore have already signed contracts with the Indian government to provide construction investment. The Smart City initiative also intends to better link India’s industrial centres, allowing for greater connectivity and ease of business. However, more than 20 of the Smart Cities are located in environmentally high-risk areas. For example, prospective Smart City Dholera, which is twice the size of Mumbai, is set to expand into a flood zone and will likely dispossess the area’s numerous smallscale subsistence and landless farmers. In building on farmland, the initiative will likely foment disquiet among agricultural workers, who have already held several protests in the area in recent months. Another three of India’s major cities, Gurgaon, Bengaluru and Mumbai, each of which has been seen heavy investment and urbanisation in recent years have already shown themselves acutely susceptible to environmental hazards. Summer monsoon rains in 2016 have caused widespread flooding and severe traffic congestion across all of the cities, despite the circulation of flood control plan by local government officials. In Gurgaon, flooding prompted traffic delays in excess of 20 hours, with many commuters forced to sleep in their cars or abandon their vehicles entirely. In light of the environmental risk and magnitude of resources needed to construct a Smart City, the Indian government would be well placed to assess environmental vulnerability, identify risks to critical infrastructure and develop early warning systems and ensure that robust institutions, especially in risk financing, are in place before embarking on major construction ventures.

Flooding

Figure 3. Map of the combined drainage basins of the Brahmaputra (violet), Ganges (orange), and Meghna (green) (Source: Creative Commons, 2015)

Approximately 400,000 of India’s 3.2 million sq km is at risk of flooding, which typically occurs during annual monsoon season between July and September. Some 75 percent of annual rainfall is concentrated during this period. A significant number of major floods are caused by water overflow in the Ganges-Brahmaputra-Meghna transboundary river basin, which carries around 60 percent of the country’s river water discharge (see Fig. 3). Other areas of high-risk include the Himalayan, North-western, Central and Peninsular river basins. Excessive monsoon rains have been the primary cause of severe flooding in recent years, however, a number of naturally-occurring factors, including silt deposits, cyclones, deforestation and tendency of rivers to meander over time, serve to exacerbate the likelihood and severity of flooding.

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Metropolitan areas and conurbations across India are increasingly prone to flooding owing to a series of problems. Mass migration to urban centres and the desire to secure domestic and international investment in the manufacturing sector as part of the “Make in India” initiative has forced cities to expand rapidly. In many of India’s major cities, such as Kolkata and Mumbai, expansion has occurred without due attention paid to planning and with insufficient regard to water flows. Indeed, structures are increasingly being built on marshlands and water courses in order to meet demand; numerous water tanks, lakes and canals have been destroyed to make way for residential and industrial structures. The prevalence of illegal construction across urban centres and inadequate waste disposal infrastructure also amplifies the risk of greater urban flooding in the coming years. Major Indian Floods  July 2005: Flooding caused by unprecedented monsoon rains kills more than 5,000 people across Maharashtra, including in Mumbai. Chhatrapati Shivaji International Airport (CSIA) closed for more than 30 hours, Mumbai-Pune Expressway closed for 24 hours. Cost estimated in excess of USD 82 million.  June 2013: Extreme precipitation causes devastating floods and landslides across Uttarakhand in northern India, killing more than 5,700 people and costing more than USD 27 billion.  November/December 2015: Excessive northeast monsoon season rains cause Adyar and Cooum rivers in Chennai and Tamil Nadu to burst their banks. Flooding kills more than 350 people and displaces some 1.8 million. An estimated three million cut off from basic services. Cost estimated in excess of USD 2 billion.

Managing the risk Figure 4. Flood deaths in India 2005-15 (excluding deaths from flood-related disease) 7000

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Flooding presents a number of operational and physical risks which, in turn, have an acute impact on business continuity, especially in urban centres. Electricity and telecommunications connectivity are impeded, facilities are closed and transport links severed. As such, it is incumbent on business to develop stringent business continuity planning (BCP) and disaster recovery (DR) capabilities. Such plans require ongoing testing and review, which G4S Risk Consulting can provide.

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1000 279 Ensuring employee safety, operational impact and 0 recovery are vital in building BCP and DR. Minimising 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 the impact relies largely on pre-emptive measures. Year Gauging exposure of a location to flooding is critical Source: Centre for Research on the Epidemiology of Disasters/National Disaster Management Authority in minimising operational impact, with proximity to bodies of water, including rivers, lakes, and streams evidently a determining risk factor. Indeed, flooding may also occur in close proximity to water even if premises or assets are not located on a floodplain. In India, the risk is amplified by the poor state of urban water channels and sewage systems, among others issues. Businesses should therefore:

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Assess the geographical location of facilities relative to areas of high flood risk. Liaising with government agencies, notably the Central Flood Control Board (CFCB) must be a priority. Government bodies including the Ministry of Water Resources (MoWR), the Survey of India (SoI), the National Remote Sensing Centre (NRSC) provide detailed maps of flood exposure, including countrywide 100-year and 500-year flood zones; Assess whether premises are located above the Base Flood Elevation (BFE), where this is a one percent risk of flooding. Flooding poses a greater risk to premises located at low elevation; Liaise with the Central Water Commission (CWC) to aid flood forecasting and monitoring. State-based Divisional Flood Control Rooms (DFCR) offer real-time update services; Identify areas of premises that are vulnerable to flooding and ensure steps are taken to secure property and other assets; and, Ensure a thorough knowledge of the supply chain, where critical products and services, notably data centres, are located, and the risks posed to them by natural hazards.

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Areas prone to flooding

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The basin of the Himalayan rivers covering a section of Punjab, Haryana, Himachal Pradesh, Delhi, Rajasthan, Uttar Pradesh, Bihar and West Bengal. The Kosi and Damodar rivers are most prone to flooding.

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The North-Western river basin covering Jammu and Kashmir, parts of Punjab, Haryana, Western Uttar Pradesh and Himachal Pradesh. The Jhelum, the Sutluj, the Beas, the Ravi and the Chenab rivers are most prone to flooding.

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The Central and Peninsular river basins covering Madhya Pradesh, Odisha, Andhra Pradesh and Maharashtra, contain the Narmada the Tapi, the Chambal and the Mahanadi. Heavy floods occur periodically in the Godavari, the Krishna the Pennar and the Cauvery rivers.

A comprehensive threat assessment will identify critical steps that need to be followed in the event of an emergency. Businesses should, therefore: ▪ ▪

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Liaise with local government, gathering intelligence on emergency planning, local warning signals, evacuation protocol and the location of emergency shelters; A Flood Emergency Response Plan (FERP) coordinator should be elected from personnel in order to initiate emergency planning and lead evacuation protocol. Key employees, namely management, should be identified before the onset of flooding and be kept alert to protocol. Ensuring communication between key personnel is essential; and, Ensuring staff have access to drinkable water and are made aware of the risk of water source contamination.

While dependent on the particular needs of an organisation, thorough BCP and DR ought to include measures to ensure operation s can resume at a particular location, for a specific client, in a particular department or for a specific service or process. Such measures may include: ▪ ▪ ▪ ▪

Permitting employees to work from home, therefore reducing depending on public transport and ensuring staff can contribute to service recovery; Resuming services at alternative, unaffected facilities; Considering alternative methods of continuity, e.g. using a generator to ensure key facilities are powered with electricity; and, Managing the expectations of clients and keeping clients abreast of possible backlogs and estimated resolution times.

Drought

Figure 5. Map illustrating areas of water stress (when the demand for water exceeds the available amount during a certain period or when poor quality restricts its use) in India (Source: World Resources Institute, 2015)

According to a 2015 report by the World Resources Institute, 54 percent of India faces high to extremely high water stress (see Fig. 5). While monsoon-related hazards have caused widespread destruction across India in recent years, 2015-6 has seen India contend with the outcomes of record low rainfall. Worsening drought has served to impair crop yields and deplete water reserves, leading to sporadic power outages and burgeoning unemployment. Water stress resulting from worsening drought in recent years has led to distress migration from farming communities to urban areas, drastically increasing pressure on municipal infrastructure and public services. Maharashtra, Karnataka, Rajasthan, Odisha, Gujarat and Andhra Pradesh are among those regions worst affected. Drought is exacerbated by the El Niño-Southern Oscillation (ENSO) weather phenomenon, an irregular periodic variation in sea surface temperatures and wind across the eastern Pacific Ocean. Droughts in India are commonly caused when an ENSO leads to the formation of a low pressure convergence centre which attracts dry air from Central

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Asia. High sea surface temperatures increase the likelihood of drought. An estimated 43 percent of El Niño-related events result in drought in India. Conversely, the so-called La Niña phase of the ENSO, wherein sea surface temperatures in the central and eastern tropical Pacific Ocean are cooler than average, routinely sees increased rainfall. According to independent New Delhi-based forecaster Skymet Weather Services, the onset of a La Niña phase in June 2016 will likely see the strongest monsoon season in India since 1994, partially allaying concerns of poor crop yields. However, the severity of recent drought conditions is likely to have a longlasting effect on India’s agricultural output and economic health. Increasing trend During 2015-6, India has experienced its worst drought in decades, affecting an estimated 300 million people in some 256 districts. Temperatures have exceeded 50 degrees Celsius across areas of northern and western India, with drought conditions anticipated to persist throughout much of the summer, despite the onset of monsoon season. Recent national assessments conducted by the India Meteorological Department (IMD) indicate that 19 of India’s 36 states are currently experiencing Soil Moisture Deficits (SMD) of more than 50 percent, compared to an average year’s rainfall. Given the lack of rainfall, the Central Water Commission estimates that supplies at all 91 reservoirs countrywide currently stand at an average of 17 percent of their total capacity. A May 2016 report by the India Meteorological Department (IMD) indicates both the frequency and severity of drought is anticipated to increase between 2020 and 2049 owing to climate change. As such, there is a growing likelihood of India becoming a “water scarce” country by 2050, where water levels fall to less than 1,000 cubic metres per capita. While intense monsoon rains brought on by the La Niña phase will likely mitigate the economic impact of drought in the short-term, India’s ability to counter the impacts of severe drought in the medium and long-term will rely largely on the development of a robust drought mitigation and management strategy. At present, there is little indication that the Indian government’s current strategy is helping to ease the impact of drought, not least economically. A burgeoning population and an expanding middle-class continue to increase the demand for water and historically poor soil pollution management, farming practices, governance and water regulation, as well as substandard infrastructure have led to depleted groundwater and a declining water table. Given the effects of a warming climate, the monsoon season is likely to become increasingly unpredictable, with drought periods almost certain to intensify during the summer months. Commercial impact The commercial impact of worsening drought is set to be significant, especially in the agricultural sector where crop yields are expected to plummet owing to extreme heat. While India has a number of national crop insurance schemes in place for agricultural workers in drought-prone areas, many farmers are too poor to afford the required premiums. Moreover, where farmers have subscribed to crop insurance schemes, the processes used to corroborate crop losses are often too time-consuming and resource-dependent to complete. Likewise, where the government has implemented mandatory rainwater collection programmes, there has been little uptake. The lack of crop diversification will continue to exacerbate water shortages, with the government contributing USD 173 million in subsidies to the irrigation-intensive sugarcane industry, ignoring crops such as millets, in an effort to ensure the allegiance of politically influential sugar barons. Policy responses such as this and high-interest lending to farmers in order for them to buy seeds, fertilisers, and food for themselves and their cattle, have drawn criticism from the agricultural sector. Numerous farmers have been forced to mortgage their land and there have been instances of suicide. Figure 6. Map illustrating areas affected by drought in India in April 2016 (Source: Maps of India, 2016)

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Managing the risk Drought presents a unique set of challenges to business, with employee welfare and business operations at risk. The most immediate impact is upon businesses which rely on significant quantities of water for the successful running of day-to-day operations, notably companies in the agricultural and manufacturing sectors where water is essential for sustaining crops and cooling machinery. While organisations with facilities situated outside of drought-prone areas are less at risk from the immediate impacts of drought, the effects of drought on related operations pose a significant risk to business continuity. As seen across India and parts of Africa, drought impedes output at hydroelectric power stations, contributing to rolling power outages and therefore increasing the likelihood of data loss and restricted business. Moreover, data centres, used by numerous organisations to remotely store, process or distribute large amounts of data, also rely on large quantities of water to prevent servers from overheating. In the absence of adequate water supplies, organisations are susceptible to data insecurity. The prevalence of wildfires during times of drought, exacerbated by heat, also poses a physical risk to premises and facilities, not least to critical infrastructure upon which organisations depend. According to figures published by the UNISDR, the 2015-16 Indian drought has seen more than 20,000 forest fires reported countrywide, destroying large swathes of forest and agricultural land. Ministry of Environment data shows more fires this year as of April, than in each of the previous three years. Drought-related wildfires across India, notably in Bihar and Telangana, have killed more than 66 people and prompted state authorities to impose cooking bans and the prohibition of religious ceremonies involving fire. Drought-related wildfires also have serious fiscal implications. A 2013 UNISDR Global Assessment Report on Disaster Risk Reduction states that drought-related wildfires inflict more than USD 146 billion of damage to global ecosystem services per year. Drought also has serious implications for business continuity owing to the potential impact of personnel availability. In India, drought often prompts state authorities to impose evacuation orders, often for long periods of time, owing to the lack of access to drinking, cooking and sanitation water. Evacuation orders directly impact business as premises become inaccessible, employees are unable to commute to work or take extended leave in order to attend to their own families and properties. Indeed, during the 2015-6 period, severe drought has prompted the Indian Ministry of Rural Development to introduce legislation guaranteeing 150 days of employment to agricultural workers in Chhattisgarh, Jharkhand, Karnataka, Madhya Pradesh, Rajasthan and Uttar Pradesh, among a number of other drought-affected states. Given the severity of the situation, a mere 1.8 percent of workers are reported to have received the promised days of employment. For businesses, particularly those in the agricultural and manufacturing sectors, preparing for drought is essential. Mitigating drought risk and ensuring business continuity relies largely on gauging exposure to drought and developing pre-emptive measures. Identifying possible indicators of drought is of paramount importance. Following the onset of drought, a number of steps can be taken to mitigate impact on business. Organisations should:

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Accumulate information about rainfall records and liaise with relevant meteorological authorities; Develop a business continuity plan to permit operations during a drought. This will help identify risks and to have a plan in place for dealing with them if the time comes, as well as ensuring quick decision-making. Testing and updating BCP is important, particularly as business conditions change; and, Check local authority drought planning guidelines and management strategies. Observe state and local wateruse restrictions. This may include:  Promoting water conservation initiative among personnel  Assessing integrity of physical assets and investing in water-conservation technologies e.g. tap aerators or water pipe insulation.

Business Continuity Plan (BCP) process at G4S Risk Consulting

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Risk Contagion While drought and flooding present immediate physical risks to operations and employee safety, they can also initiate civil unrest and increase scarcity-driven crime. Moreover, the intensification of these hazards in the coming years increases the likelihood of infrastructural failures, energy insecurity, health and economic problems across India and South Asia. Civil Unrest and Crime Incidents of civil unrest are commonplace following natural disasters in India, with communities often protesting perceived inaction by the emergency services and government negligence, among other reasons. The economic impact of the drought is felt most acutely among agrarian communities, for whom the drought has severely affected crop yields. Thousands of farmers have held protests in Maharashtra, Karnataka, Punjab, Rajasthan, Uttar Pradesh and Andhra Pradesh in recent months, demanding an increase in government subsidies and access to water supplies. Incidents of violence and severe traffic delays have been reported at the majority of protests. Drought-related unemployment was also considered a key driver in protests held by members of the Jat caste in February 2016. Dwindling farming revenues coupled with exemption from public sector employment quotas served to foment disquiet among Jats, who held violent protests across Haryana, including Rohtak, Bhiwani, Jhajjar and Sonepat; 19 people were killed and some 150 others wounded during the protests. Transport across the state was paralysed, with protesters blocking highways and railways. Resource scarcities driven by environmental hazards also contribute to increased levels of crime, including violent crime, especially in urban centres where critical supplies are easier to access. The potential for Jat protest in Sampla, Harayana in February 2016 (Source: IB Times) increased criminal activity following natural hazards is reflected in the recent deployment of armed personnel to dams across India to deter water theft amid the ongoing drought. May 2016 saw guards stationed at reservoirs and dams in Madhya Pradesh and police impose a curfew on local residents in order to preclude theft. The government response to disasters often serves as the source of unrest. During the 2015 South Indian floods, authorities were criticised for the lack of pre-emptive action, with many communities alleging that municipal authorities failed to open sluice gates at the Chembarambakkam reservoir and release excess water into the nearby Adyar River. Residents of low-lying areas allege that the authorities failed to issue an appropriate advisory beforehand, while city police officers were reportedly requested to leave mobile phones turned off, making it difficult for residents to issue distress calls. Political influence also appears to have played a key role, with a number of relief workers alleging they were forced to paste stickers of Tamil Nadu Chief Minister Jayaram Jayalalitha on aid deliveries, thereby delaying aid distribution. The lack of state deployments and organisation is reflected by the reliance on volunteer workers and civil society groups to help the rescue and aid distribution efforts. The absence of emergency relief personnel also led to lapses in security, with criminal organisations posing as relief workers in order to extort money out of victims, as well as looting goods from properties. A perceived lack of government action also prompted a series of 24-hour strikes in Tamil Nadu, with protesters frequently clashing with security personnel. Environment-related protests, marches and rallies occur regularly in India, and can escalate into violence without warning. Amid the mass migration of members of agricultural communities to district administrative centres in search of employment and resources, there is a heightened risk of service delivery protests being held in major towns and cities across India. Businesses can move to mitigate such events’ impact on business by monitoring local and social media for updates, and platforms such as G4S Risk Consulting’s Global Intelligence System (GIS), for incident information and analysis. Infrastructure and Energy Security Worsening flooding and drought in the coming years both pose serious risks to infrastructure and energy security. While annual ______________________________________________________________________________________________________ Issue Date: August 2016 Commercial In Confidence Page 8 For further G4S Risk Consulting analysis and advice, please contact [email protected]

summer monsoon rains provide short-term respite from drought that plagues India, the government will continue to struggle with meeting power supply demands. Tumbling wheat production will continue to drive migration from farming communities to urban centres, increasing pressure on infrastructure and public services, Similarly, flooding poses a direct risk to roads, bridges and dams, as well agricultural land and energy production facilities across India., especially those in low-lying areas. In 2016, diminished energy sector output as a result of drought will perpetuate ongoing electricity shortages. The Modi administration’s emergency response, including the provision of water-saving technology to farmers, is unlikely to gather momentum, with monetary constraints impeding farming communities’ acquisition of such equipment. The slow roll-out of water conservation education programmes in rural areas will also likely delay recovery. Output at hydroelectric power facilities across India will resume gradually amid the onset of the monsoon season, however, normalisation will likely take several months. The ability of the government to meet the critical challenge of India’s rapidly increasing demand for energy depends largely on its ability to mitigate climate-related impacts. Worsening drought poses the most immediate risk to India’s energy security. India’s two predominant means of power generation, namely hydropower and thermal power generation depend on large supplies of water in order function efficiently. Flooding and attendant risks such as landslides also pose a major challenge to infrastructural integrity. In 2015, flooding In Tamil Nadu destroyed more than 2,000 electric pylons, disrupting power supply to some 683 villages. Owing to the poor construction of electrical cables and lack of emergency personnel, it took more than a month to fully restore electricity and communications networks. In Chennai, flooding had a major effect on transport infrastructure, including at Chennai International Airport (MAA) and Chennai Central railway station, which both remained closed for seven days after being inundated by floodwaters.

Flooding at Chennai International Airport (MAA) in December 2015 (Source: Hindustan Times)

Following the floods, the Centre for Science and Environment (CSE) reported that the extent of the flooding and resultant damage was amplified by infrastructural shortcomings, notably unregulated urbanisation that served to blocked flood discharge channe ls and. Following an investigation, Chennai was discovered to have around 855km of storm drains relative to its 2,847km of urban roads, meaning that heavy rainfall would very likely result in flooding. According to experts at the Indian Institute of Technology Madras, the city would have required some 5,000km of storm water drainage in order to have dealt effectively with intense flooding. Reduced output in the energy sector, which is heavily reliant on water for cooling and operating machinery, is an economic concern. Many coal-fired and hydropower facilities have been forced to close, including major generating units operated by NTPC, Adani, GMR, Mahagenco and KPCL, among others. The Central Electricity Authority (CEA) reports that total hydropower generation in 2015-6 is currently running at a 6 percent deficit relative to the 2014-5 period. Plants are expected to remain closed until the onset of the summer monsoon season; however, normalisation will likely take several months. Reduced output will continue to have serious consequences for electricity generation, with sporadic power outages affecting cities countrywide. Power restored at shop following outage in Delhi (Source: qz.com)

Elsewhere, access to water across the Hindu Kush Himalayan region, notably along the Indus and the Ganges-Brahmaputra-Meghna Basins, both major transboundary rivers, is fuelling tensions among several regional players, increasing the potential for conflict. While India and Pakistan maintain cooperation on water access under the auspices of the 1960 Indus Waters Treaty, which allocates each country access to certain rivers and tributaries, several proposed hydropower projects, access to reservoirs and water sharing in the disputed Kashmir Region have served to worsen tensions in recent years. Increased political cooperation will be vital in managing access to water in the region, which also regularly suffers from severe flooding. ______________________________________________________________________________________________________ Issue Date: August 2016 Commercial In Confidence Page 9 For further G4S Risk Consulting analysis and advice, please contact [email protected]

Business and Economic Risk In November 2015, the heaviest rainfall in more than a century struck Tamil Nadu. The rains burst the banks of the Adyar and Cooum rivers resulting in widespread flooding across the state, including in the capital city, Chennai. More than 350 people died and thousands of others were forced to flee their homes. Damage costs exceeded USD 2.2 billion, with a mere 10 percent of losses insured. Firms including Tata, Infosys, Cognizant and BMW India suspended operations for more than two weeks at an estimated cumulative cost exceeding USD 40 million. State-run Chennai Petroleum Corp Ltd. (CPC) was also forced to close its oil refinery in the Manali, which typically produces 210,000 barrels per day, prompting shares to drop by five percent, rising again on 24 December, more than two weeks later. The fiscal impact of the drought on the Indian economy in 2016 is estimated at USD 100 billion. Accordingly, the implications for growth are likely to be significant, with attendant impacts of the drought, including escalating unemployment, loss of produce, waning soil health, distress migration and relief expenditure, set to negatively affect the economy. Figures published by the Central Statistical Organization (CSO) suggest that the drought has led to a 15.35 percent decline of the Gross Value Added (GVA – 2015-16) of shares in the agricultural sector, including fishery, livestock and forestry, which alone support an estimated 70 percent of the population. According to the US Foreign Agriculture Service, crop yields, primarily comprising wheat, are projected to be so low that India will be required to import an estimated 100,000kg in order meet demand. Nevertheless, economic diversification, consisting mainly of the manufacturing and service sectors, has led the Indian Ministry of Finance to forecast annual growth at 7.6 percent, despite the implications of drought for business in the short-term. The increase in natural disasters and potential for catastrophic losses due to greater urbanisation has drawn considerable attention from the Indian insurance industry, anticipated to be worth approximately USD 350-400 billion by 2020. India’s dependence on agriculture, currently accounting for 17 percent of GDP and employment of 47.2 percent of the population, leaves it vulnerable to hazardous events. Indeed, the Insurance Regulatory and Development Authority (IRDA) say the premium for catastrophe insurance may rise in the wake of the number of natural disasters in recent years. In 2014-5 alone, natural catastrophe (NC)-related insurance losses exceeded USD 11 billion. In 2016, the government introduced a crop insurance scheme worth USD 1.3 billion to help the 80 percent of farmers without crop insurance in the event of crop failure and falling market prices. Farmers are hamstrung by the lack of availability of crop insurance in more rural area, a lack of knowledge of such products and above all, its relative cost. Insurance companies would be well placed to encourage more sustainable and resilient business practices as part of their product offerings. Health Climate change-impacts, including drought and flooding, are expected to have major health impacts in India in the coming years. Drought and flood-related risks to health stem, to a significant degree, from food and water insecurity brought about by both hazards. Urbanisation, population growth, economic development, and increasing demand for water from agriculture and industry will make the health effects of climate-change impacts more widely felt. During droughts, while the authorities have dug bore wells in an effort to provide drinking water to affected communities, depleting groundwater levels mean that those affected are at risk of drinking impure water, increasing the risk of waterborne disease in times of scarcity. Impaired drinking water access during drought periods leaves the population prone to several illnesses, including kidney problems, dehydration and infections. Children are among those most at risk, especially those in less affluent communities, as drought increases the risk of malnutrition and disorders such as childhood stunting. Children retrieve clean water from well (Source: Asher Fergusson)

Flooding compounds the risks posed by poor levels of sanitation, especially among children. Water-borne diseases, including cholera, gastroenteritis, and diarrhoea – many of which are communicated via floodwaters – kill some 1,600 people a day. The figures are similar in other South Asian countries, including Pakistan, where 40 percent of all annual deaths are attributed to waterborne disease. Vector-borne diseases, notably malaria, as well as diarrheal infections, are likely to spread to colder areas as temperatures rise. ______________________________________________________________________________________________________ Issue Date: August 2016 Commercial In Confidence Page 10 For further G4S Risk Consulting analysis and advice, please contact [email protected]

Resource Security Despite having an abundance of water within its borders and heavy annual rains, the growing intensity and unpredictability of annual drought, combined with water mismanagement and limited storage facilities, not least worsening water pollution, pose a direct challenge to water security. According to the World Bank, India’s per capita water storage capacity is approximately 200m³, significantly below the 900m³ per capita global average. World Bank estimates suggest that as much as 65 percent of India’s rainwater goes uncaptured. Currently, each person has access to around 1,600m³ of water. Given India’s rapidly growing population, this is set to decrease to 1,000m³ per year by 2050, meaning that, according to UN standards, the country will become water scarce. Intensifying flooding and drought also pose a risk to India’s future food security. Agricultural production is dependent on the monsoons; increased variability in precipitation, prolonged drought and more intense weather events will significantly affect the longterm situation. While changing conditions may serve to increase yields of certain crops, such as rice and coconuts, the produ ction of other crops, including corn and sorghum, are likely to suffer, as will the amount of food required to feed livestock. Conversely, increased climatic variability may serve to impair rice yields, where rainfall is concentrated at the end of the growing season. Moreover, alterations in the flows of the Indus, Ganges, and Brahmaputra rivers brought about by both escalating drought and flooding are likely to the ability of farmers to successfully irrigate their land, leading to impaired yields of water-intensive crops. India’s changing climate is likely to worst affect the country’s wheat crop. World Bank estimates suggest that wheat yields peaked in India, and in Bangladesh, in around 2001. Despite the application of new fertilisers, yields have failed to increase, largely due to record temperatures in northern India, where a substantial portion of India’s wheat crop is grown. Should the current trend of falling yields continue, wheat yields can expect to be substantially lower in the short- and medium-term. Indeed, the Intergovernmental Panel on Climate Change (IPCC) estimates of a 2 degrees Celsius warming of India’s climate by 2050, which if proven correct, will force the Indian government to import more than twice the currently-imported amount of edible grains. The limited capacity of grainproducing states to adapt to a changing climate also serves to threaten India’s food security. Accordingly, the Indian government would be well placed to consider crop diversification, including the development of drought-resistant crops, as well as more efficient water use and management practices.

COMING SOON: Global Forecast 2016 Q4 For our Q3 forecast, click here or visit www.gis.g4s.com

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