CDRI: Private sector should share government’s burden in disaster recovery

Even though force majeure clauses often absolve parties from liability during force majeure events, the government bears the entire cost of disaster response and recovery. The Coalition for Disaster Resilient Infrastructure (CDRI) suggested that the private sector should also share some of the burden with the government.

In a recent policy brief on developing power sector resilience to extreme weather events in coastal regions, the international agency pointed out that extreme weather events can seriously damage critical infrastructure, including power systems, transportation networks, health care facilities and water supply systems. Affects form.

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Electricity infrastructure in coastal areas is particularly vulnerable. It said more than 75 per cent of India’s coastline is vulnerable to extreme weather events such as cyclones and tsunamis, with the most vulnerable being the eastern coastal states of Tamil Nadu, Andhra Pradesh, Odisha and West Bengal.

Force majeure generally refers to unexpected circumstances that prevent parties from fulfilling contractual obligations. CDRI said that in the context of disasters, force majeure clauses often relieve parties from liability when events beyond their control, such as natural hazards and disasters, occur.

“However, these streams may disproportionately burden the government, as it often bears the costs and liabilities associated with disaster response and recovery. To address this imbalance and promote public-private partnerships, it is recommended to modify the contracts to ensure that the private sector also shares the burden in such circumstances.”

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CDRI is a partnership of governments, UN agencies, multilateral development banks, the private sector and knowledge institutions that aims to boost the resilience of new and existing infrastructure systems to climate and disaster risks in support of sustainable development.

disaster preparedness

The global agency said the damaging effects of extreme weather events on power plants, substations and transmission lines could lead to prolonged power outages, disrupting power supplies to homes, businesses and essential services such as hospitals and emergency response units. Is.

It said this hinders disaster response efforts and slows down recovery and rehabilitation, leading to increased impacts on lives and livelihoods.

CDRI stressed that to enhance resilience, innovative financing solutions for adaptive preparedness should be integrated. Risk assessment should be a part of financial planning

Introducing a grant component in the current financial scenario will meet emerging needs and enhance financial preparedness for extreme weather events at the state level, it was advocated.

Partnerships with the private sector could establish a grant component focusing on disaster risk financing and reduction. CDRI said these collaborations, including insurance, reinsurance and catastrophe (CAT) bonds, provide innovative financing mechanisms, ensure community recovery and support the development of critical infrastructure.

Insurance companies have introduced a wide range of life and non-life insurance services and products in the market in India. With rising household incomes, the Indian insurance sector is set for strong expansion due to product innovation, competitive premiums, better claims management and increased regulatory oversight.

It added, “To tap this potential, thorough due diligence can be done and insurance mechanisms that serve as social safety nets and complement the existing financial mechanisms should be developed by insurance companies/private sector stakeholders.” It has been suggested to start with the cooperation of

disaster preparedness financing

CDRI suggested formulating a strong strategy at the state level, including a grant component to meet emergency needs and enhance financial preparedness for extreme weather events.

For example, similar to Department of Energy grants in the US, a grant component focusing on non-structural measures related to disaster risk financing or risk reduction financing for transmission and distribution (T&D) utilities could be established. Could.

It suggested, “It is essential to implement power utility-focused funds to address the risks and vulnerabilities of T&D infrastructure in the event of extreme weather events.”