Securing the future for ryots

At the all-India level, only 19% of farmers reported ever having insured their crops. A very large proportion of 81% were found to be unaware of the practice of crop insurance.

Over 3,00,000 farmers committed suicide in the last two decades due to crop failures and add-on problems. Issues in design, particularly related to delays in claims settlement have led to farmers not being covered, despite significant government subsidy (90 per cent of the premium).

Now, the government is working on designing of a new farm income insurance scheme, providing comprehensive risk insurance against loss in farm income (short fall in actual income over guaranteed income) in a notified area,

arising out of adverse fluctuations in yield due to occurrence of any one or combination of non-preventable natural perils such as flood, inundation, storm, cyclone, hailstorm, landslide drought, dry spells, large-scale outbreak of pests/ diseases and, adverse fluctuation of market prices

Five years ago, the UPA-II government proposed to roll out an integrated farmer security plan by redoing the insurance schemes. It was also proposed to knit along with it, risk management schemes to benefit farmers further.

During the rabi season of 2010-11, a pilot version of the Modified National Agriculture Insurance Scheme (MNAIS) was launched in 34 districts across 12 States, replacing the existing National Agriculture Insurance Scheme (NAIS). This plan was to ensure crop insurance, price protection for farmers and a market intervention scheme.

At the time of rolling out the plan, the government declared that the new policy would provide insurance cover to be sold by insurance companies, where 90 per cent would be upfront subsidy premium paid by the government and 10 per cent premium by farmers.

Why have not the farmers suicides stopped in this country till date if government were to take such a great care? Will the new scheme really be beneficial to the farmers? Is it the panacea for the ills dogging the agricultural sector?

A latest joint study of ASSOCHAM-Skymet Weather this year has revealed that less than 20 per cent of farmers in India are insured, exposing a vast majority of the farming community to the vagaries of weather, which lead them to taking desperate steps, as was seen after a vast damage to the rabi crop this year.

At the all-India level, only 19% of farmers reported ever having insured their crops. A very large proportion of 81% were found to be unaware of the practice of crop insurance. Of the un-insured, 46% were found to be aware but not interested while 24% said that the facility was not available to them.

Only 11% felt that they could not afford to pay the insurance premium, mentioned the joint study.As per the joint report, there are about 32 million farmers who have been enrolled in various crop insurance schemes across India. However, issues in design, particularly related to delays in claims settlement, have led to farmers not being covered, despite significant government subsidy.

The study also cautioned that though implementation and technical challenges inherent to such all-in-one schemes could be addressed during the course of time, a comprehensive strategy, innovative solutions, and timely rollout are more important for the success of the same. In the absence of these three, farmers keep falling prey to the vagaries of nature and man.

The ASSOCHAM report was hopeful that compared with the existing scheme, the new program has a design that can offer more timely, claim settlement, less distortion in the allocation of government subsidies and cross-subsidies between farmer groups, and reduced basis risk.

For coping with natural risks, crop insurance is one of the mechanisms available to mitigate loss. The governments have developed many crop insurance schemes in the past too. These schemes were further modified and the recent National Crop Insurance Programme (NCIP) has been evolved having Modified National Agricultural Insurance Scheme (MNAIS) and Weather-based Crop Insurance Scheme (WBCIS) as a component scheme.

MNAIS is yield-based scheme and WBCIS is scheme in which claim is announced on the basis of weather data.The ASSOCHAM study feels that the weather-based insurance products are advantageous over yield-based insurance products in terms of time taken for claim settlement and transparency in settlement of claims.

The tragedy lies in the fact that enough spade work is simply not done in educating the farmers about any of the schemes as the ASSOCHAM report itself reveals.

The Government of India which first introduced an insurance scheme from Rabi 1999-2000 season to protect the farmers against losses suffered by them due to crop failure on account of natural calamities failed to measure up to the expectations due to various loopholes.

The scheme is currently implemented by Agriculture Insurance Company of India (AICIL). The scheme is available to all the farmers, loanee and non-loanee, irrespective of size of their holding. Claims are automatically calculated based on shortfall in the current season yield obtained from crop cutting experiments (CCE).

Still, over 3,00,000 farmers committed suicide in the last two decades due to crop failures and add-on problems. Farmers go for loans, mostly from private money-lenders, for seeds, pesticides and fertilizers. Farm equipment comes second in the priority list.

Of late, the government is banking on WBCIS which aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse conditions of weather parameters like rainfall, temperature, frost etc.

Sources in the Agricultural Ministry feel the shift from a social crop insurance programme with ad hoc funding from the Government of India to a market-based crop insurance programme with actuarially sound premium rates and product design would be a major step forward.

They feel the improved product and active involvement of private sector insurance markets are expected to lead to significant benefits for farmers including faster claims settlement, a more equitable allocation of subsidies and lower basis risk.

Use of latest technology such as GPRS-enabled and camera-fitted mobile phones may be used to implement crop insurance schemes more effectively, the study says.

But this requires a comprehensive programme of capacity building in line with the needs of stakeholders such as State government functionaries, insurers and Central government agencies associated with crop insurance schemes.

Programmes for creating awareness and insurance literacy among farmers should be prepared by insurance companies and banks, in collaboration with the state governments concerned. The Central and the State Governments that are never on the same page, if not ruled by the same party, need to join hands if such a major exercise is to become successful.

In order to make MNAIS and WBCIS a nationwide scheme, NCIP was introduced in Rabi 2013-14 and NAIS was rolled back but the scheme faced reluctance from states like Madhya Pradesh, Tamil Nadu, Gujarat etc. Later on NAIS was also implemented in some states in Rabi 2013-14.

Now, the government is working on designing of new farm income insurance scheme, providing comprehensive risk insurance against loss in farm income (short fall in actual income over guaranteed income) in a notified area,

arising out of adverse fluctuations in yield due to occurrence of any one or combination of non-preventable natural perils such as flood, inundation, storm, cyclone, hailstorm, landslide drought, dry spells, large-scale outbreak of pests/ diseases and, adverse fluctuation of market prices, as measured against the MSP.

But will there be a comprehensive mechanism to implement the same on a pan-Indian scale? Above all, will there be a timely roll out?Everything looks good on paper. With growing commercialisation of agriculture,

the magnitude of loss due to unfavourable eventualities is increasing. It should be noted that agricultural insurance remains the only important mechanism to effectively address the risks to output and income resulting from various natural and man-made events.

By:W chandrakanth