The Gist of Kurukshetra: November + December 2015
Crop Insurance Schemes for Farmers Need for focused Attention
In the context of annual feature of drought and flood in one
or the other parts of the country, cllmate change and sustainable food security
agricultural insurance has been a sine qua non. Despite farmer’s access to
yield-sustaining agricultural technology and institutional credit
unpredictability in crop output stems from pestilence, price volatility in
markets and natural disasters. In India, about 90 percent of the variation in
production is caused by changes in rainfall patterns. Agricultural Insurance
Company of India implements crop insurance scheme to protect farmers from
agricultural variability, mainly weather-induced. The scheme based on ‘Area
Approach’ is implemented in 25 states and two union territories. The scheme is
offered to all farmers, loanee and non-loanee, irrespective of their size of
National Crop Insurance Programme (NCIP): The NCIP launched
in 2013 has unit area of insurance reduced to the village/village panchayat
level. It helps farmers to compensate losses in crop yield, maintain credit flow
and adopt latest agricultural technology.
It has three components.
(A) Modified National Agricultural Insurance Scheme (MNAIS).
(B) Weather Based Crop insurance Scheme (WBCIS).
(C) Coconut Palm Insurance Scheme (CPIS).
Modified National Agriculture Insurance Scheme:
Based on the recommendations of the Joint Group constituted
in 2004, to suggest improvements in the existing crop insurance scheme, a pilot
project on MNAIS was implemented in 50 districts from 2010-11 Rabi season.
The major improvements of MNAIS over NAIS include:-
- Reduction in unit area of Insurance to village/village panchayat.
- Charging actuarial premium rates for insuring crops.
- Involving private insurance companies.
- Increasing subsidy in premium up to 75 percent.
- More realistic calculation of threshold yield (average yield of last 7
years excluding up to two years of declared natural calamity).
- Minimum indemnity level of 70 percent instead of 60 percent in NAIS.
- Payment up to 25 percent of likely claims in advance to provide
immediate relief to farmers during adverse season.
- Individual assessment of claims in case of specified localized calamity
like the hailstorm or landslide.
- Uniform norms for both loanee and non loanee farmers.
It covers three types of crops.
(A) Food crops which include cereals, millets and pulses.
(C) Annual Commercial/ Horticultural crops. The state government notifies
specified crops for which data on yield are available for adequate number of
Broadly, the scheme covers three stages of crop production. They are as
[A] Stage 1: Planting or sowing. Whether the crop was prevented from
planting/sowing due to deficit rainfalls and adverse seasonal conditions.
[B] Stage 2: Covering standing crops which got damaged due to unoreventable
risks such as drought, flood, infestation of pests, landslides, wildfire,
storms, cyclones etc.
[C] Stage 3: The time period of two weeks after harvesting, when the crops are
allowed to dry in field but get damaged/ destroyed because of cyclonic rains,
Premium is calculated on actuarial basis implying that there
is higher premium for riskier crops. When a farmer pays actuarial premium to
insure crops, the entire liability of claim is on insurer. Insurance companies
have to define the premium rates for notified crops in accordance with the
prescribed standard actuarial methodology of the IRDA. Government has, however,
put a cap on maximum premium to be collected, viz. [a] 11 percent for Kharif
sea-son [b] 9 per cent for Rabi food crops [c] 13 percent for annual commercial
crops and horticultural crops.
The subsidy is as follows:
- If premium is less than 2 per cent of sum assured - No subsidy provided
- If Premium is between 2-5 percent, subsidy provided is 40 per cent
- If premium is between 5-10 percent, subsidy provided is 50 per cent
- If premium is between 10-15 percent, subsidy provided is 60 percent
- If premium is above 15 per cent, subsidy provided is 75 percent
Weather Based Crop Insurance Scheme: For bringing more
farmers under crop insurance and overcoming the shortcomings, particularly
claim- amount and delaying settlement of claims under NAIS, a pilot project on
WBCIS was implemented in 20 States in 2007-08 and now it is implemented as
full-fledged component of NCIP from Rabi 2013-14 season. WBCIS intends to
provide insurance protection to the farmers against adverse weather incidence,
such as deficient/excess rainfall, high or low temperature, humidity etc., which
can impact crop production. WBCIS envisages charging actuarial rates of premium.
Often weather conditions vary within a taluka/ sub-district
making it difficult to assess insurance claims and estimate crop yields. Taking
the public- private-partnerships funding model to help farmers. Maharashtra
government has proposed a network of 2025 automatic weather stations in the
state. Each weather station would record, weather parameters like air
temperature, relative humidity wind speed and direction, rainfall and solar
radiation etc. Analysis of weather data would help settle insurance claims,
advice farmers on crop patterns, develop pest and disease forewarning models and
rainfall forecast. Andhra Pradesh and Tamil Nadu have established state-wide
weather stations to assist farmers and settle insurance claims. Malawi has
demonstrated successful experiment on weather-based crop insurance.
Coconut Palm Insurance Scheme: There is a separate insurance
scheme for coconut palm growers because of reasons viz. coconut is cultivated
under rain-fed conditions and is susceptible to biotic and abiotic stresses.
Although it is a perennial crop its cultivation is subjected to risks because of
climatic changes. natural disasters, pests and diseases etc. Palm trees are
characterized by periodic system of crop setting and outcomes and hence resemble
seasonal annual crops. CPIS which was implemented as pilot project from 2009-10,
in the selected areas of Andhra Pradesh, Goa, Karnataka, Kerala, Maharashtra,
Odisha, Tamil Nadu and West Bengalis is now Implemented by the Coconut
Development Board [COB] as a full-fledged scheme in all coconut growing states.
Despite of the launch of various crop insurance schemes, it
seems very limited purpose has been served. The coverage in terms of area,
number of farmers and value of agricultural output is very small, payment of
indemnity based on area approach miss affected farmers outside the compensated
area, and schemes are not financially sustainable. Some micro-finance institutes
[MFI] offer micro-insurance to protect life, health and assets of low-income
households in urban areas, but not in rural areas. Though micro-insurance has
the potential to lift poor out of poverty and improve quality of human life it
has yet to make a determined penetration in rural areas on the expected scale on
par with microcredit.
Following are the aspects that need focused attention.
- There should be concern and commitment to ensure that the scheme
penetrates widely and covers large number of farmers. A massive campaign is
necessary to create awareness among farmers, convince them about the utility
of the schemes and the procedure for settlement of claims. A road map should
be prepared to ensure that progressively all farmers are covered in a period
of five years.
- Insurance products must be farmer-friendly and they need to be designed
in consultation with them taking account of the current experiences.
Research studies need to be intensified to understand as to why the schemes
have not been reaching to the intended beneficiaries despite subsidizing
- Farmers should be encouraged to share their experiences among them.
- Public and private companies must devote more resources [money, manpower
and time] to design the insurance products best suited to farmers according
to the distinct agro-ecological regions rather than one-size-fits -all.
- India can share its experiences and learn from several other developing
and developed countries to improve the agricultural insurance products and
marketing techniques among farmers.
Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)
The Cabinet Committee on Economic Affairs (CCEA), chaired by
the Prime Minister Shri Narendra Modi, has given its approval to a new scheme
the “Pradhan Mantri Krishi Sinchayee Yojana” (PMKSY). It will have an outlay of
Rs. 50,000 crore over a period of five years(2015-16 to 2019-20). The allocation
for the current financial year is Rs. 5300 crore. The major objective of the
PMKSY is to achieve convergence of investments in irrigation at the held level,
expand cultivable area under assured irrigation (Har Khet ko pani), improve
on-farm water use efficiency to reduce wastage of water, enhance the adoption of
precision-irrigation and other water saving technologies (More crop per drop),
enhance recharge of aquifers and introduce sustainable water conservation
practices by exploring the feasibility of reusing treated municipal based water
for peri-urban agriculture and attract greater private investment in precision
irrigation system. The, programme architecture of PMKSY aims at a ‘decentralized
State level planning and execution’ structure, in order to allow States to draw
up a District Irrigation Plan (DIP) and a State Irrigation Plan (SIP). DIP will
have holistic developmental perspective of the district outlining medium to long
term developmental plans integrating three components namely, water sources,
distribution network and water use· application of the district to be prepared
at two levels - the block and the district. All structures created under the
schemes will be geotagged.
In the last one year, the Government of India has taken several farmer
friendly initiatives. These, amongst other things, include the following:
- A new scheme has been introduced to issue a Soil Health Card to every
farmer. Soil Health Management in the country is being promoted through
setting up of soil and fertilizer testing laboratories. 34 lakh soil samples
has been collected and analysis is continuing.
- A new scheme for promoting organic farming “Pramparagat Krishi Vikas
Yojana” has been launched to promote organic farming.
- A dedicated kisan channel has been started by Doordarshan to address
various issues concerning farmers.
- Government is also encouraging formation of Farmer Producer
- Assistance to farmers, as input subsidy, has been increased by 50
percent in case of natural calamities.
- Norms have been relaxed to provide assistance from previous norm of crop
loss of more than 50 percent to 33 percent to farmers afflicted by natural
- Minimum Support Price (MSP) for various kharif crops has been increased
Bonus of Rs. 200 per quintal has been announced for pulses. Area coverage
under pulses has increased over the last year.
Taking it further, today the Cabinet Committee on Economic Affairs, chaired
by the Prime Minister has given its approval to two new schemes in agriculture
sector. These are the PMKSY and Promotion of National Agriculture Market.