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Agriculture: Crop Insurance

Equipping farmers to cope with crop losses

It is important to make a robust provision for fixing crop loss parameters, minimising yield-related disputes and ensuring quick transmission of yield data and account details of farmers for establishing a faster mechanism for claim settlement. Timely release of premium subsidies and simplifying the system are basic ingredients for building trust among the stakeholders. Obviously, all these factors need due consideration while devising a sustainable crop insurance policy.

Equipping farmers to cope with crop losses

Photo for representational purpose only. - Tribune file photo



SS Chahal

CROP failure has become a common occurrence due to biotic and abiotic reasons. A heatwave during the ripening stage caused widespread yield losses in wheat last year. Cotton crop was damaged by severe attacks of the whitefly and the pink bollworm. The unforeseen virulent appearance of the southern rice black-streaked dwarf virus and the damage to the wheat crop due to unseasonal rain and hailstorm in the current rabi season are glaring cases, besides the damage to vegetable and horticultural crops. Such intensified yield risks and colossal crop losses are likely to be more frequent with climatic shift in intensity and number of hot and cold days, rainfall pattern and changed forms of pests and pathogens with new virulence. These are likely to continue or even increase unless mitigation strategies are adopted widely. Under such hostile conditions, compensation is commonly announced by the government on the basis of arbitrary estimated levels of damage determined in the absence of any crop insurance (CI) cover as Punjab has so far remained away from it, probably due to disagreement over provisions of the Central Government’s schemes and the general notion that Punjab is a low-risk state in terms of widespread and frequent occurrence of crop failure. However, formal risk mitigation mechanisms, of which CI is one, are vital to safeguard the interests of farmers. Now, when Punjab has decided to opt for CI, it is imperative to evaluate its performance in other states and formulate a viable scheme by making it a part of the agriculture policy.

Worldwide, countries such as the USA, Canada, China and Japan are protecting their farmers from crop risks through various types of CI schemes, though a flawless arrangement is not yet seen anywhere. In India, ever since the implementation of the Pilot Crop Insurance Scheme (PCIS) in 1971, this provision has seen many changes. The Modified National Agricultural Insurance Scheme (MNAIS) included features such as considering village panchayat as an insurance unit, claim for prevented/failed sowing, individual farm-level assessment of losses, on-account part payment of claims providing immediate relief, threshold yield based on the average yield of the past seven years, 20% more minimum indemnity level and 40% to 75% upfront subsidy in premium equally shared by the Centre and states. However, again with certain corrections, the Weather-Based Crop Insurance Scheme (WBCIS) and the Restructured Weather-Based Crop Insurance Scheme (RWBCI) were brought out later.

The Pradhan Mantri Fasal Bima Yojana (PMFBY), introduced in 2016 in the country, is the most recent scheme, infusing lessons learnt from previous schemes and the application of modern information and communication technologies. With the ‘one premium, one season’ objective and operating on an area approach, it covers all farmers, including loanees, non-loanees, tenants and sharecroppers. Other features include covering risks from pre-sowing to post-harvest periods, encompassing modern techniques such as satellite-assisted global positioning system (GPS), remote sensing, smart phones and drones for precise and fast-track assessment of yield losses for fast and fair settlement of claims. Covering annual cash crops, all kharif and rabi crops at a uniform premium rate of 5%, 2% and 1.5%, respectively, from farmers, with the remaining share from the Centre and the states, are unique features of PMFBY. Implemented in 27 states and UTs, 5.7 crore farmers were insured under this scheme in 2016-17, but their number decreased by 14.87% and the area covered by 12.88% in 2017-18. The National Sample Survey Office in 2019 has revealed about 10% coverage under the scheme. Discouraging factors include inordinate gains for insurance companies and non/late payment of states’ share in premium subsidy. The Centre has reduced the budgetary allocation for 2023-24 compared to 2022-23.

Withdrawal of states

Mainly because of more premium subsidy than claims remitted, delayed payments, ignoring states’ needs, crop loss-determining complexities and non-availability of advanced technologies, states such as Bihar and West Bengal withdrew from the PMFBY in 2018 and 2019, respectively while Andhra Pradesh, Gujarat, Telangana and Jharkhand discontinued its implementation in 2020 because of low claim rate and other financial constraints. West Bengal and Andhra Pradesh have formulated their own schemes; the latter has launched it as a crop insurance scheme free for farmers of the state, as has been done by Gujarat and Bihar also. Gujarat has a simplified scheme with classification of losses into over 60% and 33-60% blocks. Increased burden of premium subsidy share under new amendments and revised guidelines and denial and delay of claims are the reasons being given by Maharashtra for its expected exit. This state is proposing that there should be a share of states in the premium collected from insurance companies during a non-payout or normal year.

Experience has shown that for the success of a crop insurance scheme it is important to minimise premium intricacies and simplify the process for determining the premium. For higher participation and long-term success of such schemes, it is essential that levels of indemnity should be fixed in such a way that a farmer with a low level of loss may also be covered for payment because it is crucial for calculating the threshold yield (payment is made only if the actual yield is below the threshold yield). Equally important is to make a robust provision for fixing crop loss parameters, minimising yield-related disputes, ensuring quick transmission of yield data and account details of farmers for establishing a faster mechanism for claim settlement. Timely release of premium subsidies and simplifying the system are basic ingredients for building trust among the stakeholders. Obviously, all these factors need due consideration while devising a sustainable crop insurance policy.

The author is a former VC of Maharana Pratap University of Agriculture and Technology, Udaipur

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