Agriculture: Punjab’s concerns need to be addressed

Raj Kumar

NATURAL calamities like droughts, floods and cyclones, besides erratic rainfall, cripple the farm sector, leading to huge losses in agricultural production. Crop insurance is a prerequisite to cover crop losses against such non-preventable causes.

Also read:

• Leeway for farmers
• Chronicle of a scam foretold

The Union Cabinet recently approved the revamp of the PMFBY and the Restructured Weather-Based Crop Insurance Scheme (RWBCIS) to address challenges and loopholes in these programmes. Now, the government has come out with customised crop insurance (single peril insurance cover) for states by factoring in a specific natural disaster. Such insurance will reportedly be offered first in Punjab, parts of Haryana and western Uttar Pradesh where farmers are not generally hit by droughts or floods but suffer due to hailstorms. The states/UTs can offer specific single peril risk/insurance cover with or without opting for base cover. The Centre has made enrolment under the schemes voluntary for loanee/non-loanee farmers (previously mandatory for loanee farmers).

Also read: Rotting wheat stocks

It seems that the revamp of crop insurance schemes may reduce the burden of premium on the farmers as they have been given the choice of the type of insurance. Now, the farmers will not be forced to have insurance cover. In spite of these amendments, there are some important concerns of Punjab that need to be addressed at the earliest.

Stability of yield

Since almost the entire net sown area in Punjab is irrigated, the average yield of principal crops, especially paddy and wheat, remains high as well as stable. As a result, there is less risk and few claims for any yield loss of these crops. Agro-ecology-specific guidelines are not in favour of the state as higher indemnity level is required in irrigated regions. The new scheme provides an indemnity level of 90 per cent. The analysis of time-series yield data for the past 28 years shows that the average loss of major crops (wheat and paddy) remained below 10 per cent in Punjab. Resultantly, farmers may not be eligible for claims and the payment of premium will be a waste of money. The indemnity level should be raised to 95 per cent. Punjab has sufficient irrigation facilities and there is assistance in the form of free power for crops. The state government has to bear financial burden on power subsidy to the farm sector. The premium rates to be paid under the Pradhan Mantri Fasal Bima Yojana (PMFBY) are 2 per cent for all kharif crops, 1.5 per cent for all rabi crops and 5 per cent in the case of annual commercial and horticultural crops. Keeping in view all these factors, the rates may be scaled down to one per cent.

The Threshold Yield (TY) for a crop in an insurance unit shall be based on the average yield of the past seven years, excluding two years of declared calamity, if any. Due to technological advancements, the average yield of crops in the state remains stable or even increases. So, the inclusion of a large number of years underestimates the TY. The latter should be based on recent three-four normal years.

No-claim bonus

Inadequate rain does not have a major effect on crop yield as farmers operate nearly 14 lakh tubewells to save their crops. During such times, the farmers have to incur additional cost on diesel to the tune of Rs 300-500 crore in the kharif season. Electricity consumption also shoots up by Rs 600-Rs 800 crore. During the outbreak of crop diseases or pest attacks, the cost of cultivation goes up due to plant protection measures. Farmers make every effort for yield stability, but as per norms of crop insurance, they will not be eligible for claims due to no reduction in the yield. This aspect should be factored in and the increased cost should be considered for compensation. The provision of no-claim bonus for the years when farmers do not suffer any crop loss also needs to be incorporated.

As of now, the ‘village’ is taken as the reference unit in the new policy (on the assumption of homogeneity) instead of the plot of the individual farmer’s land. However, a village may have a heterogeneous pattern. The size of the reference unit should be kept small, keeping in view the inter-unit contiguity.

Yield estimates are prone to manipulation. Accuracy, reliability and timeliness of yield estimates through Crop Cutting Experiments (CCEs) may remain inaccurate due to the lack of proper manpower allocation/outsourcing, capacity building/ training of field staff, supervision and monitoring of the process. The state governments have to carry out at least four CCEs in every village for every notified crop. This data has to be submitted to insurance companies within a month from the date of harvest. The yield assessment of multi-picking crops (horticultural and commercial) is difficult and its inaccuracy may affect the compensation.

The produce lying in the market is often affected by adverse weather conditions. In Punjab, due to mechanical harvesting and efficient transport facilities, the harvest reaches the market within a few hours. The produce waiting to be bought by agencies in the market yards should also be covered in the scheme. Post-harvest losses should be estimated at the earliest by the agencies concerned and compensation be provided to the affected farmers by insurance companies.

Lack of financial literacy as well as consumer awareness may lead to farmers’ exploitation. They also may remain unaware about the crop loss estimation in their village as they are not kept in the loop. The insurance procedure should be simplified for easier understanding.

Major insurance schemes

• Pilot Crop Insurance Scheme: Introduced in 1979, based on homogenous area yield index. In 1985, it was converted into the Comprehensive Crop Insurance Scheme (CCIS).
• Comprehensive Crop Insurance Scheme: It was introduced in the country with effect from kharif-1985. It was yield index-based crop insurance covering cereals, millets, pulses and oilseeds and remained under implementation till kharif-1999.
• National Agricultural Insurance Scheme (NAIS): To widen the coverage in terms of farmers, more crops and more risks, the NAIS (Rashtriya Krishi Bima Yojana) was implemented from rabi-1999-2000. The scheme was compulsory for loanee farmers. Punjab rejected this scheme as the state has stable crop productivity due to assured irrigation facilities.
• Farm Income Insurance Scheme (FIIS): The government introduced FIIS during rabi-2003-04 with the objective of protecting the income of the farmer due to price fluctuations, to encourage crop diversification and to reduce the government expenditure on procurement at MSP. Many states, including Punjab, did not accept it because it could lead to suspension of MSP-based procurement. FIIS remained in operation only for two seasons.
• Modified National Agricultural Insurance Scheme (MNAIS): NAIS was converted to MNAIS with some improvements and implemented from rabi-2010-11. Private sector insurance companies were also allowed to implement the scheme. The premium rates were 11, 9 and 13 per cent of the sum insured for kharif, rabi and annual commercial/horticultural crops, respectively. Punjab did not opt for it.
• Weather-Based Crop Insurance Scheme (WBCIS): In operation since kharif-2007. Weather parameters used as a ‘proxy’ for crop yield to compensate the cultivators for deemed crop losses.
• Coconut Palm Insurance Scheme (CPIS): Implemented from 2009-10 in coconut-growing areas of the country.
• National Crop Insurance Programme: Formulated by merging MNAIS, WBCIS and CPIS; implemented from rabi-2013-14.
• Pradhan Mantri Fasal Bima Yojana: Operational from kharif-2016. It is the most comprehensive crop insurance scheme so far. Farmers have to pay the lowest-ever premium rate.

— The author is Principal Extension Scientist, Department of Economics & Sociology, PAU, Ludhiana