Crop insurance is virtually a non-starter in states like Punjab, Haryana and Odisha that contribute significantly to the central pool stocks of rice and wheat.
Only two crore of an estimated 12 crore farmers in the country — earning for a population four to five times as many — had crop insurance cover in 2014-15, even as the facility was just against the cost of cultivation and barely provided any income protection. According to agriculture ministry data, a major chunk of farmers who took crop insurance were in Rajasthan, Bihar, Uttar Pradesh, Maharashtra, Karnataka and Andhra Pradesh.
The dismal performance is attributed to the low insurance payouts, level of premia that the farmers found unaffordable and hassles in settlement of claims.
Crop insurance — under the modified National Agricultural Insurance Scheme and Weather Based Crop Insurance Scheme — is virtually a non-starter in states like Punjab, Haryana and Odisha that contribute significantly to the central pool stocks of rice and wheat. Only a tiny segment of the farmer community availed of the facility last fiscal in Jharkhand, Tamil Nadu, Telangana, Himachal Pradesh and Kerala.
The agriculture ministry has identified issues such as high variability in premium rates among adjacent districts, higher premium in districts with high crop-risk profile and the cumbersome “crop-cutting experiments” to ascertain the extent of crop damage as factors that hit the spread of crop insurance across the country.
Given the tepid performance of current schemes, the government plans to launch a new scheme that would cap the premium paid at about 3% of the insured value, cover a substantial part of India’s farmland and crop output and make processing of claims hassle-free.
“Insurance based on input-cost mechanism is not going to help. The policy should be to protect the income of farmers from agriculture risks. Besides land record digitisation, satellite images should be used for quicker assessment of crop damage and settlement of dues to farmers,” said Ashok Gulati, chair professor for agriculture at ICRIER.
According to Ramesh Chand, member, NITI Aayog, the sum insured at present covers only a fifth of the crop acreage and just 5.5% of the value of total crop output. He is of the view that instead of crop insurance, which has not worked satisfactorily so far, the country should have an “Agricultural Calamity Compensation Fund”, shared between the Centre and states, for meeting a part of crop losses faced by farmers.
“Huge subsidy for crop insurance is given across the world. The US provides subsidy of more than 60% while China gives 80% subsidy. The nature of agriculture insurance is such that unless it is heavily subsidised, neither farmers nor private companies will show interest. There are issues about compensating farmers for crop losses when damages are not uniform across the country. There are serious problems of errors of inclusion and exclusion of farmers,” said Chand.
Under the crop insurance being offered by various public and private sector companies, farmers are presently paying a premium in the range of 3.5-8% of the insured value of the crop and the rest is borne by the government. Currently, around 20% (40.27 million hectares) of the total agricultural land is insured.