Maximum premium for food crops would be as low as 2.5% of the sum insured
In a bid to support farmers in case of crop failure, the government this week is expected to announce a crop insurance scheme where farmers would have to pay a maximum premium of 2.5% of the sum insured for the food crops, while the remaining cost would be borne by state and central governments.
Official sources told FE that for dealing with delay in settlement of compensation, the new crop insurance policy proposes immediate payment of 25% of sum insured amount for crop damage to farmers and use of latest technologies — drone, smartphone, mobile app and satellite imaginary — to assess crop damages in the shortest possible time.
At present, farmers pay as high as 15% premium on the sum assured under the two crop insurance schemes — Modified National Agricultural Insurance Scheme (MNAIS) and Weather-Based Crop Insurance Scheme (WBCIS).
State-owned Agriculture Insurance Company of India, a key player providing crop insurance, along with private sector companies have been taken into consultation prior to formulation of the proposed New Crop Insurance Scheme (NCIS). The Cabinet, which is expected to take up NCIS on Wednesday, would consider the agriculture ministry proposal of fixing maximum premium up to 1.5% for wheat, 2.5% for paddy, 2% for oilseeds and 2-2.5% for other crops.
As per the agriculture ministry proposal, maximum premium for horticultural crops (fruits, vegetables and plantation) is proposed at 5% under the NCIS, while in case of existing MNAIS and WBCIS premium paid for crops such as fruits and vegetables goes up to as high as 40%. According to an agriculture ministry official, the subsidy paid by the Centre is expected to go up to around Rs 7,000 crore from the current level of Rs 3,000 crore.
At present, 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. 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 MNAIS and WBCIS — 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.
“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.