Trust is the foundation of any relationship, be it in family, friends, fraternity at work, or between farmers and policy makers. But building trust requires transparency in actions. Without trust and transparency, any action by any party can be misconstrued, leading to a collapse in relations and policies. I am talking in the context of farm policies and the trust deficit that widened between some segments of the farming community and the agri-policy makers.

If agriculture in India were to be put on a fast and sustainable track, first and foremost agriculture minister Shivraj Singh Chouhan must bridge the trust deficit with farmers. The best way to do it is to form two agri-councils, one with representatives of farmers from each state, say two per state — one owner cultivator and one tenant. Let us call it the Farmers’ Council. The second council will comprise agri-ministers of each state, somewhat on the lines of the Goods and Services Tax Council. Both these councils must meet at least twice a year, at the beginning of kharif and rabi conferences that the Centre holds annually. This will go a long way to arrive at a convergence on some important reforms in the agri-sector, which is crying for change.

Second, climate change is already knocking at the door and farming will get impacted in a big way unless we take some bold steps. The Indian Council of Agricultural Research (ICAR) claims that it has produced more than 2,000 seed varieties that are climate-resilient for different crops. If that is the case, how does one explain the drop in agri-GDP growth in FY24 to just 1.4%, compared to the high of previous year’s 4.7%? It was the El Niño impact in 2023. That means either we are still way behind in creating climate-resilient agriculture or our innovations in seeds have not moved from scientists’ labs to farmers’ lands. In terms of the forthcoming Union Budget, this also means that ICAR funding needs to go up significantly, say from less than `10,000 crore today to about `15,000 crore. The marginal returns in investing in climate-resilient agriculture and promoting climate-smart agriculture are very high. The latter requires resurrection of agri-extension work in a way that promotes farming practices which can withstand extreme heatwaves or bursts of rains, etc. The extra funding of ICAR should be exclusively focused on creating climate-resilient and climate-smart agriculture. But this is not going to happen overnight. In the short run, we need to fix the crop insurance scheme, called the Pradhan Mantri Fasal Bima Yojana (PMFBY).

PMFBY was started in 2016 after back-to-back droughts in 2014-15 and 2015-16. The agri-GDP had collapsed and suddenly, the farming community was in deep stress. PMFBY was a bold step in the right direction. But the success of any such scheme depends upon how efficiently it is implemented. It started off with a big bang and good promise. In total, 26 states and 16 insurers came forward to join this scheme. But the scheme was somewhat premature as the spadework was not done, and infusion of technology was meagre. The automatic weather stations were not fixed, continuous monitoring of plots was not done through high-tech low-Earth orbits, algorithms for crop losses were not properly designed, and so on. In brief, the scheme was open for more human manipulation. It is no wonder many of our states, with the help of some leaders, took undue advantage. There were several cases of corruption. As a result, after a good start, the graph of the scheme’s adoption, instead of going up, started coming down. Re-insurers, who are the real risk-takers in crop insurance business, were not satisfied, as there was not enough transparency in crop losses and claims made. By 2021-22, there were only 20 states and 10 insurers willing to participate in PMFBY. It was feared that the scheme may fail. But there was no better alternative to compensate farmers in case of crop failures. It is at that time that a major push of technology rebooting was made. In the last two years, there seems to be a turnaround in PMFBY. The number of states and insurers participating in the scheme have gone back to 24 and 15 respectively. The improvements in yield estimation system based on technology and the Weather Information Network and Data System have raised hopes and reduced human intervention. Though still not perfect, it has an all-time high enrolment of farmers, about 40 million.

Interestingly, for the first time, non-loanee farmers who opted for this scheme comprised 55% of the total farmers insured. The area covered under PMFBY in 2023-24 was about 61 million hectares, which was roughly 40% of the gross cropped area of the states which opted for PMFBY. This has raised hopes that the technology infusion has earned some trust of insurers, re-insurers, as well as farmers. But the litmus test for the success of crop insurance depends upon the premium rates. They had peaked at 17% in 2021-22, but since then they have sharply come down to roughly 10% in 2023-24, according to provisional figures. This is a commendable revival of the scheme at the all-India level. But there is no time for complacency.

A state-wise picture throws some interesting results: the actuarial premium was just 3.4% in Andhra Pradesh, 5.7% in Uttar Pradesh, and 7.5% in Madhya Pradesh. But many other states attracted much higher premiums — Chhattisgarh (14.8%), Haryana (11.7%), Karnataka (19.2%), Maharashtra (13.5%), Odisha (13.1%), Rajasthan (9.7%), Tamil Nadu (12.0%), and so on. There is a need to study its reasons and bring the all-India premiums below 7%. Chouhan can do it, provided he fixes the system based on technology with the least possible human manipulation. Can he deliver on this?

Ashok Gulati, distinguished professor, ICRIER
Views are personal