Less than 20 percent of farmers in India are insured, exposing a vast majority of the farming community to the vagaries of weather which lead them to taking desperate steps, as is being seen after a vast damage to the Rabi crop this year, according to ASSOCHAM-Skymet Weather joint study released recently.
At the all-India level, only 19 percent of farmer reported ever having insured their crops. A very large proportion of 81 percent were found to be unaware of the practice of crop insurance. Of the un-insured, 46 percent were found to be aware but not interested while 24 percent said that the facility was not available to them. Only 11 percent felt that they could not afford to pay the insurance premium, mentioned the joint study.
As per the joint report, there are about 32 million farmers who have been enrolled in various crop insurance schemes across India. However, issues in design, particularly related to delays in claims settlement, have led to farmers not being covered, despite significant government subsidy.
DS Rawat, Secretary General, ASSOCHAM, said, “Implementation and technical challenges lie ahead which can be addressed but will require a comprehensive strategy, innovative solutions, and timely roll out”.
To address the problems, the Government of India is piloting a modified National Agricultural Insurance Scheme (NAIS), a market-based scheme with involvement from the private sector.
Compared with the existing scheme, the new program has a design that can offer more timely, claim settlement, less distortion in the allocation of government subsidies and cross-subsidies between farmer groups, and reduced basis risk.
For coping with natural risks, crop insurance is one of the mechanisms available to mitigate loss. In this context, the Government on pilot basis developed many crop insurance schemes. These schemes were further modified and the recent National Crop Insurance Programme (NCIP) has been evolved having modifies national agricultural insurance scheme (MNAIS) and weather based crop insurance scheme (WBCIS) as component scheme. MNAIS is yield based scheme and WBCIS is scheme in which claim is announced on the basis of weather data.
The Central government is working on Farm Income Insurance Scheme which will be rolled out soon for Kharif 2015. Apart from government player, private players have developed weather-based crop insurance products. These weather-based insurance products are advantageous over yield- based insurance products in terms of time taken for claim settlement and transparency in settlement of claims, reveals the joint study.
The Government of India introduced the scheme from Rabi 1999-2000 season to protect the farmers against losses suffered by them due to crop failure on account of natural calamities. The scheme is currently implemented by Agriculture Insurance Company of India (AICIL). The scheme is available to all the farmers, loanee and non-loanee, irrespective of size of their holding. Claims are automatically calculated based on shortfall in the current season yield obtained from crop cutting experiments (CCE)
Weather Based Crop Insurance Scheme (WBCIS) aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse conditions of weather parameters like rainfall, temperature, frost etc.
Mr. Rawat further added, the shift from a social crop insurance program with ad-hoc funding from the Government of India to a market based crop insurance program with actuarially sound premium rates and product design is a major step forward. The improved product and active involvement of private sector insurance markets are expected to lead to significant benefits for farmers including faster claims settlement, a more equitable allocation of subsidies and lower basis risk
Use of latest technology such as GPRS enabled and camera fitted mobile phones may be used to implement Crop Insurance Schemes more effectively. A comprehensive programme of capacity building in line with the needs of stakeholders such as State Government functionaries, insurers and Central Government agencies associated with Crop Insurance Schemes should be organised. Programmes of creating awareness and insurance literacy among farmers should be prepared by Insurance Companies and Banks, in collaboration with the concerned state governments.
In order to make MNAIS and WBCIS a nationwide scheme, NCIP was introduced in Rabi 2013-14 and NAIS was rolled back but the scheme faced reluctance from states like Madhya Pradesh, Tamil Nadu, Gujarat etc. Later on NAIS was also implemented in some states in Rabi 2013-14.
Farm Income Insurance Scheme– Presently the government of India is working on designing of new scheme farm income insurance scheme following are the salient features of FIIS –
The Scheme provides – Comprehensive Risk Insurance -against Loss in Farm Income (Short fall in Actual Income [AI] over Guaranteed Income [GI]) in a Notified Area arising out of adverse fluctuations in yield due to occurrence of any one or combination of non-preventable natural perils such as Flood, Inundation, Storm, Cyclone, Hailstorm, Landslide Drought, Dry spells, large-scale outbreak of Pests/ Diseases; and, adverse fluctuation of market prices, as measured against MSP.
Agricultural production and farm incomes in India are frequently affected by natural disasters such as drought, floods, cyclone, storm, landslide, earthquake etc. Susceptibility of agriculture to these disasters is compounded by the outbreak of epidemics and man-made disasters such as fire, sale of spurious seeds, fertilisers and pesticides, price crashes, etc. All these events severely affect farmers through loss in production and farm income, and are beyond the control of farmers.
With growing commercialisation of agriculture, the magnitude of loss due to unfavourable eventualities is increasing. In recent times, mechanisms like contract farming and futures trading have been established which are expected to provide some insurance against price fluctuations directly or indirectly. But, agricultural insurance is considered an important mechanism to effectively address the risks to output and income resulting from various natural and manmade events.