Scheme designed to cover both yield and price riskIn the wake of the recent crop losses suffered by farmers, the government is about to revive and launch the ‘farm income insurance scheme’ to insure them against a fall in their income.
Speaking to Financial Chronicle, a top official in Union ministry of agriculture said, “Farm income insurance scheme would cover both the yield risk and the price risk so as to insure a farmer’s income. We have held consultative meetings with chief ministers/agricultural ministers of all state governments in March. We have now written to them to provide us their feedback on the scheme. The insurance cover would protect a farmer against income loss. Existing yield insurance schemes provide cover to farmers for crop loss depending on the extent of the shortfall in guaranteed yield in a unit area. Similarly the existing weather-based crop insurance scheme covers adverse weather fluctuations. But both the schemes do not cover the prospective income of a farmer.”
“We have told state governments that they have the flexibility to continue with either the existing modified national agricultural insurance scheme (MNais), the weather index-based crop insurance scheme, introduce the farm income insurance scheme or even offer a combination of these schemes to suit the needs of the farmers,” the official said.
Farm income insurance scheme was first introduced by the NDA government in 2003-04 on pilot basis in 22 districts of 14 states, but later discontinued by the subsequent UPA administration.
The scheme was envisaged to address both yield risk and price risk so as to stabilise farmers’ incomes. However, the earlier scheme focused on income with respect to individual crops, and not on farm income. The scheme used area approach for actual yield and price measurement. If the actual income of a farmer fell short of the guaranteed income (i.e., product of average yield and minimum support price), they would be eligible for compensation to the extent of indemnity. The scheme covered mainly paddy and wheat crops.
An official of Agricultural Insurance Company told FC, “In September, representatives from the central government, state governments and insurance companies met to discuss the contours of the product (farm income insurance scheme). The insurers formed a working group and submitted their suggestions to the ministry of agriculture. We know the central government has written to state governments asking to pilot the scheme in their districts and provide their suggestion.”
The existing insurance scheme called modified national agricultural insurance scheme (MNais) protects yields against unavoidable perils like fire and lightning; storm, hailstorm, cyclone, typhoon, tempest, hurricane, tornado, flood, inundation and landslide; drought, dry spells; pests and diseases.
Sanjay Datta, chief of underwriting and claims at ICICI Lombard General Insurance, told FC, “Both Nais and MNais are yield-based schemes. The entire claim is calculated on the yield, which would depend on crop output. But low yield is not the only reason why a farmer suffers. There can be a situation when prices of a produce falls even if the yield is normal. So there are occasions when a farmer may have more output but still earn low income. However, the issue in farm income insurance scheme is getting data, as over the years we have built a database around farm output, rainfall and temperature but do not have consistent data on agricultural prices.” Successive Union governments have introduced many crop insurance schemes in the past three decades. After experimenting with pilot schemes, “individual farm-based” approach, which had adverse claim ratio, and “area-based” approach with voluntary participation provision, the government introduced the first nationwide area yield guarantee insurance scheme in 1985 named comprehensive crop insurance scheme, which was compulsory for farmers seeking bank loans.
In 1999, this was replaced by the national agricultural insurance scheme (Nais), expanding the coverage base and introducing additional features. This scheme was further improved and a pilot modified Nais (MNais) scheme was introduced in rabi 2010-11. Apart from this, a weather index-based crop insurance scheme (WBCIS) was also launched as a pilot scheme in kharif 2007. The coconut palm insurance scheme (CPIS) was also implemented on pilot basis from 2009-10 in eight states. More recently, the government approved the national crop insurance programme for implementation throughout India’s from rabi 2013-14 by merging MNais, WBCIS and CPIS. On an average over 20 per cent of India’s crop area is insured under the three schemes — Nais, MNais and weather-based insurance. Nais does not offer any income assurance to farmers against price fluctuations. Even though the share of agriculture to total GDP is merely 12.5 per cent (2014-15), agriculture still remains the backbone of Indian economy.
Source - http://www.mydigitalfc.com/
