India - As crops fall, insurance must rise to curb farmer suicides
When Deepak Singh speaks of his farm land, he never fails to utter a small prayer to fate. The 55-year-old farmer from Mathura in Uttar Pradesh had travelled to Delhi in mid-February to protest amendments to the land acquisition law that would enable the government to acquire lands like his for national interest projects without his consent.Singh chanted slogans along with hundreds of farmers, hoping to protect his two hectares and its wheat harvest. Losing his farm to a highway or factory was not his only fear. He was also afraid of rain - too much, too little, too soon, too late. As it turned out, it was the latter fear that crushed Singh. Sudden, unseasonal showers in late March devastated the almost harvest-ready wheat on Singh's land along with crops in 14 states.This is the worst countrywide crop loss due to unseasonal rain in nearly 25 years. Rabi crops of rice, wheat, potatoes, fruit, sugarcane, mustard and cotton lie destroyed. About 150 farmers are estimated to have died from shock or committed suicide. For a country where climate-induced crop losses and farmers' distress is a recurring pattern — three lakh farmers have committed suicide in 17 years — India's crop insurance ecosystem is grossly inadequate.Only 19% of Indian farmers have ever had crop insurance, an Assocham-Skymet Weather study released earlier this week discovered. Among the rest, 24% said the facility was not available to them and 11% said they couldn't afford the premium. Most said they were especially discouraged by delays in settlement of claims, which have often extended to a couple of years after the crop loss.About 90 crore farming households, close to 90% of whom are small and marginal farmers like Singh, survive on an average income of only `3078 a month from agriculture, according to income data from National Sampling Survey Organisation (NSSO). They don't have any safety net when crops fail. Nearly half of them are in debt and distress is inevitable. The NSSO 2013 also shows that only 4% of farmers, many of them high value croppers, have insurance. And yet, state expenditure on crop insurance premium was cut by 1.2% despite warnings of unpredictable rain due to climate change.Crop insurance in India has been historically poorly designed and structurally flawed. There have been five national schemes since 1985, and all have failed. High premium and compulsory clubbing of insurance with loans forcing farmers to pay premium and excluding non-borrowers are the most common reasons for this failure.Once crop losses occurred, claim-making was so bureaucratic and obstacleridden that payments were delayed or not received. The method of calculating settlement eligibility is also rigid and unfair to the small holders, who need insurance most of all.Threshold production is used as the basis for extent of crop loss. This means individual farmers take insurance, but their crop loss is not evaluated against expected yield for their own farm, but on threshold yield, which is the block's average yield in the past five or three years. The farmer's own loss is also not considered for the claim, but the average loss of the block. "This doesn't show understanding of rural landscape, rainfall patterns and heterogeneity in agricultural practices," say agricultural economist Jayati Ghosh. A farmer who lost 70% of his crop could not claim insurance payout because his block had only 20% less yield than it did in the past five years. These difficulties discouraged farmers from being insured, which led to low coverage, and therefore high premiums, making them unaffordable for those aware of insurance.Crop insurance has also often been linked to bank credit. A farmer taking farm loans from a bank must purchase insurance. This protected banks from loss, not the farmer. Economists across the board believe insurance works best when it is varied and voluntary. The latest insurance project, announced by the BJP-led government, is the yet-to-be-launched National Crop Income Insurance Scheme (NCIIS), which guarantees income to the farmer during fluctuating prices (he pays a maximum of 20% of the loss), and during yield losses due to natural calamities, including drought or unseasonal rain (70-50% of loss caused). It brings all the other existing national insurance programmes under its purview.The NCIIS is inspired by a similar Farm Income Insurance Scheme, implemented in Gujarat in 2003, withdrawn in a year because of low farmer participation, but reintroduced in 2013 with minor changes. This proposal also calculates loss by block and not by each farm holding. This is a systemic hangover that the government rationalises by saying that it is impossible to calculate yield loss per land holding. "If satellite data and technology can project yield data in India, why not calculate crop loss?" asks Devinder Sharma, an agricultural analyst.The government is debating inviting private players to agricultural insurance. Some believe this will expand coverage, and improve efficiency of settlements. Ghosh admits private insurers might bring a wider range of policies covering many more eventualities. But she worries that private insurance has "proven lower claim settlement rates" and hidden expenses that will increase premium.Increasing coverage is the only way to make premiums affordable. The agricultural insurance market is not still as developed as life or vehicle insurance markets, and might not be ready for private players yet, argues Himanshu, rural economist and fellow at the Delhi-based Centre de Humains. "The public sector has its problems, but it has the best penetration in agriculture now," he says. Once the government ploughs the insurance field, then private players could follow.Today's rumblings of weather must reinvigorate long-ignored agricultural insurance. Whoever issues the instruments, it is the system that must be redefined in the country— to make crop insurance unit-based for greater accuracy and to fairly compensate greater losses with greater indemnity, to compensate real loss and not loss against average yield, make insurance voluntary and not linked to loans or bank credit, and create awareness programmes that will improve coverage and eventually shrink premiums. Satellite technology must be harnessed for better data collection on yield. Sharecroppers, tenant cultivators and women farmers must also be brought into its purview.If there is an inevitable condition most economists agree on, it is that the government must step in to subsidise premium for crop insurance. Even with a combination of public and private sector instruments, more companies and farmers will enter the space if assured that the government will cover a part of the premium, at least for farmers with small and medium holdings. This will not only improve insurance coverage but also go many steps towards reducing debt, stabilising income and preventing distress deaths.In Mathura, as Singh awaits a relief cheque from the UP government, he says, "Something will really change for people like me when the government doesn't jump to the rescue of farmers only during drought or heavy rain." With robust crop insurance for farmers, crisis relief could be a thing of the past.Source - http://economictimes.indiatimes.com/
