The Union cabinet on Wednesday signed off on a revamped crop insurance scheme designed to mitigate risks associated with contemporary Indian farming.
The farmer-friendly move
comes at a time when the country is experiencing a protracted period of rural
distress after below-average monsoon rainfall in 2014 and 2015.
How is it different from
previous schemes ?
- Under the previous crop insurance
scheme, risks were only partially covered.
- The existing premium rates vary
between 2.5% and 3.5% for kharif crops and 1.5% for rabi crops—but the
coverage was capped, meaning farmers could, at best, recover a fraction of
their losses.
- Also, the premium for commercial
and horticulture crops was calculated on actuarial
basis, meaning premiums
could be as high as 25% depending on the risk factor involved.
How is it good ?
- it provides for localized events
and removes the cap.
- will cover half of India’s cropped
area in the next three years, up from the present level of 23%.
- centre has substantially increased
the budget for crop insurance from Rs.2,823 crore in 2015-16 to Rs.7,750
crore in 2018-19.
- There is no cap on subsidy on premium, meaning the
government will bear the cost even if the balance premium is as high as
90%. In previous schemes, due to a cap on premiums, farmers did not get
the full sum during claim settlement.
Some notable features ?
- government liability on premium
subsidy will be shared equally by the centre and states.
- will cover local-level calamities
such as hail storms and landslides and even cover farmers if they cannot
sow crops due to inclement weather.
- the scheme will cover post-harvest
losses due to cyclonic and unseasonal rains.
- smartphones will be used to
capture and upload data on crop cutting (to estimate loss in yield) to
reduce delays in settling claims
- remote sensing will be used to
reduce the number of crop-cutting experiments.
Expert opinion !
- while the low premium will drive penetration and
enrolment and make the insurance scheme viable for
insurers, it remains to be seen if the
unit for assessing crop loss has been reduced to the village level (in
earlier schemes block and panchayats were taken as units, making it
difficult for a farmer to claim compensation for events like hailstorms).
------------------------------------------------------------------------------------------------------------
So above was the ROSY
picture of the scheme....but in UPSC u also need to know the THORNY part of the
story !
So let's assess the
challenges which come in the way of the scheme !
- For the success of
such a scheme the main challenge will be spread of
awareness so that farmers are made cognizant of the product which must
have a simple design. As it is more of a market-oriented measure to cover
volumetric risk, farmers have to be educated about the scheme in terms of
how it will help them. There has to be wide-scale outreach programmes
carried out to drive home the advantage of these products.
- Second, the smaller
farmers have to be targeted as this is particularly the vulnerable class.
Presently the scheme
does not distinguish between the large and small farmer as that does raise
the issue of identification.
- Third, the scheme
has to work in the sense that the process has to be seamless so that all
the claims are settled seamlessly. Further, given the volumes that may be
involved, insurance companies have to be geared up to handle such
transactions.
- Fourth, as part of
housekeeping, land
records need to be in place for making assessment of the premium.
- Fifth, we need to
have access
to weather data in various regions that is not captured by the IMD. Efforts by private
players to create such weather stations like those by NCMSL (National
Collateral Management Services Limited) have to increase as all decisions
on premium as well as payouts would be contingent on this data.
- Last, crop loan practices
are weak which
has to change as often banks do not insist on this when giving a loan.
------------------------------------------------------------------------------------------------------------
Way forward!
- Banks today do
insist on farmers taking some insurance and would probably once again have to play a critical role in spreading the good word given that they are the first point of contact
with the farmers. The new payments banks and small
banks would also enable this process to proliferate.
