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ThecurrentsetofinsurancepoliciesundertheNAIS,ModifiedNAIS,andtheWBIShavefailedmiserablytoprotectourfarmers.

WrittenbyAshokGulati|Publishedon:April13,201512:00am

From plate to plough: ABaisakhi gift for thefarmer

OPINION MONDAY,APR13,2015Follow

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Unseasonal rains are breaking the back of Indian farmers.The prime minister has taken the first step by deciding toraise the existing norms of compensation by a hefty 50 percent from the existing Rs 9,000 per hectare for irrigatedcrop, Rs 4,500 per ha for unirrigated crop and Rs 12,000 perha for perennial crop. Further, the compensation will begiven to all those who have suffered even one-third loss,relaxing the existing criterion of minimum damage of atleast 50 per cent. Also, procurement quality norms forwheat have also been relaxed. All these steps are in theright direction and the Narendra Modi government needsto be commended for that.

But the central question remains: Is this enough to bringback smiles on the faces of Indian farmers? And the shortanswer is Not really. To understand better as to whyIndian farmers will not be happy with this otherwisepositive decision of the government, consider the followingfacts.

In this rabi season, the biggest crop that has suffered iswheat. The yield of wheat on irrigated tracts is betweenfour to five tonnes per ha. Even if one takes four tonnes asthe wheat yield on irrigated area, at a minimum supportprice of Rs 14,500 per tonne, the gross value turns out to beRs 58,000 per ha. His out-of-pocket expenses, generally, arehalf of this gross revenue. One can now see that even a 50per cent increase in the existing compensation norms of Rs9,000 per ha will not recover the out-of-pocket expenses hehas incurred on various inputs. How he is going to survivefor the next four to six months is beyond imagination. Nowonder, under extreme desperation, many of them takeunfortunate and extreme steps.

Obviously, compassion and slogans of Jai Jawan, Jai Kisan

are not enough. We need better insurance policies that arerational and sustainable as business models. The currentset of insurance policies under the National AgricultureInsurance Scheme (NAIS), Modified NAIS, and the Weather-Based Insurance Scheme (WBIS) have failed miserably toprotect our farmers. The compulsory deduction ofpremiums from loans to farmers, who take institutionalcredit, basically protects the banks from potential baddebts, but not the farmers. The Modified NAIS and WBIShave very high premium rates, hovering around 10 percent of the sums insured, based on three years averagedata collected for the kharif and rabi seasons. No wonder,as per the NSSOs situation assessment survey of farmersfor 2012-13, less than 5 per cent of farmers (presumablybeyond loanee farmers accounts) opted for cropinsurance. With 95 per cent farmers exposed to the risks ofnature, insurance policies have a long way to go.

Why are crop insurance premiums so high in India? Onekey reason is the small scale of coverage, less than 15million hectares (mha), in any typical crop season. In acountry where the net sown area is around 140 mha andthe gross cropped area hovers between 190-200 mha,insuring only 15 mha or so is peanuts. We need a majoroverhaul of our crop insurance system, and this is a goodtime to do so, converting a crisis into an opportunity to seta more robust and sustainable system in place. Before Isuggest one, it will be good to take a quick look at how theworld is insuring its crops and farmers from the vagaries ofnature. Maybe we can learn something from internationalbest practices.

The US and China are the worlds biggest crop insurers. Inthe US, the state supports almost 70 per cent of premiumspaid by farmers. In China, the state used to support 50-65

per cent of premiums, which was raised to almost 80 percent in 2013. So the first lesson for Indian policymakers isthat the state will have to pitch in heavily. Assuming thatwe need to have a minimum coverage of 100 mha,insurance experts tell us that premiums will fall to lessthan 5 per cent of sums insured, and may stabilise around2.5 to 3 per cent. Even assuming that premiums will fallfrom 10 to 5 per cent, as the scale of insured area increasesfrom, say, 15 mha to 100 mha, and if the sum insured is,say, Rs 30,000 per ha (Rs 40,000 per ha for irrigated cropand Rs 20,000 per ha for unirrigated crop, with equalweights), the premium required will be Rs 15,000 crore for100 mha covered (or Rs 1,500 per ha).

If the state is ready to bear, say, two-thirds of this, one-third can be charged to the farmer. On a per hectare basis,the farmers share will be only Rs 500 per ha as premiumfor an insurance cover of Rs 30,000 per ha and this isvery much a workable business model. If stategovernments are also taken on board under cooperativefederalism, the Centres share can be reduced to 50 percent (Rs 750 per ha); while the state governments sharecan be 25 per cent (Rs 375 per ha) and the farmers 25 percent (Rs 375 per ha).

From where will the state get resources of Rs 10,000 croreto insure 100 mha? Then Prime Minister Atal BihariVajpayee, when he was to construct national highways andintroduce the Pradhan Mantri Gram Sadak Yojana, put a 2per cent cess on fuel. A similar idea can be used forcomprehensive insurance, by putting a 2 per cent cess onfarm input industry (tractors and farm implements,fertilisers, pesticides, and even agri-credit) and a 3 to 5 percent duty on exports of water-guzzling crops and produce,such as rice, sugar, buffalo meat, etc.

Comments(2)

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Private-sector insurance agencies can be invited to bid forthe share of insurance at the lowest premium and fastestsettlement of claims at the block level, without any plot-to-plot assessment. Farmers accounts can be linked to pixel-based mapping of their fields and satellites can be used,with agronomic experts to gauge the extent of damages.

If the Modi government can do this, it will be the bestBaisakhi gift to Indian farmers on April 13. It can bringback smiles on their faces and insure them for all the yearsto come.

The writer is Infosys chair professor for agriculture atIcrier

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Nasa This is a very bad idea going down the way ofMNEGRA. Our farmers will find ways to show thecrop is damaged due to some or the other reason,unless the insurance will kick in only when govtdeclares that the destruction qualifies for theinsurance to be kicked in.

about 5 hours ago (0) (0) reply(0)

Girish will the finance ministry ever consider this?similarly universal health insurance can beimplemented. why do they forget simple executiontactics blinded by their own marketing follies?

about 6 hours ago (0) (0) reply(0)

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