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Performance of Crop Insurance in Rainfed Regions- The case of Maharashtra

BY: Suresh A | Category: Others | Submitted: 2015-12-24 12:24:44
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Article Summary: "Crop insurance is considered as an effective risk transfer mechanism. In India, crop insurance has a long history in its various forms. However, the penetration of the crop insurance schemes is low, and therefore, its effectiveness in protecting the farmers during stress is limited. This issue is serious in case of rainfed farmi.."


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Performance of Crop insurance in rainfed regions- The case of Maharashtra

Introduction

Agriculture is a sector, which subject to a high degree of risks and uncertainty. The income and employment generated from the agriculture sector is seasonal, irregular and uncertain. Besides various input factors, dependency of agricultural production is exceedingly on the natural factors such as excessive or scanty rainfall, hails, storms, landslides, peril etc. Adverse and uncertain weather conditions lead farmers to vulnerable situations.

Crop Insurance Schemes in India since Independence

First crop insurance scheme introduced was First Individual Approach Scheme in 1972. Initially, this scheme was comprised to H-4 cotton crop in Gujarat only but later on it was extended to groundnut, wheat, gram and potato in Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu and West Bengal. The scheme insured only 3110 farmers and paid premium of Rs.4.54 lakhs only as against Rs.37.88 lakhs, therefore, it was continued till 1978-79 only. Another scheme introduced in 1979 was Pilot Crop Insurance Scheme (PCIS) based on area approach. This scheme covered 6.23 lakhs farmers growing cereals, millets, oilseeds, cotton, potato and chickpea and was implemented in 12 states till 1984-85. In line with this scheme, a new scheme was launched namely Comprehensive Crop Insurance Scheme in 1985. It was based on short term crop credit and homogenous area approach. This scheme covered 763 lakh farmers for a premium of Rs.404 crore against claims of Rs.2303 crore. Both the schemes, PCIS and CCIS were subject to the farmers having seasonal agricultural loans from any financial institutions. But in case of PCIS, scheme was on voluntary basis while CCIS was compulsory for all the loanee farmers. Different states were demanding for the timely modification in CCIS. Therefore, a new scheme was launched in 1997 viz., Experimental Crop Insurance Scheme. Afterwards, numbers of schemes were launched to insure farmers from the crop losses due to different calamities.

Schemes launched are listed as follows:

National Agriculture Insurance Scheme in India


The National Agricultural Insurance Scheme (NAIS) was introduced in Rabi 1999-2000 by the Agriculture Insurance Company of India Ltd. (AIC). This scheme was the replacement of Comprehensive Crop Insurance Scheme (CCIS). The main objective of the Scheme was to protect the farmers against the crop losses suffered on account of natural calamities, such as, drought, flood, hailstorm, cyclone, pests and diseases. The scheme focused on to increase coverage of farmers, crops and risk commitment. It was available to all the farmers both loanee and non-loanee irrespective of their size of holding. It covers all the food crops (cereals, millets and pulses), oilseeds and annual commercial/horticultural crops, in respect of which past yield data is available for adequate number of years 3. The Scheme was continued till Kharif2013; however, some States are allowed to implement NAIS during Rabi 2013-14 also. The Scheme was optional for States/Union Territories (UTs) and it had been implemented by the 25 States and 2 Union Territories in one or more seasons.


Modified National Agricultural Insurance Scheme (MNAIS)

To improve further and make the Scheme easier and more farmer friendly, a proposal on Modified National Agricultural Insurance Scheme (MNAIS) was prepared and was approved by Government of India for implementation on pilot basis in 50 districts from Rabi 2010-11 seasons.


Pilot Weather Based Crop Insurance Scheme (WBCIS)
With the objective to bring more farmers under the fold of Crop Insurance, a Pilot Weather Based Crop Insurance Scheme (WBCIS) was launched in 20 States in 2007. Apart from Agriculture Insurance Company of India, some private companies have also been allowed to implement the Scheme. The WBCIS is intended to provide insurance protection to the farmers against adverse weather incidences, such as deficit and excess rainfall, high or low temperature, humidity etc. which are deemed to impact adversely the crop production. It has the advantage to settle the claims within shortest possible time. The WBCIS is based on actuarial rates of premium but to make the 4 Scheme attractive, premiums actually charged from farmers has been restricted at par with NAIS. The WBCIS was implemented in 18 States and 469.38 lakh farmers were covered for a premium of Rs.7,51,920 lakh against the claims of Rs. 52,860 lakh under the Scheme from 2007-08 to 2012-13. The total area insured was 632.01 lakh hectares during the same period.

Coverage of NAIS, WBCIS and MNAIS in Maharashtra

Among all the states, Maharashtra is the state with higher number of farmers insured under the schemes NAIS, MNAIS and WBCIS. Total number of farmers insured under NAIS till the year 2012-13 is 34.5 million, out of which 30.3 million were insured during Kharif season and 4.2 million in Rabi Season (Table 1). There is significant decrease in number of farmers insured i.e., 29.5 million in 2000-01 to 17.4 million in 2013-14. However, area insured is decreased by more than 50 per cent during the same time period. Out of total farmers insured, only 31 per cent of them get benefitted till 2012-13.


Table 1 Season-wise Farmers/Area Covered, Sum Insured and Insurance Charges under NAIS in Maharashtra (2000 to 2012-2013)
Season FI ('000) AI ('000 Ha.) SI (Rs. M) FB ('000)
Kharif 2000 2529 2817 17780 1057
Rabi 2000-01 421 379 4640 174
Kharif 2001 2667 3119 18140 551
Rabi 2001-02 86 61 200 20
Kharif 2002 1793 2275 10130 229
Rabi 2002-03 248 274 840 121
Kharif 2003 1727 1880 9210 528
Rabi 2003-04 1035 1160 3490 944
Kharif 2004 2070 1928 11210 693
Rabi 2004-05 141 104 650 22
Kharif 2005 2316 1888 12230 245
Rabi 2005-06 239 238 970 26
Kharif 2006 1638 1269 8350 620
Rabi 2006-07 38 45 150 1
Kharif 2007 1892 1213 8560 260
Rabi 2007-08 92 69 250 0.145
Kharif 2008 3453 2233 16370 1713
Rabi 2008-09 52 52 310 10
Kharif 2009 3102 2144 24350 1329
Rabi 2009-10 82 96 750 1
Kharif 2010 2125 1254 12630 82.5
Rabi 2010-11 56 61 640 2
Kharif 2011 2192 1441 15720 163
Rabi 2011-12 320 316 2520 283
Kharif 2012 1331 1047 13700 417
Rabi 2012-13 992 883 10470 901
Kharif 2013 1484 1331 19760 287
Rabi 2013-14 258 206 2690 67
Kharif 30320 25842 198170 8176
Rabi 4179 4062 29860 2613

Note: M- Million, FI- Number of Farmers Insured, AI- Area Insured, SI- Sum Insured, FB- Number of Farmers Benefitted

Farmers got insured under the scheme MNAIS in Maharashtra for Rabi 2010-11 (Table 2). Number of farmers got insured in Rabi 2010-11 was only 3663 and area insured was 5151 hectare. The corresponding figure for 2011-12 was 48301 and area insured was 44470 hectare and sum insured by them was around Rs. 70 million. There is only slight variation in number of farmers insured and area insured from the period of implementation. Total number of farmers insured under MNAIS was around 52 thousand and area insured was 50 thousand. On an average less than 1 hectare area was insured by each farmer.

Table 2: Season-wise Farmers/Area Covered, Sum Insured and Insurance Charges under MNAIS in Maharashtra (2010-11 to 2012-2013)
Season FI ('000) AI ('000 Ha.) SI (Rs. M)
Rabi 2010-11 3.663 5.151 5.9278
Kharif 2011 46.958 42.812 68.1056
Rabi 2011-12 1.343 1.658 2.1771
Kharif 46.958 42.812 68.1056
Rabi 5.006 6.809 8.105

Note: M- Million, FI- Number of Farmers Insured, AI- Area Insured, SI- Sum Insured, FB- Number of Farmers Benefitted

Implementation of WBCIS in Maharashtra started from Rabi 2011-12 onwards (Table3). Till the year 2013-14, 0.61 million farmers insured 0.71 million hectare areas and sum insured by them was Rs. 2326 million. However, out of the total insured farmers, 0.46 million farmers get the benefit under this scheme i.e., 74 per cent of the total number of farmers insured. Unlike NAIS and MNAIS, in case of WBCIS number of farmers insured under Rabi season is much higher than that of Kharif season. There is very slight variation in number of farmers insured and area insured during the period 2011-12 to 2012-13.

Table 3: Season-wise Farmers/Area Covered, Sum Insured and Insurance Charges under WBCIS in Maharashtra (2011-12 to 2012-2013)

Season FI ('000) AI ('000 Ha.) SI (Rs. M) FB ('000)
Rabi 2011-12 45 48 427 11
Kharif 2012 4 5 27 3
Rabi 2012-13 62 64 583 20
Kharif 2013 11 11 64 1
Rabi 2013-14 44 50 369 26
Kharif 462 551 948 402
Rabi 151 162 1378 56

Note: M- Million, FI- Number of Farmers Insured, AI- Area Insured, SI- Sum Insured, FB- Number of Farmers Benefitted

It is clear from the Table 4, major crops insured under NAIS in Maharashtra during Kharif season are Cotton, Paddy, and Soybean and during Rabi season Bengal gram, Jowar, Wheat. In case of Kharif crops, highest numbers of farmers are insured under Soybean followed by Cotton and Paddy for the year 2013. However, in case of Rabi crops, highest numbers of farmers are insured under Jowar followed by Bengal Gram and Wheat.

Table 4: Crop-wise Farmers/Area Covered, Sum Insured and Insurance Charges under NAIS in Maharashtra (2011-13)

Season FI ('000) AI ('000 Ha.) SI (Rs. M)
Kharif 2011
Cotton 113 125 2097
Paddy 317 270 4637
Soyabean 500 413 4057
Kharif 2012
Cotton 138 157 3300
Paddy 196 192 2660
Soybean 314 275 3423
Kharif 2013
Cotton 283 328 6774
Paddy 150 161 2343
Soybean 398 403 5990
Rabi 2011
Bengal gram 51 35 467
Jowar 158 186 1039
Wheat 0.4 0.3 2
Rabi 2012
Bengal gram 278 184 3285
Jowar 477 507 4164
Wheat 3 2 10
Rabi 2013
Bengal gram 87 60 1159
Jowar 96 95 729
Wheat 0.3 0.1 1

Note: M- Million, FI- Number of Farmers Insured, AI- Area Insured, SI- Sum Insured, FB- Number of Farmers Benefitted

In case of WBCIS, major fruits insured were Banana, Grape, Orange, Mango, Guava, Pomegranate and Cashewnut. For the year 2013, only four fruits were insured i.e. Cashewnut, Grape, Guava, and Pomegranate. Among all, highest numbers of farmers were insured under Guava followed by Grape, Pomegranate and Cashewnut (Table 5).

Table 5 Crop-wise Farmers/Area Covered, Sum Insured and Insurance Charges under WBCIS in Maharashtra (2011-13)

Season FI ('000) AI ('000 Ha.) SI (Rs. '000)
2011
Banana 3.3 5.0 500423
Grape 11.2 11.9 1789922
Mango 4.1 4.4 439459
Orange 15.3 15.0 901676
Pomegranate 8.0 9.1 453025
2012
Banana 13.3 21.1 2110671
Grape 6.0 6.7 1005774
Guava 6.0 6.7 1006239
Mango 3.7 2.9 289173
Pomegranate 2.8 3.1 312217
2013
Cashewnut 0.6 26365 0.4
Grape 3.1 510850 3
Guava 3.4 519043 4
Pomegranate 1.3 122299 1

Note: FI- Number of Farmers Insured, AI- Area Insured, SI- Sum Insured, FB- Number of Farmers Benefitted

Summary and conclusion

The data presented in the tables indicate that the coverage of crop insurance schemes putting together all the insurance schemes is limited. This is true in terms of the number of farmers covered, and number of crops brought under the schemes and total area covered. All the three schemes face various constraints. The most important of them being, the attitude of farmers towards the concept of crop insurance. It is noted that farmers believe the crop insurance as a source of expenditure, than a risk transfer mechanism. Further, constraints in crop insurance in terms of the delay in delivery of compensation, procedural difficulties and the sum received by the farmers are sources of discontent among farmers against crop insurance. Therefore, attempts are needed to enhance the depth and coverage of crops insurance, so that it is more inclusive and effective as a risk management mechanism.

About Author / Additional Info:
Working as Senior Scientist (Agricultural Economics). Working on rainfed agriculture, risk management and natural resource economics.

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