Agricultural insurance in INDIA(BHARAT)-2

Agricultural insurance in INDIA(BHARAT)-2

Some assurance: however new crop insurance theme will be a game-changer

That insurance penetration amongst India’s farming community could be abysmal is a notable truth. Out of the gross cropped space of 195.26 million hectares within the country, only 42.82 million hectares or twenty two per cent was coated underneath crop insurance in 2014. whereas the coverage was higher in some states — particularly Rajasthan and additionally Chhattisgarh, Odisha, Bihar and Mysore — it had been few tenth or less for the likes of Gujarat, West Bengal and province (see table).

But the low unfold of agricultural insurance — one in each 5 hectares — isn’t the sole issue. Equally necessary is that the inadequacy of canopy, in terms of the total insured (SI) or the most quantity that insurance would pay within the event of crop harm.

According to the Commission for Agricultural prices and costs (CACP), the common SI per area unit underneath the present national agricultural insurance theme was simply Rs eighteen,464 (Rs 19,141 in kharif and Rs sixteen,927 in rabi) in 2013-14. this is often manner below the gross worth of output (GVO) for many crops. Take paddy, wherever the GVO on associate degree all-India average yield of thirty six quintals and minimum support value (MSP) of Rs one,310/quintal in 2013-14 puzzled out to Rs forty seven,160 per area unit. Or tur (arhar), wherever these numbers stood at eight.5 quintals, Rs 4,300/quintal and Rs thirty six,550 per area unit, severally.

If policy claims cannot cowl even 1/2 the worth of turn out once the crop suffers serious harm, it solely shows why farmers aren’t very curious about taking insurance protection. And it additionally explains the poor unfold of crop insurance during a country that has full-fledged 5 full-fledged drought years (2002, 2004, 2009, 2014 and 2015) during this century alone.

The Narendra Modi government’s new Pradhan Mantri Fasal Bima Yojana (PMFBY) guarantees a departure from the present crop insurance schemes. These presently cap the premiums at 8-9 per cent of the SI for rabi foodgrains and oilseeds, and at 12-13 per cent for annual business and farming crops. within the traditional course, if the SIs were to be set nearer to the GVOs, the figurer premiums — i.e. supported correct applied mathematics risk assessment — would estimate even higher. during this case, the premiums are lowered  just by keeping the SIs a lot of below GVOs. The PMFBY, going by what has been notified, removes any artificial capping of the SI, leading to low claims being paid to farmers. The SI are calculated by multiplying the MSP of a crop with the common seven-year ‘threshold’ yield (excluding bad luck years) for the actual village punchayet space wherever it's fully grown. The premiums would be determined by the SI and not the opposite manner spherical, as is that the case currently. Farmers can, however, ought to pass the same premium of simply a pair of per cent for all kharif crops, 1.5 per cent for rabi and five per cent for commercial/horticulture crops. The gap between the figurer premiums and also the rates collectable by farmers would be absolutely met by the govt. there's no upward limit on government grant. 

If the theme is enforced as secure, it'll definitely be a big leap forward. however there square measure many catches. the primary is that PMFBY are applicable solely from future kharif season, which can well witness a traditional monsoon. the actual fact that it'd not profit farmers these days, once they square measure within the grip of associate degree torturing drought, might somewhat limit the scheme’s political attractiveness. Secondly, implementing the theme in letter and spirit can entail large premium grant outgo, additional therefore during a drought year. 

The implicit assumption appears to be that if low premiums attract additional farmers, the accumulated insurance penetration and crop space coverage can reach driving down figurer rates, because it is going on with mobile decision charges. The CACP reckons the premiums to drop to three.5 per cent of SI if five0 per cent of India’s gross cropped space is insured. On associate degree SI of Rs fifty,000 per area unit, this might come back to Rs one,750. For the farmer, the premium price are Rs 350 per area unit assumptive eighty per cent government grant. Lastly, it’s not clear whether or not and the way a lot of of the grant burden can ought to be borne by the states. What would happen to farmers in states whose governments insist that the tab be absolutely picked up by the Centre? On the full, though, there's plenty to commend regarding the PMFBY from a farmer’s point of view. If the conditions of low premiums and also the SI covering the whole GVO square measure met — in conjunction with fast claim settlements enabled by mobile and satellite technology — it will end up to be a game-changer for Indian agriculture