Why the New Crop Insurance Scheme is Not Helping Indian Farmers

With millions of farmers affected by drought and flooding every year, it’s time to give them some better insurance.

Recently Delhi and Gurgaon saw immense public outrage, followed by extensive media coverage when a few hours of incessant rain brought the city to a standstill. When thousands of farmers are forced to abandon their villages as flood waters destroy their crops, wash away their livestock and reduce their houses to shambles, it is the traffic snarls in Delhi which fill up the front pages of the newspapers.

The average rainfall in India in July-August shows a decreasing trend since 1951, even though rainfall variability has gone up. In the recent past, there has been a shift towards greater intense rain spells coupled with more frequent less intense dry spells. While this causes a great deal of inconvenience in the lives of urban commuters, it threatens the very existence of their rural counterparts.

Almost 80 percent of the winter crops in Uttar Pradesh were impacted in 2015. It was the worst affected state with 73 out of 75 districts suffering losses. Rajasthan, Haryana and Bihar followed close after Uttar Pradesh.

With this level of crop destruction, farmers need alternatives.

Why Crop Insurance Schemes Fail Our Farmers

There are existing crop insurance schemes, the problem is most haven’t benefited farmers.

Only about 20 percent of all farmers in the country are insured for crop damage. This is because the insurance premium is seen as an added burden over and above the loans they are already struggling to pay.

Small and marginal farmers suffer the most as the premiums are quite high. At the same time, some of the terms and conditions of the schemes are downright absurd. For instance, the farmers are required to report crop loss within 48 hours of its actual occurrence to the local agriculture department. In the days following a natural disaster, this can be difficult for farmers.

The process of verifying claims is another problem. If the damages are over 50 percent, an upfront payment of 25 percent is made. However, the remaining 75 percent is paid after the ‘crop cutting experiment’ — an assessment which estimates the losses against the expected actual yields.

In the absence of a more scientific mechanism of doing this, these assessments are unable to give an accurate value of the produce. The remaining payment as well as the payment for those who have suffered less than 50 percent crop damage takes from six months to a year and sometimes even more. This fails the entire purpose of giving compensation to the affected at a time when it is most needed.

Pradhan Mantri Fasal Bima Yojna – Flailing Hope?

In January this year the Pradhan Mantri Fasal Bima Yojna was announced. The scheme is already running into trouble.

Although the scheme has subsidised the insurance premium for the farmers, it has also made it mandatory for the states to share the rest of the premium with the Centre. The states are unwilling to share this burden as it is too high for them — in some states, it accounts for almost more than half of their agriculture budget.

As the tussle goes on between the Centre and State, the sowing season has already gone by. Several states are resorting to ways and means of evading the financial burden.

One of them being issuing tender notifications for implementing the scheme. So far 22 states have done so, most of them sending the notification in the months of June and July.

Another tactic that the states are resorting to is a reduction in the amount insured in order to bring down the premium. Rajasthan, for instance, has reduced its premium from the expected Rs. 1,800 crore to Rs. 676 crore.

But, the woes don’t end here. One of the key features of the scheme shifts the unit of ‘crop cutting experiments’ from the block level to that of villages across the country.

According to the Agriculture Insurance Company Limited (AICL), this new change requires about 4 million crop experiments and an equal number of people to carry them out. Considering the sheer number of personnel required as well as the inadequacy of this method in estimating crop losses, the answer perhaps lies in the adoption of new technologies i.e. through remote sensing and satellite data.

With the existing loopholes and unresolved issues in the implementation of the scheme it seems that the farmers might have to wait for even longer to secure their livelihoods in this climate risked world.

(Parul Tewari is a Senior Research Associate with the Centre for Science and Environment)