Crop Insurance Schemes

CROP INSURANCE

Agriculture in India is highly susceptible to risks like floods, drought and others. So it is necessary to protect the farmers against natural calamities. Due to that, GoI introduced many schemes throughout the country. Prof. V. M. Dandekar often referred as Father of Crop Revolution in India.

“Crop Insurance is the scheme purchased by agriculture producers to protect themselves from heavy losses due to natural calamities and to stabilize the farm business during the period of crop failure”. 

General Objectives for Crop Insurance:

These are the general objectives adopted by the different crop insurance schemes.

1.   To protect the farmers against loans suffered by them due to crop failure.

2.   To fight against natural calamities such as drought, flood, cyclones, fire etc.

3.   To provide the required credit to farmer for season.

Different Crop Insurance Scheme:

In October 1965 the Government of India decided to introduce a Crop Insurance Bill and a Model Scheme of Crop Insurance in order to enable the States to introduce crop insurance if they so desired. In 1970, the draft Bill and the Model Scheme were referred to an Expert Committee headed by Dr. Dharm Narain.

There after flow of schemes continues to till today. These are enlisted below and their features are discussed in Table.

1.   First Crop Insurance Scheme, 1972

2.   Pilot Crop Insurance Scheme, 1979

3.   Comprehensive Crop Insurance Scheme, 1985

4.   National Agriculture Insurance Scheme (NAIS), 1999

5.   Agriculture Insurance Company of India Limited (AIC), 2003

6.   Pradhan Mantri Fasal Bima Yojna (PMFBY), 2016

Table: Different Crop Insurance Scheme

No	Scheme	Est. Year	Objectives or Coverage	Features
1.	First Crop Insurance Scheme	1972 Gujarat	Insurance of cotton, wheat and potato	It is based on Individual Area Approach. Upto 1978-79 covered only 3110 farmers with premium of Rs. 4.54 lakhs against claims of 37.88 lakh. So not successful
2.	Pilot Crop Insurance Scheme	1979	The scheme covered cereals, millets, oilseeds, cotton, potato, gram and barley. It covers 13 states with 6.27 farmers.	V. M. Dandekar Suggests Homogenous Area Approach. GIC & state government shared risk in the ratio of 2:1. The scheme a Premium of  Rs. 1.97 cr. against Claims of  1.57 crore
3.	Comprehensive Crop Insurance Scheme (CCIS)	1985	It was implemented on Homogeneous Area approach and was linked to short-term crop credit. It covers 15 states and 2 Union Territories (UT).	Premium & Claims were shared by Central & State Government in 2:1 ratio. The Scheme was optional to State Governments. Drawback of the scheme out of total claims ₹16.23 billion, Gujarat alone received ₹7.92 billion for one single crop, groundnut. It is replace by NAIS.
4	National Agriculture Insurance Scheme (NAIS)	1999	To provide insurance covered and financial support to the farmers during calamities, pests & diseases. To encourage the farmers to use progressive farming practices and higher technology in Agriculture. It covers 25 states & 2 UT.	Scheme is available to all farmers irrespective to their holding size. It covers all food crops such as cereals, pulses, oilseeds and others. Premium rates vary from 1.5 to 3.5%. It operates on the basis of area approach and no upper limit of insured amount.
5.	Agriculture Insurance Company of India Limited (AIC)	2003	To provide financial security to persons engaged in agriculture and allied activities. It covers 500 districts with 20 million farmers. To help in stabilizing farm incomes. Head office is at New Delhi.	It includes Weather Based Crop Insurance Scheme (WBCIS). It is under administrative control of Ministry of Finance, GoI. Initial paid up capital was Rs. 200 Cr. and contributed by GIC (35%), NABARD (40%) and 4 Public sector banks (35%: 8.75% each) Authorized share capital was Rs. 1500 Cr.
6.	Pradhan Mantri Fasal Bima Yojna (PMFBY)	2016	To provide insurance coverage and financial support to the farmers in the event of crop failure.	The scheme covers Kharif, rabi crops as well as annual commercial and horticultural crops. In addition to yield loss, it covers post harvest losses also.

PRADHAN MANTRI FASAL BIMA YOJNA (PMFBY)

In January 2016, NDA Government has launched a new crop scheme called Pradhan Mantri Fasal Bima Yojna (PMFBY) or Prime Minister’s Crop Insurance Scheme. It will replace NAIS and Modified NAIS. The new scheme will come into force the Kharif season starting in June this year. The theme of the scheme is ‘Minimum Premium, Maximum Insurance to Farmers’.

          The new insurance scheme would cost the government Rs 8,800 crore over the next three years, assuming that 50 per cent of farmers are covered. At present, with 23 per cent insurance cover, the Centre spends Rs 3,100 crore a year on crop insurance. The insurance amount covered will also not be capped and so also the premium rates.

Objectives:

1.   To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.

2.   To stabilize the income of farmers to ensure their continuance in farming.

3.   To encourage farmers to adopt innovative and modern agricultural practices.

4.   To ensure flow of credit to the agriculture sector.

Implementation Agency:

The Scheme shall be implemented through a multi-agency framework by selected insurance companies under the control of the

ü  Department of Agriculture,

ü  Cooperation & Farmers Welfare (DAC&FW),

ü  Ministry of Agriculture & Farmers Welfare (MoA&FW),

ü  Government of India (GOI) and

ü  The concerned State in co-ordination with various other agencies like Financial Institutions (Commercial Banks, Co-operative Banks, RRB’s), Government Departments (Agriculture, Co-operation, Horticulture, Statistics, Revenue, Panchayati Raj etc.)

Crops Covered:

The scheme covers Kharif, Rabi crops as well as annual commercial and horticultural crops. For Kharif crops the premium charged would be up to 2% of sum insured and for Rabi it is 1.5% of sum insured. For annual commercial and horticultural crops premium will be 5%.

Insurance:

There would be One insurance company for whole state. Private insurance companies join hands with Agriculture Insurance Company of India Limited (AIC) to implement this scheme.

Losses covered:

In addition to yield loss, it covers post harvest losses also. It also provides farm level assistance against different calamities.

          At the same time Losses arising out of following conditions shall be excluded. Certain examples are War & kindred perils, nuclear risks, riots, malicious damage, theft, grazed and/or destroyed by domestic and/or wild animals, In case of Post–Harvest losses the harvested crop bundled and heaped at a place before threshing, other preventable risks.

Use of Technology:

Scheme recommends mandatory use of remote sensing, smart phones for quick estimation of losses suffered to process the claims further.

Other Features:

The scheme aims to bring 50% farmers under purview of it within next 2 to 3 years. About 25% of the likely claims will be settled directly on farmers account. It prescribes only one premium rates for each season for all foodgrains, oilseeds and pulses etc.

Comparison with earlier crop insurance scheme:

1.   It is optional to loanee and non-loanee farmers and open to all farmers.

2.   It set lowest premium so far in insurance scheme. (Premium rate is lower than the NAIS).

3.   It provides full coverage of insurance.

4.   Also covers localized risks such as landslide, inundation etc. For first time inundation has been included.

5.   Covers post harvest coverage. NAIS did not cover it, while modified NAIS cover only for coastal regions.

6.   Only one premium rate per season.

7.   Use of technology is mandatory in it.

Some of the General Insurance companies provide crop insurance scheme are as follows.

1.   Agriculture Insurance Company of India Ltd.

2.   IFFCO-Tokio General Insurance Co. Ltd.

3.   Tata AIG General Insurance Co. Ltd.