Crop Insurance Schemes in India for Farmers

Introduction

Agriculture forms the backbone of India’s economy, as over 50% of the population depends on farming for its livelihood. Indian farmers, despite being the backbone of India’s economy, face various problems, primarily arising from climatic vagaries, pests, diseases, market fluctuations, and infrastructure. Most of these result in financial instability and create a vicious cycle of debt and poverty. To address these issues and provide farmers with financial security, the Government of India has introduced several crop insurance schemes. These are for mitigating risk and ensuring that they get adequate compensation for crop loss due to natural calamities, pests, diseases, or other unforeseen circumstances.

Importance of Crop Insurance in India

Crop insurance is considered an important tool for safeguarding farmers against the uncertainty of agriculture production. Because of frequent and intense natural disasters such as droughts, floods, hailstorms, and unseasonal rains due to climate change, farmers are severely vulnerable to losing their crops. Crop insurance helps provide financial stability, thereby protecting their income and livelihood. This, in turn, motivates the farmers to implement better agricultural practices, advanced technology, and more resilient crop varieties as promoted by the government through its insurance schemes.

Types of Crop Insurance Schemes in India

India launched several crop insurance programs to address the varied risks of losses by farmers. These crop insurance schemes cover small, marginal, and large-scale farmers, and include food grains, pulses, oilseeds, and horticultural crops. The major schemes are as follows:

1. Pradhan Mantri Fasal Bima Yojana (PMFBY)

It was in 2016 that the Prime Minister Fasal Bima Yojana (PMFBY) was introduced across India as the flagship crop insurance scheme. This highly expansive scheme aims to provide affordable insurance coverage for farmers against any loss occurring in their crops due to natural calamities, pests, diseases, or other adverse factors. Among other attractive features, this premium is sponsored by the government and is not very high. This covers food crops, oilseeds, and horticultural crops and is therefore a scheme that reaches out to various farmers across the country.

In the case of PMFBY, a small amount of the premium is collected from the farmer and the balance is paid by the government. It covers losses arising due to both pre-and post-harvesting of crops and ensures protection against any adverse weather events such as droughts, floods, and unseasonal rains. The coverage also includes local calamities like hailstorms and cyclones.

Features:
  • The coverage includes both food and cash crops.
    Low premium rates, with the government providing subsidy.
    Cover against yield loss as well as post-harvest loss.
    Fast claims settlement process due to technology including remote sensing and drones.

1. Weather-Based Crop Insurance Scheme (WBCIS)

The WBCIS is an insurance scheme that provides coverage based on weather parameters rather than the actual yield of crops. It is based on scientific weather data such as rainfall, temperature, humidity, and wind speed. This scheme is ideal for crops that are highly sensitive to weather conditions, such as cotton, maize, and oilseeds.

WBCIS is not dependent on yield estimation but based on the actual weather data measured by automatic weather stations. This means that whenever the weather surpasses the critical threshold, then the farmer receives compensation even if the crop yield is not impacted. This has made WBCIS a rather innovative way to mitigate the uncertainty of weather risk, which in itself is somewhat unpredictable.

Features:
  • Insurance based on weather parameters such as rainfall, temperature, and humidity.
  • Suitable for crops that are sensitive to weather changes.
  • No need for direct estimation of crop yield.
  • Emphasis on compensation of weather-related risks.

3. National Agricultural Insurance Scheme (NAIS)

The National Agricultural Insurance Scheme came into existence in the year 1999 and can be considered the oldest crop insurance plan in India. This scheme gives coverage to damage caused by a natural calamity such as floods, droughts, and even pests, where the crops come under both categories of food as well as cash crops. For the management, the Agriculture Insurance Company of India (AIC) is being used, providing much-needed finances to the poor farmers.

Under this scheme, the amount to be insured is based on an average yield for a period. Compensation is payable if the actual yield falls below the threshold. Popular among farmers, the scheme has been criticized due to its ineffectiveness in reaching small farmers and its tendency to delay compensation.

Features:
  • Provides coverage against loss due to natural calamities, pests, and diseases.
  • It provides average crop yield-based compensation.
  • It is run by the public sector company AIC.
  • It is suitable for food crops and cash crops alike.

4. Modified National Agricultural Insurance Scheme (MNAIS)

The MNAIS is an upgraded version of the NAIS introduced in 2010. This modification aims to improve the scheme’s effectiveness by providing more localized coverage. MNAIS includes a more accurate compensation system and covers both yield loss and post-harvest losses due to adverse weather conditions. The scheme also uses advanced technologies like weather forecasting and satellite imagery for more precise loss assessment.

MNAIS is the friendlier counterpart to its old version, much more transparent while offering faster compensation processing and open communication with farmers. However, it is pretty challenging to provide it to almost all rural villages and remote area coverage.

Feature:

  • Its compensation system uses improved localized risk.
  • Higher use of superior technology for high-quality risk assessing.
  • Ensures yield as well as post-harvest losses.
    It is more transmissible and makes claims processing quick.

5. RWCIS: Restructured Weather-Based Crop Insurance Scheme

The RWCIS is another weather-based insurance plan that was launched to extend the coverage of weather-based risks to more crops. The scheme assesses the risk faced by farmers through detailed weather data and advanced forecasting models. It covers a wide range of weather risks, including drought, excessive rainfall, frost, and high or low temperatures.

RWCIS is especially useful to farmers whose crops are sensitive to particular weather events, such as cotton, sugarcane, and groundnuts. The scheme has been commended for its targeting of specific localized weather events that can decimate crop yields.

Features
  • It zeroes in on the specific weather risk factors, which include drought and excessive rainfall.
  • It makes use of super-advanced weather forecasting to evaluate the risks correctly.
  • Covers a wider range of crops compared to other weather-based schemes.

Benefits of Crop Insurance Schemes

  1. Risk Mitigation and Financial Security: The most significant benefit of crop insurance is that it provides financial protection to farmers in case of unforeseen losses. Whether due to natural disasters or pest attacks, farmers are compensated for their losses, which helps them continue farming without falling into debt.
  2. Increased Agricultural Productivity: Farmers will be more likely to use modern farming techniques, better crop varieties, and efficient irrigation systems when financial risks are reduced. Overall agricultural productivity improves and food security is enhanced.
  3. Availability of Credit: Crop insurance increases the credit worthiness of the farmer. In case the farmers are insured, banks and financial institutions will more likely provide credit to them as the risk of non-repayment is less as there is a coverage of insurance.
  4. Investment in Agriculture: Crop insurance ensures safety, so the farmers would invest in agriculture. It facilitates the adoption of new farming practices and increases the sustainability of agriculture.
  5. Encouraging Crop Diversification: By covering a range of crops, these insurance schemes allow farmers to diversify their crops, reducing the financial risk associated with monocropping.

Challenges of Crop Insurance Schemes in India

While crop insurance schemes offer many benefits, they are not without their challenges:

  1. Low Penetration Among Farmers: Although these schemes are available, most of the farmers, particularly small and marginal farmers, are unaware of the available insurance products. The unawareness, coupled with the complicated processes of enrollment, limits their reach.
  2. Latent Settlement Period of Claims: Crop insurance can also be listed among the prime complaints of the farming community- a latent period in the settlement of claims due to lengthy paperwork and red tape resulting in a lot of time in settlement, causing insurance to lapse when it most is needed by the farmer.
  3. Lack of coverage for small farmers. Small and marginal farmers, who constitute a considerable percentage of India’s agricultural community, cannot afford the premiums. Even after subsidies, the premium remains unaffordable to most of them.
  4. Difficulties in Accurate Loss Assessment Assessing crop losses with precision is particularly problematic for large, far-flung areas. Such loss assessments sometimes are not delivered promptly, while in some instances, incorrect loss assessment has caused delay or refusal of claims.
  5. Other crops, such as fruits, vegetables, and floriculture, still fall partially uncovered under the schemes: The schemes are able to cover virtually all major food crops, but many other crops that a farmer may grow still remain un-covered. This means the schemes are not as effective for farmers who will have lots of varieties under their plantations.
    Conclusion
    Crop insurance is extremely important in safeguarding the livelihood of India’s farmers by providing a safety net against adversities. It is critical in ensuring the sustenance of agriculture in the changed climate and risky agricultural scenario. The schemes so far have indeed been effective and provided protection but require greater outreach, timely claim settlements, and greater inclusion among small farmers. Crop insurance in India can see a sea of change with sustained reforms and technologies, which shall bring growth stability and food security.

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