Insurance

The Perils of India’s Crop Insurance

India has been offering crop insurance to farmers for more than forty years. But they see it more as a conditionality for bank loans than a truly risk mitigation device, writes Vivian Fernandes in this short brief on the subject.

  • India has been offering crop insurance schemes since 1972
  • In all cases, the claims have been much higher than the premium earned.
  • Currently, India has two schemes, the modified National Agriculture Insurance Scheme and the Weather-based Crop Insurance Scheme.
  • They are offered mainly by the state-owned Agricultural Insurance Company of India and three private insurers
  • In the case of mNAIS, the area approach is followed, which means, all farmers in an agriculturally homogenous area get compensated if their yields are less than the threshold (moving) average. The chances of unwarranted losses are high because of fraud or just negligence on the part of crop yield assessors.
  • Most farmers do not see a benefit. The compensation is inadequate and delayed. Eighty percent of the insured opt for it because they cannot get a bank loan without it.
  • Agriculture Minister Radha Mohan Singh told the Rajya Sabha on 11 December 2014, that existing insurance schemes have failed and a new one is in the works.
  • Weather-based crop insurance is perhaps a better scheme. The government could throw it open to both public and private insurers on least-subsidy basis.

(Photo: Distraught farmers, awaiting procurement of wheat for many days at a mandi in Nupur Bet near Ludhiana, pose for a photograph on 24 April, 2015. Photo by Vivian Fernandes)

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