The Gokhale Institute of Politics and Economics (GIPE) in Pune is devising a special model to improve crop insurance for farmers in the country, after the government of Haryana requested it to do so. The institute is studying the latest kharif season, and the insurance claim patterns during it, in Haryana. Once the model is completed, GIPE plans to approach the Maharashtra government for a similar exercise.
Experts at the institute said the current central insurance scheme — Pradhan Mantri Fasal Bima Yojana (PMFBY) — also provides a protective cover for crop yield, along with crop loan, and this has made a significant difference in the overall insurance coverage for farmers. The effort now is to ensure better insurance cover for farmers and fair profit margins for insurance companies, said Rajas Parchure, director of GIPE.
There are a few insurance companies in India that deal with crop insurance and the Agriculture Insurance Company of India Ltd is the largest of them, with a 60 to 65 per cent share of the market.
During its study, the institute found that many farmers’ insurance claims get rejected on several grounds, such as overpricing of insurance premiums and manipulation of crop yield, done by both parties. Agriculture insurance companies, meanwhile, are making huge profits in the process, particularly during the last two to three years, and there is an urgent need to tighten the scheme, said GIPE experts.
In 2017, the total premium amount paid to insurance companies in the country was Rs 25,764 crore, while the net profit made by them collectively stood at Rs 2,874 crore. In Maharashtra, 1.17 crore farmers were insured for both kharif and rabi season in 2016 – 2017, and the variability of monsoon was also reflected in the insurance pattern sought by farmers. The study found that 67 per cent farmers incurred heavy losses due to dry spells or poor rains in kharif season, as compared to 7.5 per cent farmers who faced losses during rabi season.
“Of the total area under rabi cultivation, only 6.25 per cent was insured, while as much as 42.78 per cent was insured under kharif cultivation. Given the amount of uncertainty in kharif cultivation, as the crop depends heavily on monsoon, more farmers insure kharif crops,” stated a recent GIPE report that evaluated the PMFBY in Maharashtra.
Some of the suggestions by the institute include putting a cap on the number of bids on a particular area that an insurance company can make and appointing an independent agency that will evaluate crop insurance applications, so that there is no interference from any party. “GIPE can be one of the agencies that carries out crop assessments and gives a report to the insurance companies. But for that, we will need the government’s support as massive trained manpower will be needed to carry out such assessments on the field,” said Parchure, adding that nearly 1,000 people will be needed only in Maharashtra for such an exercise.
But the biggest challenge for carrying out crop assessment in India is the size of farms, said GIPE experts. “In India, the farms are tiny in size in comparison to farms abroad. This makes it challenging for the assessors to visit or evaluate individual farmers here, but instead, a large area is considered as one entity before the claims are settled,” said researchers.
Significantly, in recent years, the number of farmers who don’t have a loan but still seek insurance as protective cover against crop failure is higher than than those farmers who have availed a loan in Maharashtra.
In 2016, 1.10 crore farmers — 65 per cent of the total number of insured farmers — didn’t have any loans. The number of farmers without a loan burden, who are seeking insurance, was higher in drought-prone Marathwada than in Pune and Ahmednagar districts. “Awareness about insurance is growing and more farmers who have no loan burden are seeking insurance cover. The companies also have the mandate of increasing the insurance cover by 5 per cent annually…,” said researchers.