‘Crop insurance is a fertile field’

This is where the modern insurance sector can play a major role and considerably strengthen the financial security of farmers.

In India, the agriculture sector engages 72 per cent of the total population. It has a very high dependence on weather as only 35 per cent of the area is irrigated. The majority of cultivators are uneducated and not fully aware of the scientific and technologically advanced farm practices.

Moreover, the markets are not well developed, hence farmers do not get remunerative prices. The inadequate rural infrastructure is another important area.

Apart from human considerations, there is the challenge of converting this scenario into a business opportunity. Insurance players could develop suitable products to take care of the requirements of individuals as well as households in rural areas, with crop-related, asset-related, health-related products or other components that affect production, assets, income or livelihood or life.

To understand the prospects for insurance companies in rural India, it is very important to understand the requirements of India’s villagers. Our villagers are farmers, craftsmen, milkmen, weavers, casual labourers, construction workers and shopkeepers and so on. More often than not, they are into more than one profession.

A typical farmer is totally at the mercy of the monsoon. What happens if there are floods or a drought or a pest attack? What if there is a crop failure or a crash in prices? With the WTO regulations all set to be enforced, what will be the fate of a small farmer left to the mercy of global market forces?

Agriculture crop insurance cannot increase productivity or be a source of finance, but it can play a role in enhancing both. The objectives of crop insurance can be decided on the basis of priorities for the development of agriculture in the country.

Considering crop insurance as a risk-mitigation measure for agriculture production, the following objectives may be assigned:

• Stabilising agricultural production or the farmer’s income by reducing adverse effects resulting from crop losses due to natural hazards

• Encouraging farmers to adopt improved technologies that can lead to increased production and more efficient use of inputs

• Better credit rating, required for the increased flow of crop loans to the farmers.

The future lies in policies that villagers really need and which accurately focus on the end-user and his or her requirements. Wherever possible, a package approach should be adopted so that the various covers do not have to be marketed separately.

The government of India introduced the Comprehensive Crop Insurance Scheme in 1985 through the General Insurance Corporation. The scheme was broadbased by way of scope and content and renamed National Agricultural Insurance Scheme (NAIS) from1999-2000.

The Agriculture Insurance Company (AIC) was constituted to cater to the requirement of agriculture insurance, and is now the implementing agency. Besides NAIS, the AIC has formulated certain new innovative products like ‘Farm Income Insurance Scheme’ and ‘Varsha Bima Yojana’, which are being implemented in selected pockets on a pilot basis.

Private sector insurance, after its entry in November 2000, is now at a take-off stage, with global entities like Allianz group, ING Prudential, AIG group, Aviva, Metlife, CHUBB, Royal Sun Alliance and Lombard setting up operations in association with established domestic business houses. The initiatives taken by the private sector companies in regard to agriculture crop insurance, however, are very limited and insignificant.

The rural Indian market, with its vast size and demand base, cannot be ignored by the corporates. The government’s plans to infuse used funds in the rural sector will further help in enhancing the demand potential.

Kumar is the chairperson of NABARD