The Narendra Modi government deserves credit for lowering the eligibility for farmers to claim compensation against natural disasters. Financial assistance would henceforth be given even if crop losses are 33 per cent, as against the 50 per cent requirement till now. Unlike most other businesses, farmers are exposed to the vagaries of the market as well as the weather. In the latest rabi crop season, for instance, they suffered both from lack of rains when required (during sowing and vegetative growth stages) and from an excess when least desirable (at the time of maturity and harvesting). Compensation against such unforeseen disasters can by no means be viewed as dole. State support for crop destruction owing to factors beyond anyone’s control is different from subsidies on fertiliser or water, which are market-distorting and also promote inefficient resource use.
This only further strengthens the case for an effective crop insurance mechanism. Such a scheme would ensure that compensation is not dependent on government large-heartedness. While the Modi government may have also hiked compensation amounts by 50 per cent, the fact is these are still pretty low. What is Rs 13,500 per hectare, for example, to a wheat farmer in Punjab, whose crop in normal conditions would have fetched five times that amount? Add to this, the time taken for the payments (from surveys by the tehsildars to final sanction by the state government machinery) and also the ceiling of two hectares per farmer, the relief sums hardly work out to much in real terms. What is needed, instead, is a system where payouts are triggered automatically based on deviations of identified weather parameters (rainfall, temperature, humidity, etc) from their normal levels during a particular stage for any crop. This should be combined with the use of high-resolution satellite imagery and tools like handheld GPS sensors to assess actual crop damage.
While enhancing compensation is a good first step, the Modi government should think beyond conventional calamity relief. A robust crop insurance system, in which claim settlements are automatic and linked to weather readings rather than the whims of revenue officials, is what we need to eventually move to. This would require making insurance mandatory for any compensation against crop loss. The government, if necessary, can subsidise the premiums payable — more so for small and marginal farmers. Such subsidy is preferable to under-pricing of urea and electricity or procuring grain at support prices fixed way above market rates. And given the sheer vulnerability of agriculture to climate change, it may be necessary, too.