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BW Businessworld

When Numbers Don’t Say Anything

India strives to bring 50 per cent of the gross cropped area within the ambit of insurance by FY19 to shield farmers from the whimsies of nature. The evident progress of the PMFBY notwithstanding, the Economic Survey looks wistfully towards Kenya’s crop insurance scheme. What is the Indian administration stumbling on? BW Businessworld investigates

The Economic Survey for the 2018-19 fiscal says, “Of course, climate change will increase farmer uncertainty, necessitating effective insurance. Building on the current crop insurance program (Pradhan Mantri Fasal Bima Yojana) weather-based models and technology (drones for example) need to be used to determine losses and compensate farmers within weeks (Kenya does it in a few days).” That was probably the harshest reflection on the Union government’s much bandied about crop insurance schemes for farmers. Ironically, it comes not from the Opposition in Parliament, or the political groups that champion the cause of the tillers of the soil or even economists who track policies — but the government itself.

The farmer needs to be reimbursed within weeks of a natural calamity like a drought, flood or an untimely hailstorm to make crop insurance schemes seem like a secure cushion against the whimsies of nature. In Kenya, where agriculture’s contribution to the gross domestic product is 24 per cent, crop insurance claims of cultivators are reimbursed within a few days. In India the farmer sometimes waits forever. A month or so after the Economic Survey was released, the Union Budget revealed a 44 per cent hike in the Pradhan Mantri Fasal Bima Yojana (PMFBY). Apart from raising the crop insurance kitty to a whopping Rs 13,014 crore for the financial year ahead, the Centre also proposes to extend the insurance cover to 50 per cent of the cropped area.

The PMFBY was launched with much fanfare in January 2016, with a corpus of Rs 5,501 crore, which was 84 per cent higher than the Rs 2,983 crore allocated for crop insurance in the 2015-16 fiscal. Since then, the government has demonstrated its sincerity in assuaging the distress of cultivators coping with the vagaries of nature (made worse by Climate Change), through astronomical allocations for crop insurance. The area covered by crop insurance only increased by 6.5 per cent from 53.7 million hectares in 2015-16 to 57.2 million hectares in 2016-17, however.

Did the marginal increase in cultivating area covered really make much difference on the ground? We come to that part of  the story later. In the 2017-18 fiscal, the PMFBY received a Budgetary allocation of Rs 9,000 crore, which was a magnificent 63 per cent jump over the previous year.

Provisions have been made for crop insurance since the early 1980s and ever since, crop insurance schemes have attracted flak for failing on counts of  “transparency, quick reimbursement and the correct assessment of loss”. Three crop insurance schemes were in effect before the PMFBY was announced — the National Agriculture Insurance Scheme (NAIS), the Modified National Agriculture Insurance Scheme (MNAIS) and the Weather Based Crop Insurance Scheme (WBCIS). The penetration of agricultural insurance was low and stagnant in terms of area insured and farmers covered. An ICRIER report says that between 2013-14 and 2015-16, the average area insured under all the schemes was 47 million hectares, covering 39 million farmers.

In the case of  both the MNAIS and the WBCIS, farmers had to pay eight per cent to ten per cent of the premium and could not insure all of their crop because of a cap on the premium. They could not claim reimbursement for much of the subsidies granted to them for farming inputs either. Settlement of crop insurance claims took as long as six months. Most cultivators, therefore, grew their crops without any significant insurance coverage.

Pradhan Mantri Fasal Bima
The PMFBY stands out from  the earlier schemes on several counts and not just because the Budgetary  outlay for it is magnificent. The crop insurance scheme ignores an  upper limit on government subsidy and the cap on the rate of premium for  crop insurance. The cap checked the government spend on crop insurance,  but it also discouraged farmers from applying for crop insurance.  Farmers are now entitled to reimbursement of their entire claims for  crop loss.
The farmer pays a uniform premium of two per cent for  Kharif crops, 1.5 per cent for Rabi crops and five per cent for  commercial and horticultural crops only. The rest of the premium for  crop insurance is borne by the government. The PMFBY strives to be more  effective by encouraging use of technology, like smart phones for  capturing and uploading data on crop harvesting. “The scheme is doing  fine,” says National Rainfed Authority of  India CEO, Ashok Dalwai.  “Even in the year 2017-18 when the Monsoons were good, claims worth more  than Rs 12,000 crore were paid ... The crop coverage is about 35 per  cent,” he says. Not all agree with him, though.

“Farmers do not  have much technical knowledge on subjects like insurance,” argues  Prabhakar Kelkar, Vice President of the Bharatiya Kisan Sangh. “They are  very simple people,” he says, “and then there is the issue of  coordination between the states and the Centre …” Some, like the  National Secretary of the Communist Party of India, Atul Kumar Anjan,  are more scathing in their criticism. “This is nothing new,” he says of  the PMFBY, “It is all old material in new package, they (the government)  have deceived them (farmers)!” Anjan is also a former member of the  National Farmers’ Commission.

 Yet numbers do show a 53 per cent jump in the number of farmers insured since the PMFBY was launched. Traditionally, the more enlightened within the farming community, like cultivators of cash crops like cotton, oilseeds and sugarcane, have opted for insurance. Small and marginal farmers still tend to be ignorant of such government largesse. The irony is that they (the small and marginal farmers) still make up the multitude within the cultivating fraternity.

So, while the government has been successful to an extent in increasing the area covered by crop insurance and in bringing more farmers within the ambit of the PMFBY, the really marginalised farmer may still be in the dark corner of  his small farm field. The crop insurance success story, therefore, is one of those tales where numbers (as in statistics of hectares covered by insurance) do not say many things about the facts on the ground. “They (the beneficiaries) perceive it as a mutual fund. The leaders are also promoting it that way,” says Dalwai, as an explanation for why the scheme was taking so long to catch on in some parts of agrarian India. “Once it is accepted as an insurance, they will realise that claims can be made only when crop losses are realised. Estimation of crop loss is a challenge,” he says.

Kilimo Salama
At a seminar on crop insurance recently, Union Minister of State for Agriculture and Farmers’ Welfare, Gajendra Shekhawat admitted that “lack of coordination between the Central and Provincial governments remains a root cause of anomalies in the crop insurance schemes”. The government of Kenya, whose crop insurance scheme the Economic Survey lauds, ensures that insurance claims of  farmers are settled in less than four days. Kenya relies on ‘Kilimo Salama’, a weather-index that automatically detects deviation in rainfall, presumes a low-yield or crop loss and transfers money to the accounts of the farmers.

“It requires state-of-the-art technology and real-time monitoring which involves a huge investment,” says Jatin Singh, Founder of Skymet (a major player in the Indian weather forecasting market), adding, “We have progressed in the field, but there is still a long distance to cover.” Dalwai concurs that “automatic weather gauge stations, sampling system” would ensure quick settlement of  farmers’ claims.


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