The Hindu Business Line : Raining benefits

The most critical or potent among the various risks an average Indian farmer faces during any farming season is the weather, more precisely the amount of total rainfall and its distribution over the crop cycle. Output losses and, in turn, fall in income caused by poor precipitation have been the defining feature of the agriculture sector for many decades. Cultivation under irrigated conditions represents just about 40 per cent of the total cropped area. Stagnating farm production (annual average of 2.2 per cent during 1992-2002) resulting in worsening agrarian crisis continues to be the economy's bane. It is in this context that the proposed rainfall-based crop insurance scheme mooted by the Government deserves to be welcomed; but one must hasten to add, it may not be the ultimate solution.

Unfortunately, earlier insurance schemes including the National Agricultural Insurance Scheme (NAIS) as also some private initiatives failed to deliver adequate levels of the intended benefits for various reasons including shortcomings in their formulation. Uncertainties over unit area of insurance, calculation of guaranteed income, low indemnity level and delay in settlement of claims were the key problems; and in some cases, high premiums discouraged farmers. No wonder, at about 1-1.5 crore farmers representing approximately 27-29 million hectares, the NAIS has been far from successful even seven years after its launch. The new scheme is said to be an improvement over the previous ones in that the payout would be a function of precipitation at different stages of crop growth and the moisture requirement at each level.

Be that as it may, it is necessary to debate whether the proposed scheme will actually benefit farmers by protecting them against the vagaries of weather. There seems to be tacit assumption that crop losses occur due to moisture stress caused by rainfall deficiency. While more often than not it is true, it need not necessarily be the case always. Crop losses can occur due to excessive rain or due to other natural calamities such as floods, hailstorms, and frost. Pest attacks are largely driven by aberrant weather. Would compensation be paid, and if so, how the payout would be calculated in case farmers in some regions have access to supplemental irrigation facilities (despite erratic rain) is unclear. Eventually, what the farmer needs is compensation for loss of income due to natural calamities or what are popularly called force majeure conditions.

In addition to compensating for loss of income due to erratic rainfall, it is of utmost importance to build capacity among farmers to withstand the setback and enable them to bounce back the following season. In initiating and strengthening the process of capacity building, commercial banks that lend to farmers and insurance companies that provide rainfall-deficiency cover must work together. Importantly, vigorous attempts to complete the ongoing irrigation projects and ensure expansion of irrigated acreage brook no delay.

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