Crop insurance revisited

Earlier this month, unseasonal rain ravaged 11 districts of Maharashtra, damaging crops such as green gram, jowar, onion and wheat, grape and cotton planted over 1.9 lakh hectares. The moot point is whether crop insurance will come to the rescue of farmers in over a thousand villages. The State agriculture minister has said that farmers not covered by insurance will be compensated from the National Disaster Relief fund up to a maximum of ₹18,000 per hectare — a pittance. Field reports suggest that grape farmers in badly-hit districts such as Jalna have not been able to buy crop insurance because the area is not ‘notified’. A minimum of 20 hectares of a crop is required to be cultivated in a revenue circle for the region to be notified for crop insurance. This criterion must be revisited if it is impeding the spread of insurance. The Pradhan Mantri Fasal Bima Yojana (PMFBY), launched in January 2016, seeks to bring 50 per cent of gross cropped area under insurance by the end of 2018-19 by addressing the limitations of earlier schemes. Consequently, farmers pay only 2 per cent of the total premium in the case of kharif crops, 1.5 per cent for rabi crops and 5 per cent for horticulture crops. The Centre and States share the remaining premium burden equally, and there is no cap on the insurance cover. Given the serious investment in PMFBY (₹10,698 crore in 2017-18), implementation issues should be addressed at the earliest.

The PMFBY should improve its settlement record, which wasn’t very impressive in 2016-17. Against a claim of ₹12,438 crore in 2016-17, less than half the claims were settled. Delays in crop cutting experiments (CCE) and States not coughing up their share of the premium have led to this situation. Delayed CCEs affect the assessment of damage and accuracy of claims. (It is not clear whether CCEs have been proactively carried out in Maharashtra.) Settlement delays can affect the credibility of the scheme and its spread (now informally estimated at 26 per cent of GCA), more so when the premium is being compulsorily deducted against crop loans. Under weather-based insurance, growers should get an upfront amount while CCEs arrive at accurate estimates. Sharecroppers too should be covered.

It is important to revisit the role of banks and insurance companies in PMFBY. Instead of insurance companies getting rural customers on a platter through the banks, they should earn their customers and premiums by marketing their products, just as they do in urban markets. This would hold them more accountable to their clientele, and push them to offer differentiated products to suit different crops and agro-climatic conditions. It does not make sense for the PMFBY allocation to fill the coffers of insurance companies alone — given the rate of settlement claims. The lens has to be on the insurer.

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