With the monsoon this year being bountiful and well distributed, it is at first glance not surprising that crop insurance has found few takers. But that’s the problem: the monsoon is not the only risk that looms over farming. In these times of climate-change-induced extreme weather, late season losses are by no means a remote possibility. In February 2015, the wheat crop suffered huge damage in Punjab, thanks to an unseasonal hailstorm. An irrigated State, Punjab’s farmers have never been drawn to crop insurance; as a result, they were reduced to depending on doles from the Centre and the State government. This episode acted as the trigger for the Pradhan Mantri Fasal Bima Yojana, rolled out for this kharif. With Punjab as the backdrop, the Commission for Agriculture Costs and Prices had made a pitch last year for comprehensive, all-India crop insurance coverage, covering 50 per cent of farmers in two or three years, from the barely 20 per cent at present. The PMFBY has slashed kharif premiums to 2 per cent of the sum insured for kharif crops, and 1.5 per cent for rabi, the subsidy accounting for 80-90 per cent of the actuarial rate. This was against the just-scrapped Modified National Agriculture Insurance Scheme charging farmers about 8 per cent, and the subsidy amounting to 65-70 per cent. Yet, if the new offer is has not evoked enthusiasm, one needs to explore the reasons – other than a possibly misplaced sense of confidence about the weather and the indifference of a handful of States.

The PMFBY is based on estimates of yield loss, which depends crucially on crop-cutting experiments (CCEs) conducted on a sampling basis. Payments in this case are slow in coming, and for the indemnity sum to correspond to the losses incurred by the individual farmer CCEs have to be skillfully done for as small a unit area as possible. The moot point is whether this method inspires confidence. Weather-based insurance, however, is a straightforward affair, since it merely compensates farmers concerned for deviation from the norm in a particular region. Payouts are quick. But the issue here is that the compensation is not always accurate. What the sector needs is a range of products – similar to the insurance products on offer for the urban consumer. Both the government and the insurance players should conduct market studies to understand the sort of insurance that farmers and sharecroppers are looking for – and this could vary across regions and crops grown.

If the outreach is no more than 20 per cent of farmers, it is because these buy a policy by default when they take a crop loan. While the new policy talks about reaching out to sharecroppers and others, it is not clear how that will be achieved. The scope of the bank-SHG linkage can be looked into. India needs a crop insurance revolution, given the livelihoods involved and the relentless exposure to risks.