Commodity Analysis

BusinessLine Agri Summit: Risk mitigation in farming is need of the hour

Our Bureau | Updated on February 22, 2020 Published on February 22, 2020

The conference on February 27 & 28 will look at how to risk-proof agriculture

The Indian farmer today faces several risks — starting from climate variability, fluctuation in yields, pest attacks, imperfect markets and weak infrastructure to limited credit availability and insurance. Increasing rural distress and rising number of farmer-suicides are the outcome of the absence of risk management tools in agriculture.

Cognizant of the perils in farming, the Centre has been bringing out policies to manage them all. But outcomes have been slow. The Pradhan Mantri Fasal Bima Yojana, the crop insurance scheme introduced in Kharif 2016, is an improved version of the earlier schemes and covers wide-ranging risks. The cost of this insurance scheme is subsidised significantly for farmers. According to government data, a total of six crore farmers are covered under the scheme. However, there have been some pitfalls in the scheme because of gaps in implementation at the State level, and not all farmers are happy with the programme.

 

 

 

While small changes in structure and implementation process can improve the scheme, the government has decided to make it voluntary for loanee farmers from kharif 2020 and limit the subsidy. So, the fate of the scheme is unclear now. The other way risk management can be done in agriculture is through hedging in the commodities market. Over the past few years, the Centre and commodities market regulator SEBI have given an impetus to commodity exchanges. The SEBI last year forwent the regulatory fee in agriculture commodity derivatives so that the cost of hedging on the platform reduces for farmers and farmer-producer organisations (FPOs).

Farm credit

The government has also been trying to bring more farmers into the institutional credit channel through Kisan Credit Card and pushing banks to meet their priority sector lending.

Farm credit has been growing every year and this year’s target is a massive ₹15-lakh crore.

That said, ground reports reveal that accessibility to credit for small and marginal farmers is still poor.

PM-KISAN, the income support scheme for farmers introduced last year, is a good move. It is much better than price policy support through MSP (minimum support price) that doesn’t benefit all farmers. It is also better than loan waivers which benefit only farmers who borrow from institutional sources.

However, given that PM-KISAN excludes tenant farmers and that there have been challenges in identifying the eligible farmers under the scheme, its effectiveness has been limited.

At the BusinessLine Agri Summit on February 27 and 28 in New Delhi, experts from the sector will look at how to risk-proof agriculture. To make farming a viable business and help farmers prosper, attention has to be given to mitigate risks one way or the other.

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Published on February 22, 2020
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