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HomeOpinionMarch rains left Indian farmers in need of govt help. Crop insurance...

March rains left Indian farmers in need of govt help. Crop insurance scheme will be tested

Farmers in Telangana, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Haryana have suffered heavy losses due to unseasonal rains in March. Will Pradhan Mantri Fasal Bima Yojana rescue them?

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The effectiveness of the government’s crop insurance scheme is going to be put to the test again. The unseasonal rains in March may not have had much impact on India’s food security but the affected farmers are in deep trouble.

No occupational class is as vulnerable to adverse weather events as the farmers. After working hard for months, it is heartbreaking to see their efforts in ruins. Most small and marginal farmers earn barely enough to make both ends meet. If they lose their crop to weather events, they end up in debt. Some of them commit suicide. 

A tough season all around

In March 2023, unseasonal rains, hailstorms, and strong winds in parts of India shattered farmers’ dream of harvesting a bumper crop. What is more alarming is that like 2021-22, this rabi (winter) season has also witnessed unusual weather. Initially we saw a prolonged dry spell, with no rainfall all through November 2022 to February 2023. Then several days in February had unusually high temperatures. Fortunately, that spell did not last very long but hail, rainfall, accompanied by strong winds in March would have caused huge loss of income to affected farmers.

The damage to rabi crops seems to be quite widespread.

According to Telangana agriculture department, around 20,000 acres of maize, green gram, papaya, mangoes, and other crops were affected due to an untimely hailstorm in several districts of the state. In Maharashtra, losses have been reported for wheat, maize, papaya, mangoes, vegetables, banana and grapes on over 66,000 hectares (ha) affecting more than 85,000 farmers. Similarly, in Madhya Pradesh, crops, particularly wheat, spread over 40,000 ha were reportedly damaged affecting over 5,000 farmers. In Punjab, wheat, vegetables, and fruit crops (bottle gourd, okra, bitter gourd, watermelon, etc) are reported to be damaged on 13 lakh ha. Rajasthan has reportedly suffered 2 percent to 40 percent of crop damage on 0.25 mha of rainfed areas in many districts. These media reports are not based on actual surveys, and they may well be over-stating the extent of losses.

State governments of Punjab, Rajasthan, and Haryana have ordered special girdawari (crop assessment) and announced relief to affected farmers. Compensation of Rs 15,000 per acre was announced by the Punjab government for farmers who have suffered more than 75 percent of crop loss and Rs 6,750 per acre for a loss between 33 percent and 75 percent. Telangana has announced compensation of Rs 10,000 per acre for affected farmers. Madhya Pradesh has also announced a compensation of Rs 32,000 per hectare for farmers whose crops have suffered loss of over 50 percent.

In 2016, the Modi government launched an attractive Pradhan Mantri Fasal Bima Yojana (PMFBY) in which the farmers were required to pay a nominal premium. The maximum premium for food grain and oilseeds crops in kharif (summer) is 2 percent of sum insured. For rabi crops, the maximum premium is only 1.5 percent. For annual commercial and horticultural crops, the maximum premium is 5 percent of sum insured.

The objective of the scheme is to provide financial support to farmers who suffer crop loss or damage arising out of unforeseen events. It covers risk from pre-sowing to post-harvest stages.

Due to changes in the last two years, PMFBY is no longer compulsory for farmers and even those farmers who have availed crop loans can opt out by submitting a declaration to their bank. However, farmers who do not submit the declaration are automatically insured.

The wheat and mustard farmers may get insurance claims for their crop losses in Haryana, Rajasthan, and Uttar Pradesh as these states notified these crops for insurance for rabi 2022-23. However, farmers who have opted out of the insurance scheme will not get any insurance claim.

It is currently not possible to assess the number of farmers who will receive insurance claims because the details are yet to be communicated by the states to insurance companies.


Also read: NAFED procuring onions only a bandage. Govt must plan long-term measures, loop in farmers


Assessing the damage 

In the last few years, the debate in the media has remained largely focused on premium subsidies paid by the Union and the state governments, and the claims paid by insurance companies. It was highlighted that some private insurance companies have made huge profits from PMFBY as their claim ratio was very low. To address this problem, the Beed model of crop insurance was promoted in some states where the insurance company is not obliged to pay claims exceeding 110 percent of gross premium. If the crop losses are high, the state government must bear the claims of more than 110 percent of the premium collected. However, if the claim amount is less than the premium, the insurance company can only keep 20 percent of the amount as handling charges and reimburse the balance amount of premium to the state government (premium surplus).

It is not known if the Beed model has been adopted by the states that witnessed adverse weather events in March. It is also not known if the state governments of affected states have paid their share of premium subsidy to insurance companies. If this has not been paid, the companies are not obliged to settle the insurance claims. Both these issues will have an impact on settlement of claims of farmers.

In 2021-22, the claim ratio in Maharashtra was 74 percent, in Haryana 136.7 percent, in Uttar Pradesh 62.7 percent, and in Rajasthan 54.2 percent.

The use of modern technology like satellites, drones, artificial intelligence, and modelling tools, etc is now an important feature of PMFBY for assessment of crop damage. After an extensive process of evaluation of technical capability of shortlisted private companies, the government validated four companies for assessment of losses in kharif crops, using modern technology. But it seems that the technical capability of these companies is not being used for assessment of damage. If the yield assessment of damaged crops has to wait till crop cutting experiments are conducted, the farmers may not receive any claim for several months from now. In that event, the idea of using technology would have been defeated.

In the 2023-24 Union Budget, an amount of Rs 13,625 crore has been provided for premium subsidy, etc under PMFBY. The states will also contribute an equal amount.

If the state governments and insurance companies can ensure prompt settlement of insurance claims, PMFBY’s usefulness to farmers will have been proved and it may attract more farmers to opt for crop insurance. Already, in Maharashtra, crop insurance is taken by large numbers of farmers who have not availed crop loans because their previous experience of receiving claims is not bad.

The government should release granular data of crop insurance information in public domain so that independent researchers can also evaluate the functioning of the scheme on the ground.

Siraj Hussain is a former Union agriculture secretary. Kriti Khurana is a PhD scholar of economics at BITS Pilani, Hyderabad. Views are personal.

(Edited by Prashant)

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