Farmers need insurance from govt policies

Farmers need insurance from govt policies

The Prime Minister’s Crop Insurance Scheme (PMCIS) was announced with much fanfare as the panacea for all risks faced by the farmers. Ironically, on...

The Prime Minister’s Crop Insurance Scheme (PMCIS) was announced with much fanfare as the panacea for all risks faced by the farmers. Ironically, on the same day news came that in the year 2015 over 3,228 farmers had committed suicide in BJP-ruled Maharashtra.

The phenomenon of farmer suicides has continued unabated for over two decades when the neo-liberal economic policies have been in operation. The ruling classes in a denial mode however, has sought to underplay the unprecedented human tragedy and linked farmers’ misfortunes to the weather gods.

What the Prime Minister is proposing is to insure the farmers from vagaries of nature. What is actually required is to insure farmers from the adversities created by deliberate government policies...

Uncontrolled increase in input prices coupled with fall in prices of agricultural commodities is a regular phenomenon. Minimum support prices are unremunerative and far below actual costs of production.

Farmers do not even get this price as there is no effective procurement. The absence of effective support system to address such risks has acted as a disincentive to farmers and there is need for immediate confidence-building measures to overcome such a scenario.

The efficacy of the PMCIS to address risks of farmers also needs to be analysed as effectively, insurance has the potential to build confidence among the cultivating peasantry.


The first and foremost was the need for a universal comprehensive crop and income insurance scheme covering both income and yield risk for all farmers including tenant farmers and sharecroppers as well as for all crops.

The PMCIS continues with the system of covering loanee farmers only on a mandatory basis. Non-loanee farmers as well as tenant farmers and sharecroppers are likely to remain excluded from its ambit as is the case at present.

The socially and economically oppressed Dalit and Adivasis will also largely be excluded from the scheme. Most of them living in precarious situation with meagre incomes from cultivation will find it difficult to pay the premium.

To be truly inclusive the Central and state governments must subsidise the entire premium for the poor, small and marginal farmers, tenant farmers, share-croppers as well as all Adivasis and Dalits farmers…

The Centre and state should share these expenses in 70:30 ratio as many states are unable to bear this huge expense. North Eastern states and states like Odisha, Jharkhand, Chhattisgarh and Bihar must be fully subsidised by the Central government. Only such decisive moves will help to incentivise the farmers and make agriculture viable.

‘All-risk agricultural insurance’ which can absorb the shock of crop failure by providing a cushion that assures the farmers of adequate protection against crop losses as well as fall in incomes due to market volatilities is what was required. This is indispensable in the context of climate change and other exigencies as well as volatile prices of farm produce under a trade liberalised economy.

A separate price stabilisation fund to address the issue of fall in prices of agricultural commodities due to trade liberalisation must be instituted with adequate funds. The PMCIS fails to come up with a comprehensive resolution of these issues.

At present there are restrictions on crops that can be insured in a district though the crop is traditionally grown in the district for the last several years. Any new scheme for being effective should be applicable to all districts and expanded to cover all crops (including food crops, horticultural and plantation crops) and all farmers including tenant farmers/share-croppers.

Unit of assessment

The underlining principle should have been that even in case there is crop loss in a farm the farmer should be able to get compensation. At present, assessment is being done at block, taluk or mandal level.

This is leading to denial of reimbursement of losses to genuine farmers who have lost their crops. The unit for insurance should be provided on the basis of data on yield and weather collected at the level of the village with the losses on individual farms taken into account.

Only then the calculation of the threshold yield and indemnity levels can be sensitive to local conditions and address losses suffered by individual farmers. For ensuring this the government should immediately establish systems of village-level collection of data on crop yields, weather conditions and price situation.

It is also notable that even in such a situation and undervaluation of losses as well as undue delays in settlement of claims the coverage and indemnity payments are biased towards a few regions and crops.

According to the Situation Assessment Survey and National Sample Survey Organisation the share of households not insuring their crop are in some crops up to 100 percent and in most crops over 95.

The extension of risk period under crop insurance till the produce reaches the storage within reasonable time after crop harvest must be ensured. At present this covers only up to crop cutting and possibilities of later risks in the interim period between the harvest and transport to storage facilities are not effectively taken into account.

In case of post–harvest losses the harvested crop bundled and heaped at a place outside the field before threshing will not be covered in the scheme. Coverage is available only up to a maximum period of 14 days from harvesting for those crops which are kept in ‘cut & spread’ condition to dry in the field after harvesting, against specific perils of cyclone/ cyclonic rains, unseasonal rains throughout the country. This could act as a loophole to deny farmers genuine claims from damages caused post-harvest by rains or other causes.

Gross undervaluation

In calculating the threshold yield for purpose of settling insurance claims the present scheme proposes to take the rolling averages of past seven years, rather than the potential yield in a normal year. Semi-arid and dry-land agriculture as well as flood-prone areas and drought-prone areas will show a low average leading to gross undervaluation of losses and thereby denying the farmers their due.

In areas that are frequently hit by drought and floods, yields of the affected years should be eliminated and only yield for normal years should be taken into consideration to fix the threshold level for loss assessment. Removal of two calamity years alone will not suffice as erratic climate in many regions leads to losses and low yields every season.

Since actuarial premia are likely to be high for regions with low and erratic rainfall, a special budgetary subsidy must be ensured to address problems of these regions. Indemnity levels, threshold yields and other yardsticks must be amended to safeguard the interests of peasants in arid and semi-arid zones.

The calculation of actual yields as well as costs must be done in a transparent manner and calculations of scale of finance must be based on latest information and arrived scientifically by also involving experts and farmers’ representatives. Minimum support prices must also be calculated according to the Swaminathan Commission recommendation of at least 50 per cent above the cost of production (C2+50%). This may be particularly useful to ensure farmers are given correct insurance in years registering fall in yields.

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