Bankers have sought a cess-like structure for agriculture insurance. In their list of proposals discussed with the stakeholders in the industry, these officials have said that there should be a low-premium compulsory National Agriculture Insurance Policy with contribution from central & state government.
Less than 20 per cent of farmers in India are insured, exposing a vast majority of the farming community to the vagaries of weather which lead them to taking desperate steps, as is being seen after a vast damage to the Rabi crop this year, according to an Associated Chambers of Commerce and Industry (ASSOCHAM)-Skymet Weather joint study.
At the all-India level, only 19 per cent of farmer reported ever having insured their crops. A very large proportion of 81 per cent were found to be unaware of the practice of crop insurance. Of the un-insured, 46 per cent were found to be aware but not interested while 24 per cent said that the facility was not available to them. Only 11 per cent felt that they could not afford to pay the insurance premium, mentioned the joint study.
In their proposal, top bankers in an Indian Banks' Association interaction have said that since agriculture insurance market is not well developed, the government through suitable policy measures should ensure insurance premium be affordable & subsidized from sources like cess as done in Education loans.
As per the ASSOCHAM-Skymet study, there are about 32 million farmers who have been enrolled in various crop insurance schemes across India. However, issues in design, particularly related to delays in claims settlement, have led to farmers not being covered, despite significant government subsidy.
The government is planning a modified National Agricultural Insurance Scheme (NAIS), a market-based scheme with involvement from the private sector, since only Agriculture Insurance Company (AIC) operates in this space.
Compared with the existing scheme, the ASSOCHAM-Skymet study said that the new programme would have a design that may offer more timely, claim settlement, less distortion in the allocation of government subsidies and cross-subsidies between farmer groups, and reduced basis risk.
For coping with natural risks, crop insurance is one of the mechanisms available to mitigate loss. In this context, many crop insurance schemes have been developed. These schemes were further modified and the recent National Crop Insurance Programme (NCIP) has been evolved having modified national agricultural insurance scheme (MNAIS) and weather based crop insurance scheme (WBCIS) as component scheme. MNAIS is yield based scheme and WBCIS is scheme in which claim is announced on the basis of weather data.
Bankers, have further said that claim of insurance should be on unit-loss basis instead of loss evaluated at block level . Also, they have said that share croppers/tenants farmers & women should also be covered. At present, in insurance claim threshold yield is average 3/5 years crop yield i.e. less than actual farm yield of that particular year.
Weather Based Crop Insurance Scheme (WBCIS) aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse conditions of weather parameters like rainfall, temperature, frost among others.
At present restructuring in agricultural loans in case of natural calamity is done when crop loss /damage is more than 50 per cent. During the inauguration of Pradhan Mantri MUDRA Yojana, PM Narendra Modi announced that the criteria of 50 per cent crop damage for providing compensation to affected farmers has been reduced to 33 per cent. These 33 per cent loss criteria should be taken as benchmark for restructuring.
Presently there is a system of two types of Insurance i.e. a weather based Insurance scheme and a Modified crop Insurance scheme. Bankers proposed that this should be replaced by a single insurance scheme to cover all risks of crop loss faced by the farmer.
Moreover, in the modified insurance scheme, the claim is not tenable if 50 per cent crop loss is not occurring over the whole of the Block. This means that the determinants for insurance claim are very broad and hence individual farmers at the local level will be put to loss. Bankers have proposed it should be ensured that the determinants of insurance claim are fixed at the micro level i.e. at each farm.
In many states, each district has been allotted to one insurance company for weather-based crop insurance. Bank officials have said that this ends up creating a monopolistic situation.
Apart from AIC, private players have developed weather-based crop insurance products. According to ASSOCHAM-Skymet, these weather-based insurance products are advantageous over yield- based insurance products in terms of time taken for claim settlement and transparency in settlement of claims, reveals the joint study.
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