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LATEST NEWS UPDATES | A harvest-time gift -Ashok Gulati

A harvest-time gift -Ashok Gulati

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published Published on Jan 18, 2016   modified Modified on Jan 18, 2016
-The Indian Express

New crop insurance scheme is welcome. Its litmus test: Whether crop-damage assessment can be done within two weeks of the extreme weather event and compensation paid a week after that

The Narendra Modi-led government needs to be complimented for taking the first major step to revamp the crop insurance system to address the increasing distress in Indian farming. With back-to-back droughts, and unseasonal rain and hail in certain pockets, it became clear that the risks in farming are on the rise, and the existing system of crop insurance was nowhere near meeting the needs of the peasantry. The sums insured were low (based on the cost of inputs rather than prospective income), the premiums high (generally ranging between 8-12 per cent in the case of the modified scheme), the assessment of crop damage lacked transparency and didn’t use the latest technologies (this was more a political exercise than scientific assessment) and, finally, compensation took unduly long, even going beyond a year in many cases, and was reported to be ridden with corrupt practices.

Given this backdrop, the new scheme is surely a step in the right direction and very timely — not only could it save Indian agriculture from the increasing risks of nature, it could help protect the political goodwill of the NDA government, which has been fast dissipating in rural areas. Although more details are needed on the new scheme, especially on how it will be implemented, but as a concept, it surely deserves kudos.

While actuarially based premiums generally hover around 10-12 per cent for most kharif crops, the share of farmers has been capped at 2 per cent in the new scheme. For rabi crops, the farmer’s share has been fixed at 1.5 per cent — against actuarially based premiums of 8-10 per cent. For year-long cash crops and horticulture crops, this has been capped at 5 per cent. What this means is that farmers will get almost 80 per cent subsidy in insurance premiums, which will be borne by the government — presumably by the Centre and the state government, although there is lack of clarity on the proportion that will be shouldered by each.

This rate of subsidy in crop premiums is not out of line with international practices. The United States insures its farmers (about 123 million hectares) and gives subsidy to the tune of around 70 per cent. China insures its farmers for a sown area of around 75 million hectares with a subsidy on premiums of about 80 per cent. India plans to cover around 50 per cent of its cropped area, which hovers around 195 million hectares, over the next five years if the scheme really takes off.

The new scheme is estimated to cost the government around Rs 8,000-9,000 crore annually. Given that the government is already shelling out around Rs 5,000 crore annually (average for the last five years) through its clumsy mechanism for disaster relief, the additional cost of the scheme isn’t much. Nevertheless, the scheme could be the harbinger of change, provided that two conditions are satisfied.

First, crop assessment should be done in a transparent manner and within a specified period of time, and using high technology such as automatic weather stations (AWSs), drones, low earth orbits (Leos) and satellites. Is this infrastructure in place? How much will it cost and how much time will it take to get it in place? There is no clarity on this. Can we fix the time period within which crop-damage assessment must be done: Say, within two weeks of the extreme weather event? These issues need to be clarified for the successful implementation of the scheme.

Second, compensation must be paid to farmers’ accounts directly, say, within a week of assessment of crop damage. In Kenya, compensation is paid in two to four days. In order to do this, the financial infrastructure has to be in place. Information has to be digitised plot wise — the plot of the tiller who has paid the premium has to be synchronised/ seeded with her bank account number, Aadhaar number and mobile number. This is critical, as the crop-damage assessment exercise has to be matched with data on plots and bank account numbers of the tillers. Is all this infrastructure in place? I doubt it.

To ensure that this idea is not buried under bureaucratic wrangling of various stakeholders, the prime minister’s office must focus on and persevere with the creation of this basic infrastructure. This task must be accorded the same priority as was given to the opening of Jan Dhan accounts. This exercise will involve the ministries of rural development (to clean up land records), agriculture and farmers’ welfare (to digitise plot-wise information), as well as banks (to seed accounts of tillers with their Aadhaar and mobile numbers). But who will set up the AWSs, drones, Leos, and satellites? Who will be responsible for the functioning of this high-tech equipment? What would be the role of private-sector insurance companies? The role of Nabard and the RBI? All these questions need systematic answers. The accountability of each stakeholder needs to be clarified and fixed. Lot of work still needs to be done.

The bottomline is that crop-damage assessment must be done within, at most, two weeks of the extreme weather event, and compensation to farmers deposited directly into their accounts within a week of the assessment — without their asking or even realising it. This would be the litmus test for the success of this scheme and the perfect Lohri/ Bihu/ Pongal gift to farmers. Only then will the risks of farming be reduced, incentives for private investments in agriculture increased, and agricultural growth and farmers’ prosperity revived.

Will the government rise to the challenge? Only time will tell. Nevertheless, at this stage, the government deserves compliments from farmers and farm analysts for focusing on the problems of rising risk in agriculture.

The writer is Infosys Chair Professor for Agriculture at Icrier, Delhi


The Indian Express, 18 January, 2016, http://indianexpress.com/article/opinion/columns/narendra-modi-crop-insurance-sysytem-nda-governmenta-harvest-time-gift/


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