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LATEST NEWS UPDATES | Rains, tomato crisis: Will farmers be better off buying private insurance? -Subhomoy Bhattacharjee

Rains, tomato crisis: Will farmers be better off buying private insurance? -Subhomoy Bhattacharjee

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published Published on Jul 28, 2017   modified Modified on Jul 28, 2017
-Business Standard

Farmers are not getting enough protection as states mostly do not pay the premium they should

With the rains falling in abundance and tomatoes refusing to do so, agriculture economy experts have a lot to say on what both mean for the sector.
 
Both pose a risk to farmers — of floods and of lack of pricing power. Yet the farmers don't have much to fend those off since agricultural insurance as a protection from rain and tomato assault often does not make sense for them.
 
As this article by Sanjeeb Mukherjee in Business Standard shows, the cover is not happening because mostly states do not pay the premium they should on behalf of the farmers. This is the root of the weak crop insurance coverage that has happened ever since it was offered to farmers in 1985, at first as a Comprehensive Crop Insurance Scheme, to be replaced by the National Agriculture Insurance Scheme in 1999, or even after a dedicated Agriculture Insurance Company of India Ltd was formed in 2003.
 
The state government finance departments are not answerable to Agriculture Insurance Company for why they pay less premium. Once the market was opened up for private insurers, those companies could demand even less of an answer and, so, while the optics are there, the farmer finds he has hardly any crop loss protection to bank upon. Can this be solved by incentivising farmers to buy protection from the markets themselves?
 
Instead of asking these difficult questions, the recent report on agriculture insurance by the Comptroller and Auditor General of India again falls into the trap of judging the sector through the prism of a public sector entity. In the process it does more harm than good.
 
At a time when the centre is pushing for extension of the Pradhan Mantri Fasal Bima Yojana (PMFBY) among farmers, it would have done a world of good if the audit report had admitted that the three-decade-old model was junk, and outlined what could be an alternative.
 
Crop insurance does not get done because states pay inadequate premium on behalf of the farmers. They do this to cut their subsidies. This problem is not going away any which way the premium is thought of. The states compound it by not keeping records of farmers insured but outsource it to banks from which farmers take loans. “Neither the governments nor (insurance companies) have any role in maintaining databases of beneficiaries (farmer-wise, crop-wise and area-wise) under any of the schemes.” Who maintains those? Why, the banks of course. And who will they maintain any record for? Only for those farmers who take out loans and only for that amount of course. What happens to farmers who have not taken loans from banks — the audit has no solutions to offer. What then is the use of this audit?

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Business Standard, 27 July, 2017, http://www.business-standard.com/article/economy-policy/rains-tomato-crisis-will-farmers-be-better-off-buying-private-insurance-117072700983_1.html


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