Making some sense of crop insurance

Crop damage from unseasonal rains, hailstorm and strong winds has been quite widespread in India, Mar 2015. -- ANI photo

Unseasonal rains, hailstorm and strong winds that appeared in three phases beginning the end of February have already done an extensive damage to the standing crops. With crop damage extending to over 181 lakh hectares in 14 States, crop losses have already dealt a severe blow to farmers. But with more rains expected in the next few days just before the wheat harvesting normally begins, more trouble awaits farmers.

According to preliminary estimates of the Ministry of Agriculture, Uttar Pradesh and Rajasthan have taken the maximum brunt, followed by Haryana, Madhya Pradesh, Maharashtra, Jammu & Kashmir, Punjab and Himachal Pradesh. Crop losses have also been reported from West Bengal, Andhra Pradesh, Telengana and Uttarakhand.

Public memory is very short. While it is being said that the present spell of unseasonal rains is the worst in the last 25 years, the fact is that unseasonal rains accompanied by hailstorm had also done extensive damage to standing crops in 24 lakh hectares in Madhya Pradesh and 18 lakh hectares in Maharashtra a year earlier, in March 2014.

While 43 farmers had committed suicide in the Bundelkhand region of Madhya Pradesh (and adjoining Uttar Pradesh) and another 40 in Marathwada region of Maharashtra last year, the death toll this year from the unseasonal rains in March has exceed 67 in Uttar Pradesh alone. More deaths have been reported from Rajasthan, MP and Maharashtra. But the loss to human lives is no indicator of the severity and extent of the crop damage the country has witnessed. It is the extensive damage to standing wheat, oilseeds, and pulses and in addition the damage to fruits and vegetables from hailstorm that has aggravated the agrarian crisis.   

Although Prime Minister Narendra Modi did assure farmers of immediate help and relief when he spoke to them in his radio programme Mann ki Baat on Mar 22, I am reminded of an insensitive remark made last year by the former Agriculture Minister Sharad Pawar when he said unusual rains and hailstorms are not uncommon and, therefore, appealed to farmers to show courage. But Pawar was quick to assess the damage accruing to sugar mills from a reduced sugarcane harvest even before the expert teams had visited the affected regions and assessed the crop losses.  

What has made the difference this year is that besides the media repeatedly highlighting the extensive damage to standing crops, the NDA is keen to ward off the anti-farmer tag it has earned especially after its failure to provide 50 per cent profit in the minimum support price (MSP) that it had promised before the elections. With the government already under flak for pushing in an anti-farmer land acquisition bill, it swung into action to salvage its popular image of being farmer unfriendly. Aerial surveys were conducted; top ministers travelled to the affected areas; chief ministers were quick to announce a series of measures including deferring interest payments on crop loans, waiver of electricity bills, immediate assessment of crop losses, and came up with promises of a higher compensation package. We will have to wait and watch to know how much of it actually translates for farmers once the weather returns to normal. 

In the past we have seen farmers receiving relief cheques of Rs 8, Rs 10, Rs 215, Rs 1305 and so on. Year after year we have read news reports of how farmers who have seen their crops affected by inclement weather had been poorly compensated by indifferent State governments. After months of waiting, when a farmer gets cheque that is not even worth presenting before a bank, it only shows the contempt and cruelty by which the farming class is treated. It is therefore heartening to see this year a lot more seriousness to help the affected farming families. Already, many States have announced a higher relief than what is spelled out under the provisions of the State Disaster Relief Fund.  

Earlier, I have watched with dismay the reluctance on the part of successive governments to provide for any meaningful crop insurance plan for farmers. While in urban areas, Insurance companies have appropriate plans to provide cover for every individual, house and automobile, for farmers the crop losses are assessed only at the block level. A farmer at best can get compensation for an average crop loss suffered in a block even if his own loss in his crop field is several times higher. Furthermore, not many farmers actually know that they have been insured, and not many Insurance companies know what the farmer is cultivating. They just pick up the premium from the banks, and disappear to return later at the time of collecting the next premier. This is primarily the reason why farmers have never been enthused to take to crop insurance.

Insurance companies say that it is practically impossible to ascertain the loss per farm. I don’t agree. This is just an apology to avoid adding on to the operational costs. In an age when it is easy to track the movement of every truck carrying foodgrains, I don’t see why the same technology cannot be used for mapping each and every farm in the country. At a time when remote sensing is being used to count the number of trees, it should not be difficult to measure the crop losses in each and every farm or a cluster of farms to begin with. Therefore I have two suggestions to make crop insurance meaningful:  

* IFFCO-Tokio General Insurance Company has launched a Barish Bima Yojna in collaboration with Karnataka government. It provides crop insurance coverage to a minimum group of 25 farmers having 100 acres of cultivable land. Although insurance amount was awarded on the basis of the amount of rainfall received, there is a need to improve it further to add yield losses suffered by farmers. A little more effort can succeed in turning this into a comprehensive crop risk insurance model for farmers. And subsequently, using the latest technology, it should be possible to come down to calculate the losses that each individual farmer suffers.

* Dhan Foundation in Tamil Nadu has come up with the concept of Micro-Insurance. Borrowed from the Netherlands where Micro-Insurance has worked very well. Let me illustrate. Mutual crop insurance was done for a major pest called red hairy caterpillar. Farmers were advised to take preventive measures, go in for crop rotation, and at the same time the yield loss was compensated. The premium was roughly 30 per cent of the sum assured. Similarly, ground nut was insured against weather fluctuation. A Mutual Insurance Committee is formed among the villagers, which decides on actual premium and also ascertains crop losses. The committee takes care to ensure proper claim settlement, which has often been completed in one month.

Two prerequisites are absolutely necessary. The first is the need to set up rainfall gauges in each and every village. The second is to enhance the budgetary provision for crop insurance from the existing Rs 3,000-crore. Not providing enough financial support for strengthening crop insurance only shows how low it stands in national priority. #

What utility crop insurance of it cannot compensate farmers for his crop losses?

Perpetually at the mercy of nature. 

There is nothing more gruesome for any farmer than to see before his own eyes his lush green standing crop flattened by the vagaries of nature. All his hopes and aspirations from a bountiful harvest are grounded in a matter of few minutes. Not only the crop, but his life too is flattened.

As many as 24 lakh hectares of land in Madhya Pradesh and another 18 lakh hectares in Maharashtra have been hit by a series of frequent hailstorms in the past three weeks or so. Extensive damage has also been reported from parts of Punjab, Haryana, Rajasthan, Uttarakhand, Uttar Pradesh, Karnataka and Tamil Nadu.

It is easy to call this a natural calamity. It is easy for Union Agriculture Minister Sharad Pawar to say crop losses from excessive rain and hailstorm are not unusual, and, therefore, appeal to farmers to show courage. But for millions of small farmers who toil endlessly to tend the crops in the hope that the harvest will feed their families for a few months, all is lost. For those who didn’t commit suicide, such natural disasters push back their household economy by at least three years. Already reeling under debt, life becomes as tall as a mountain for them. They know they have no one to curse except their own fate. This is an agricultural emergency.

With 43 farmers committing suicide in the Bundelkhand region and another 37 taking their own lives in Maharashtra (and still counting) ever since the freak hailstorms with a severe magnitude lashed central India in the past three weeks, the extent of damage caused to the standing crops is all evident. Such has been the severity of the storm that as many as 900 cattle have also reportedly perished.

While Agriculture Minister Pawar says unusual rains and hailstorms are not uncommon and wants farmers to demonstrate courage, he appears more concerned with the damage done to sugarcane. Even before the expert teams have been formed to assess the damage, he has already announced that 15 percent of the standing cane crop has been damaged and has even worked out the loss to the sugar mills. But for the rest of the affected farming community, his advice is to brave this grave loss collectively. A Group of Ministers has been constituted, which is expected to meet next week. 

Although both Maharashtra and Madhya Pradesh each have demanded a Rs 5,000 crore relief package to be provided immediately, the loss estimates will swell by the time estimates flow in from other states. But if past experience is any indication, crop loss compensation is hardly going to be any relief. 

We have had in the past examples of Rs 1 to Rs 20; Rs 95 to Rs 1,470; and Rs 3,000 to Rs 5,000 being provided as relief. After months of waiting, when the farmers get a cheque that is not even worth presenting before a bank, it only shows the contempt and cruelty by which the farming class is treated. I am not expecting the situation to be any different this season. It is a matter of few days before the first phase of polling begins on 10 April and farmers will disappear from the political radar once the election campaigns peak.

It was in 2007 that the world’s largest weather-based crop insurance programme was launched. By 2012-13, it had expanded to 15 states, covering some 12 million farmers. Prior to this, a number of crop insurance schemes were launched beginning 1972. While all these schemes remained almost at the pilot project stage, these crop insurance schemes do not eliminate risk, but only manage to spread risk over time and space. These schemes only provide compensation based on an index rather than the actual damage, and are also based on an average over a demarcated area, often a block, rather than compensate for the actual loss.

I don’t know what utility these crop insurance projects are serving. Way back in 1920, agriculture expert JS Chakravarti had written: “No insurance authority could ever maintain a supervising agency, which would be able to watch and enforce that every insured field receives the required amount of care and attention at the hands of the cultivar. Unless some method is devised by which this great difficulty is minimised, a system of crop insurance would indeed be impossible.” Isn’t it a reflection of our lost priorities that even after 100 years of knowing this, crop insurance continues to be riddled with the same problems and the same level of inefficiency?

I have never understood why crop insurance agencies or companies can’t be made to assess the actual loss a farmer suffers. If every individual can be insured for his life, and that includes people living in remote villages, why isn’t the same system extended to cover crops as well? If an individual house can be insured against theft or fire or a natural disaster, why can’t a crop field be insured in the same manner? Why should the insurance agency be allowed to follow an area approach in the case of crops?
Well, the answer is very simple. The governments are not keen.

Imagine, if the 18 lakh hectares that has been hit by hailstorm in Maharashtra was insured? Farmers wouldn’t have been a worried and harried lot. No farmer would have opted to kill himself. I have a few suggestions on how to achieve this.

First, the government must make it mandatory for the insurance companies to insure all farmers for their standing crops. This can begin especially by making it compulsory for the foreign insurance companies that are lobbying to raise the cap from the existing 26 to 49 percent. These companies should only be allowed to invest, provided they give an undertaking that they would provide individual crop insurance. If they can’t, don’t allow them in.

At the same time, all existing crop insurance schemes should be reworked to achieve the goal of providing compensation based on individual loss.

Secondly, the government must step in to provide at least two-third of the insurance premium. Even in the US, it is the government that provides the bulk of the premium share as specified under the provisions announced under the Farm Bill 2014, which is applicable for another 10 years. In India too, state governments actually end up paying a higher compensation year after year for crop losses than what could have been the premium outgo. At the same time, it will be helpful to seek farmers’ suggestions to make the crop insurance schemes really effective. The State Farmers’ Commissions should be entrusted with the task to come out with models in wider consultations with farmers, civil society and experts.

Somehow we have come to believe that crop insurance based on individual approach is totally impracticable. Unless this feeling is rectified, I don’t see any glimmer of hope for the farmers. It is easy to tell farmers to pick up courage at times of natural calamities but just imagine if ever your own house or company is destroyed in a fire or an unforeseen disaster, would you have the courage to stand the loss suffered? It is difficult to rebuild affected livelihoods unless, of course, the loss is covered through insurance. Farming is no exception.

Published in: Tehelka Magazine, Volume 11 Issue 13, Dated 29 March 2014