CROP INSURANCEPROGRAMME OF GOI Perspective of MNAIS - RAJENDRA KUMAR TIWARI Joint Secretary, Department of Agri. & Coop. Ministry of Agriculture, GOI
Risks affecting Agriculture production– A Major Challenge Vagaries of weather - rainfall - temperature - humidity - wind - cyclone - hailstorm Pest & diseases Fire Quality of inputs Soil Market prices
Objectives of Crop Insurance• To provide insurance coverage and financial support to the farmers in the event of prevented sowing & failure of any of the notified crop as a result of natural calamities, pests & diseases.• To encourage the farmers to adopt progressive farming practices, high value in-puts and higher technology in Agriculture.• To help stabilize farm incomes, particularly in disaster years.
HISTORICAL BACKGROUND OF CROP INSURANCE IN INDIA• LIC introduced first scheme based on individual approach in 1972 for cotton in Gujarat, Continued up to 1978-79 and covered 3110 farmers premium of Rs. 4.54 lakhs and paid claims of Rs. 37.88 lakhs.• In 1979 Pilot Crop Insurance Scheme (PCIS) was introduced. homogenous area approach limited to loanee farmers. 13 States implemented till 1984-85,covering 6.27 lakh farmers Premium of Rs. 196.95 lakhs and claims of Rs. 157.05 lakhs.• From Kharif 1985, Comprehensive Crop Insurance Scheme (CCIS) was introduced which continued till Kharif 1999. The claims ratio was 1 : 5.72. CCIS was criticized for limited coverage of farmers, crops and risks.• For covering farmer’s, yield and price, Farm Income Insurance Scheme (FIIS) was also Piloted during Rabi 2003-04 and Kharif 2004 seasons in selected districts
Existing Crop Insurance SchemesI. NAIS: yield based; non-actuarial premium except horticultural crops / annual commercial crops; underwriting of losses by Central & State Govt. on 50:50 ratioII. WBCIS: weather based ; actuarial premium with premium subsidy shared equally by Central & State Govt.III. CPIS: plant based; actuarial premiumIV. MNAIS: yield based; actuarial premium with premium subsidy shared equally by Central & State Govt.
NATIONAL AGRICULTURAL INSURANCE SCHEME (NAIS)• For improving the scope and content of CCIS a broad based NAIS was introduced from Rabi 1999-2000.• NAIS provides for greater coverage of farmers, crops and risk commitment.• Premia-structure has been rationalized and the scheme is required to operate at smaller unit area of insurance.• Subsidy to Small and Marginal farmers.• It is presently being implemented by 25 States & 2 Union Territories• In last 22 Crop Season: Farmers Covered : 17.01 crore ( Av. not more than 15% farmers) Premium Collected: Rs. 6213.41 crore Claims Paid : Rs. 20437.21 crore Claim ratio : 3.29 Loss cost : 9.86%
State-wise farmers benefited under NAIS (in lakhs) 90 80 70 60 50 40 30 20 10 0 Raj UP MP Guj Bihar Cha ti TN Mah Andh Karn WB Jhar Oriss Other nd sgarh ra a s
Limitations of NAIS• Large insurance unit area• Delay in payment of claims due to late submission of yield data & availability of Govt. funds• Pre-sowing/ planting Risk is not covered• Unattractive basis of calculation of threshold yield,• Low indemnity level,• Localised calamities are not covered• Post Harvest Losses are not covered• Different seasonality discipline for loanee & non- loanee farmers• Lack of competition
Main Recommendations of JG Report• Actuarial premium regime with suitable subsidy• Reduction in insurance unit area to Gram Panchayat• Basis of calculation of threshold yield –best 5 of 7 years’ yield• Higher indemnity levels of 80% & 90%• Coverage of: Pre-sowing & post-harvest losses Perennial crops Personal accident Package insurance policies covering other assets of farmers, including Animal Husbandry• Private insurers to be encouraged,• Exemption from Income Tax & Service Tax so that an adequate Catastrophic Reserve Fund can be built
Recommendations of other Committees• National Mission on Sustainable Agriculture (NMSA) recommended for the following in respect to crop insurance program: Improvements in the existing NAIS w.r.t. calculation of threshold yield, reduction of insurance unit, on account payment of claims, etc. Promotion of blended/mixed insurance scheme. Comprehensive insurance products to address all the needs of different farming systems. Design of Insurance products using weather index. Weather Insurance products based on climate change.• Prime Minister’s Council on Trade & Industry- Sub-Committee on enhancing Agri Production & food Security has recommended to Link Agriculture credit with crop insurance to manage default risks
Major Modifications in NAISSl. Parameters NAIS Modified NAISNo. 1 Insurance Unit The defined area may Village Panchayat be a Gram Panchayat, for major crops Mandal, Hobli, Circle, Phirka, Block, Taluka etc declared by GOS 2 Threshold yield Moving average yield of Average yield of last preceding 3 years for 7 years excluding upto Rice & wheat and 5 2 years of declared years for other crops natural calamities 3 Indemnity levels 60%, 80% & 90% 70, 80% and 90% 4 Pre- sowing/ Presently not covered Prevented/Failed Planting Risk Sowing Risk to be covered upto 25% of SI
Major Modifications in NAIS …Cont.Sl. Parameters NAIS Modified NAISNo. 5 Post Harvest Presently not Post harvest losses on Losses covered account of cyclones in coastal areas to be covered 6 Early The claims are On account settlement of Settlement settled based on the claims upto 25% of likely final yield estimates total claims submitted by GOS 7 Localized Presently not Individual assessment of calamities covered claims in case of hailstorm and landslide 8 Seasonality Different for loanee Uniform seasonality Discipline and non-loanee discipline for loanee and farmers non-loanee farmers 9 Implementing AIC Private insurance Agency companies with adequate infrastructure and experience are also allowed
Subsidy & Net Premium for Farmers under MNAISSl.N Actuarial Subsidy to Farmers Premiumo Premium (equally shared by payable by (% of SI) Central and State farmers Govt.)1 Upto 2% NIL Upto 2%2 >2-5% 40% subject to minimum 2-3% net premium of 2% of SI3 >5-10% 50% subject to minimum 3-5% net premium of 3% of SI4 >10-15% 60% subject to net 5-6% premium of 5% of SI5 >15% 75% subject to minimum =>6 net premium of 6% of SI
MNAIS- Present Status• Implemented in 34 districts covering 22 States during Rabi 2010-11 season• The scheme would be on actuarial regime in which insurance company will receive premium on commercial basis and will be responsible for all claims• GOI & State Govts. will provide premium subsidy upto a max. of 75% at different slabs of actuarial premium to make the scheme affordable for farmers• The coverage in Pilot MNAIS is expected to 25% of total farmers of 50 districts.
Area Yield Index and Weather Index: Advantage and ChallengesArea Yield Index Weather Based IndexAll peril covers Single or sometimes multiple(drought, excess rainfall, flood, perils cover-pest & diseases)- resulted rainfall – (excess & deficit),yield temperature, relative humidityEasy to design Technical challenges in index design (peril, crop, farming practices, agro-meteorological zone etc.)Low start-up costs High start-up costsHigh loss assessment costs Lower loss assessment costs(CCEs)Slow claims settlement Faster claims settlement
Major Challenges in implementation of MNAIS Assessment of crop yield at Gram Panchayat level – Strengthening of Crop Cutting Experiments (CCEs) to increase their accuracy, reliability and timeliness; Standardization of procedures and manuals (sample size, numbers, process etc.), proper manpower allocation/outsourcing, capacity building/ training of field staffs, supervision and monitoring of process, real time reporting of CCEs -through SMS, internet etc., computerization of yield data/reporting of CCEs result etc. Alternative method for yield/loss assessment – Use of remote sensing technology Normalized Differential Vegetative Index MoU was signed between DST and AIC for launching a Pilot project on Remote sensing technology in Bihar, Karnataka, Rajsthan & UP No progress could be achieved due to transfer of concerned experts of DST Methodology for yield assessment of multi-picking crops (horticultural & Commercial)
Major Challenges in implementation of MNAIS ...cont Adequate Automatic Weather Stations (AWSs) – for on- account payment Existing -2000 AWSs (based on uniform distribution), Required- 8000 AWSs• Fiscal Management- shifting of liability from financing post losses to pre-loses financing i.e. advance subsidy in premium• Product Designing- risk classification (basis risk, Threshold Yield, Indemnity level), appropriate weighting/calculation of basis risk (risk rating), multi-optional products for the farmers based on their need/choice (pre-sowing, planting, post-harvest losses)• Benchmarking/registration before providing government support• Rationalization & Standardization of premium rates• Development of new products – for uncovered crops/areas
Major Challenges in implementation of MNAIS …cont• Evaluation & Monitoring for proper implementation and further planning & Policy decision Grievance redressal mechanism• Publicity & awareness,• Coordination amongst all stakeholders• Clerical mistake