This document discusses several topics related to risk coverage and diversification in agriculture, including crop insurance programs in India, contract farming models, reasons for agricultural diversification, and crop storage methods. It provides details on the Pradhan Mantri Fasal Bima Yojana crop insurance scheme in India and describes centralized, nucleus estate, intermediary, and multipartite contract farming models. The document also lists types of agricultural diversification such as livestock, fisheries, and horticulture and discusses their benefits.

1. RISK COVERAGE
[Document subtitle]
ABSTRACT
RISK COVERAGE WITH DIFFERENT DATA
ANALYSIS
[Course title]

2. Group 11- Risk Coverage
Crop Insurance@Supreet Mishra
Crop insurance is an insurance policy in which the farmers get subsidized by the federal government, to
protect against either the loss of their crops due to natural disasters, such as hail, drought and floods or
the loss of revenue due to declines in the prices of agricultural commodities.
In India, the GOI have introduced Pradhan Mantri Fasal Bima Yojana (PMFBY)
About PMFBY
The PMFBY was launched in FY 2016. The objective of the PMFBY is to:
• Providing financial support to farmers suffering crop loss/ damage arising out of unforeseen
events
• Stabilizing the income of the farmers to ensures their continuance in farming
• Encouraging farmers to adopt innovative and modern agricultural practices
Contract farming: @Siddhartha Sarangi, Saurabh K Chaturvedi
Contract farming can be defined as agricultural production carried out according to an agreement
between a buyer and farmers, which establishes conditions for the production and marketing of a farm
product or products. Typically, the farmer agrees to provide agreed quantities of a specific agricultural
product. These should meet the quality standards of the purchaser and be supplied at the time
determined by the purchaser. In turn, the buyer commits to purchase the product and, in some cases, to
support production through, for example, the supply of farm inputs, land preparation and the provision
of technical advice
Intermediary model - In this model, the buyer subcontracts an intermediary (collector, aggregator or
farmer organization) who formally or informally contracts farmers (combination of the centralized/
informal models). Special characteristics of this CF model are:
The intermediary provides embedded services (usu- ally passing through services provided by buyers
against service charges) and purchases the crop.
This model can work, if well-designed and if incentive-structures are adequate and control mechanisms
are in place.
This model can bear disadvantages for vertical coordination and for providing incentives to farmers
(buyers may lose control of production processes, quality assurance and regularity of supplies; farmers
may not benefit from technology transfer; there is also a risk of price distortion and reduced incomes for
farmers).
Multipartite model - This model can develop from the centralized or nucleus estate models, e.g.
following the privatization of para- statals. It involves various organizations such as govern- mental
statutory bodies alongside private companies and sometimes financial institutions. Special features:

3. This model may feature as joint ventures of parastatals/ community companies with domestic/ foreign
investors for processing.
The vertical coordination depends on the discretion of the firm. Due attention has to be paid to possible
political interference.
This model may also feature a farm-firm arrangement complemented by agreements with 3rd party
service providers (e.g. extension, training, credits, inputs, logistics).
Separate organizations (e.g. cooperatives) may organize farmers and provide embedded services (e.g.
credits, extension, marketing, sometimes also processing).
This model may involve equity share schemes for producers.
Centralized model - In this model, the buyers’ involvement may vary from minimal input provision (e.g.
specific varieties) to control of most production aspects (e.g. from land preparation to harvesting). This
is the most common CF model, which can be characterized as follows:
The buyer sources products from and provides services to large numbers of small, medium or large
farmers.
The relation/ coordination between farmers and contractors is strictly vertically organized.
The quantities (quota), qualities and delivery conditions are determined at the beginning of the season.
The production and harvesting processes and qualities are tightly controlled, sometimes directly
implemented by the buyer’s staff.
Typical products: large volumes of uniform quality usually for processing; e.g. sugar cane, tobacco, tea,
coffee, cotton, tree crops, vegetables, dairy, poultry.
Nucleus estate model - In this model, the buyer sources both from own estates/ plantations and from
contracted farmers. The estate system involves significant investments by the buyer into land,
machines, staff and management. This CF model can be characterized as follows:
The nucleus estate usually guarantees supplies to assure cost-efficient utilization of installed processing
capacities and to satisfy firm sales obligations respectively.
In some cases, the nucleus estate is used for research, breeding or piloting and demonstration purposes
and/ or as collection point.
The farmers are at times called ‘satellite farmers’ illustrating their link to the nucleus farm. This model
was in the past often used for state owned farms that re-allocated land to former workers. It is
nowadays also used by the private sector as one type of CF. This model is often referred to as “out
grower model”.
Typical products: perennials
*Advantages *
Contract farming is looking towards the benefits both for the farm-producers as well as to the agro-
processing firms. Producer/farmer

4. Makes small scale farming competitive - small farmers can access technology, credit, marketing channels
and information while lowering transaction costs
Assured market for their produce at their doorsteps, reducing marketing and transaction costs
It reduces the risk of production, price and marketing costs.
Contract farming can open up new markets which would otherwise be unavailable to small farmers.
It also ensures higher production of better quality, financial support in cash and /or kind and technical
guidance to the farmers.
In case of Agri-processing level, it ensures consistent supply of agricultural produce with quality, at the
right time and at a lesser cost.
Agri-based firms
Optimally utilize their installed capacity, infrastructure and manpower, and respond to food safety and
quality concerns of the consumers.
Make direct private investment in agricultural activities.
The price fixation is done by the negotiation between the producers and firms.
The farmers enter into contract production with an assured price under term and conditions.
Diversification: @Arnab Adhikari, @Pratim Das
Diversification in agriculture is one of the essential components of economic growth. It can be defined
as the stage where traditional agriculture is transformed into a dynamic and commercial sector by
shifting the traditional agricultural product mix to high standard products, which has a high potential in
stimulating production rate. Here, agricultural diversification is supported by a change in technology or
consumer demand, trade or government policy and by transportation, irrigation and other
developments of infrastructure.
Two aspects of Diversification:
● Change in the cropping pattern.
● Transformation of manpower from agricultural work to other associated activities like poultry,
livestock, fisheries etc., and also of the non-agriculture sector.
Reason for diversification:
1) To reduce risk of earning from the agriculture sector.
2) To provide wider choice.
Reason for Diversification of Agricultural Activities

5. Types of Diversification
Benefits of Diversification

6. Poultry and Livestock
Animal husbandry – Most of the farmers use the mixed crop-livestock system to increase their
standards of living and income. Animal husbandry is an agricultural branch that deals with the practices
of farming, breeding, and the care of farm animals like cattle, dogs, sheep, and horses. In India, about 70
million small and medium farmers, labourers, and a large number of women are dependent on the
livestock sector.
Fisheries – Aquaculture, or fisheries, is an important part of food production that provides economic
security to the millions of people besides livelihood support. In India, the total fish production
contribution from inland sources is about 64% and 36% from the marine sector (sea and oceans). Today,
fisheries contribute a total of 0.8% to the total GDP.
Horticulture – It is agriculture that deals with the plantations of the garden crop, especially that of
vegetables, fruits, flowers, tuber crops, species, and ornamental or medicinal plants. These plants
provide food and nutrition besides providing employment. In India, the horticulture sector contributes
6% of GDP and one-third of the agricultural output
Types of Non-Farm Employment in Rural Areas

7. Golden Revolution in India

8. Crop Storage:@Rajat Biswas
When crops are cultivated for commercial purposes, they are cultivated on a huge scale. We are talking
about quintals upon quintals of grains and crops. So this presents us with a logistic problem of where
and how to store these grains. It requires absolute planning and management so these grains can be
stored without spoilage. Let us take a look at the steps to be taken for successful storage of
crops/grains.
Harvesting of crops is seasonal , but consumption of the food grains is continuous. The market value of
the produce is generally low at harvesting time. There is a necessity to store the produce for different
periods. The different categories of agricultural produce needing storage are foodgrains , oilseeds ,
seeds and fodder.
Factor of Storage:
Several factors that influence the storage of food grains are moisture content, quality of produce
,climate and storage conditions.
The most important factor deciding the storability of the produce is moisture content of grains .
Higher moisture content of grains results in severe attack of insects and microorganisms in addition to
heating and germination. Grains with high moisture respire at a higher rate than dry seeds. When the
moist seeds are stored, the moisture from upper layers moves downwards and deterioration of grains in
lower layers takes place. Insects obtain water needed for their body from the food material they eat.
Moist seeds are amenable for easy biting or chewing by insects.

9. Hedging:@ Korto S. Johnson
Farmers Should Have a Hedging Strategy
Farmers are too familiar with the rampant uncertainty that riddles the markets and crops every season.
Moreover, to mitigate risk and help ease the stress associated with it, agriculture professionals should
consider putting together a hedging strategy like.
Hedging strategies present opportunities to farms that do not grow their own crops, as the effects of a
strong or weak growing season can travel into the cattle industry. If there will be a weak corn harvest,
the prices of cornmeal may rise, which will increase the costs of raising cattle. If cattle futures are
trading at $2.75 per pound and the rancher can turn a profit at $2.50 per pound, they may want to lock
in the price at $2.75 to secure the profit. While there is always a chance the price may increase or
decrease. The benefit of hedging is to increase the chance of turning a profit at the end of the season to
remain open for the next season.
How does it work? While hedging seems like a complicated process, it is an effective strategy to turn a
profit even during challenging times. When establishing a position, it must always balance out the
position with an opposite transaction. This means if a farmer buys a futures contract at their first
position, then they must offset it later by selling in their second position. The second transaction occurs
when the cash market transaction takes place when the farmer sells their crop, since the hedging price
protection is no longer needed and is closed out.
This is an example, if a farmer expects their harvest to be at least 20,000 bushels of corn by September,
then they can establish a price for the corn in April to protect against the potential of falling prices. Like,
the cash price for corn is $4.50 per bushel in April, and the price of September corn futures is $4.75. The
farmer might short hedge his crop by selling four, 5,000-bushel corn futures contracts at $4.75 per
bushel. In this example, the price of corn cash and futures falls at the start of August. When the farmer
sells their corn to local buyers at $4.22, they may close out their hedge by buying September futures at
$4.45. The $0.30 gain in the futures market offsets the lower cash prices allowing the farmer to turn a
profit despite the falling prices. Had the farmer not engaged in a hedging strategy, then they would have
received $4.22 per bushel earning a loss on the season.
The prices of crops and livestock are in a constant state of flux based on perceived or actual changes in
supply or demand. Due to the ever-changing prices, farmers should frequently analyze their risk
exposure and adjust their hedging strategies. Whether a farm produces or consumes corn, hedging can
minimize risk. (Typically, producers implement a short hedge to lock in prices for their corn). Whereas,
consumers employ a long hedge to secure a targeted price.) Creating a tailored hedging strategy is
another way for farmers to lock in prices during higher-priced periods to reduce risk and uncertainty, as
well as secure profits at the end of the season.

10. Area and production of horticulture crops :- All India
Crops 2018-19 2019-20
(Final) (3rd Advance Estimate)
Fruits Area Production Area Production
Aromatics and Medicinal 627 795 685 761
Flowers Cut 647 694
Flowers Loose 303 2263 307 2300
Total Flowers 303 2910 307 2994
Honey 120 115
Plantation Crops
Arecanut # 718 1144 743 1108
Cashewnut 1105 743 1125 703
Cocoa 94 24 98 26
Coconut 2151 14682 2105 14195
Total Plantation 4069 16592 4071 16031
Spices
Ajwain 35 22 43 33
Cardamom 81 23 87 20
chilies (Dried) 780 1743 701 1751
Cinnamon/Tejpata 2 5 2 5
Celery, Dill & Poppy 30 30 33 34
Clove 2 1 2 1
Coriander 470 592 638 769
Cumin 1027 699 998 696
Fenugreek 122 192 117 185
Fennel 90 157 83 142
Garlic 358 2910 358 2920
Ginger 164 1788 175 1876
Nutmeg 24 15 24 15
Pepper # 245 137 241 134
Vanilla 0.4 0.1 0.3 0.1
Saffron 3 0.004 4 0.004
Tamarind 46 189 47 189
Turmeric 253 961 257 946
Mint (Mentha) 334 34 328 35
Total Spices 4067 9500 4138 9754
Total 25737 311052 26219 319567
# Arecanut and Black Pepper data revised by DASD for 2018-19 and 2019-20(3rd Adv. Est)

12. Crops 2018-19 2019-20
(Final) (3rd Advance Estimate)
Fruits Area Production Area Production
Almond 10 11 9 11
Aonla/Gooseberry 92 1046 96 1131
Apple 308 2316 309 2783
Banana 866 30460 877 31779
Ber 50 539 49 512
Citrus
(i) Lime/Lemon 305 3482 317 3698
(ii) Mandarin 469 6243 479 6397
(iii) Sweet Orange( Mosambi) 187 3266 196 3529
(iv) Others 67 412 67 408
Citrus Total (i to iv) 1028 13404 1058 14032
Custard apple 40 339 43 359
Grapes 140 3041 147 2939
Guava 276 4253 290 4359
Jackfruit 185 1764 188 1776
Kiwi 5 13 5 13
Litchi 96 721 96 719
Mango 2296 21378 2301 20529
Muskmelon 57 1266 59 1306
Papaya 149 6050 144 6086
Passion Fruit 12 81 12 76
Peach 19 118 19 125
Pear 42 300 42 306
Peanut 1 0.2 3 0.2
Pineapple 104 1711 108 1802
Plum 23 85 23 90
Pomegranate 253 2915 275 3256
Sapota 89 1059 80 979
Strawberry 1 5 2 18
Walnut 108 299 108 287
Watermelon 100 2495 109 2922
Others 248 2298 251 2253
Total Fruits 6597 97967 6702 100448
Vegetables
Beans 236 2356 221 2226
Bitter gourd 99 1205 107 1292
Bottle gourd 187 3011 188 3018
Brinjal 727 12680 723 12345
Cabbage 400 9127 398 9213
Capsicum 34 497 34 521
Carrot 109 1893 106 1875
Cauliflower 465 9083 459 8844
Cucumber 105 1588 111 1638
Chilies (Green) 377 3783 363 4027
Elephant Foot Yam 33 817 33 801
Mushroom 0 182 210
Okra/Ladyfinger 513 6176 534 6371
Onion 1220 22819 1431 26148
Padwal/Pointed gourd 55 757 59 715
Peas 552 5562 568 5791
Potato 2173 50190 2056 48662
Radish 200 3143 205 3170
Pumpkin/Sitaphal/Kadu 94 2043 100 2051
Sweet Potato 110 1156 105 1112
Tapioca 163 4976 173 5582
Tomato 781 19007 813 21195
Others 1441 21118 1530 22655
Total Vegetables 10073 183170 10316 189464

13. Index Components for FY 2020-21
Acap of 20% and floor of 3% are enforced on to the individual Commodity Index
Percentage. The capensures that no single Commodity dominates the index performance.
The floor ensures that each commodity, however small, has a meaningful contribution to
the Index

15. Policies & schemes :-
List of companies which provide Crop Insurance:
Following are the list of General Insurance Companies which offer Crop Insurance Schemes:
• Reliance General Insurance Co. Ltd.
• Cholamandalam MS General Insurance Co. Ltd.
• Agriculture Insurance Company of India Ltd
• IFFCO-Tokio General Insurance Co. Ltd
• HDFC ERGO General Insurance Co. Ltd.
• ICICI Lombard General Insurance Co. Ltd
• Future Generali India Insurance Company Limited
• Bajaj Allianz General Insurance Co. Ltd
• Universal Sompo General Insurance Company Limited
• SBI
Pradhan Mantri Fasal Bima Yojana (PMFBY), the flagship program
of the Government, is considered to be a game changer and will bring
happiness to the life of distressed farmers since it covers a whole
gamut of risks and losses at multiple crop stages. ‘Nature’, that
seemingly has significant impact on the crop cycle, largely remains
the biggest uncertainty. The still bigger problem of lack of a common
technological solution to ascertain whether losses have occurred or
not, remains unaddressed. However, PMFBY can help safeguard
farmers against foreseeable losses to some extent. All stakeholders
in agriculture sector, be it the farmer himself, Government, agri-
insurance companies, agri-business people or local traders to name a
few, are always in need of ‘information’ on accurate estimation and
forecast on crops on ground including their health, likelihood of
losses, actual losses, etc. to take ‘informed decisions’ in their domain.
We all are now living in an ‘information world’ where electronics,
computers and mobile phones have changed the way we live, think
and act. Integration of satellite, mobile and ground-based information
together can resolve the ‘information darkness’ in agriculture sector
and can provide all the information that is sought by different
stakeholders. This also helps to create a decision support system,
customized to each end. Grouping the solutions into logical groups,
we can speak of Ground Based, Low altitude, and High-altitude

16. systems. Ground based: a) Mobile, b) Hand held sensors and c)
Robotics Android mobiles and variety of applications developed on
that platform are now widely available to address different farmer
issues - right from advisories for which crop type to be sown in accord
to the ground conditions, to midseason crop advisories, weather
alerts to determine the harvesting timing for best yields and finally
marketing information for getting appropriate price for the produce.
Hand held sensors readily provide soil parameters, vegetation indices
etc. for instantaneous information and remedial measures.
Horticulture yield estimation is a tricky subject and efforts are still on
by various scientific agencies to reach a less field intensive and more
accurate estimation of yield
Agriculture Insurance Support Services
• Any effective system of insurance is based on accurate and timely data. Also
effective insurance mechanism operates on the law of large number and that in
turn requires effective distribution channels.
• The Working Group therefore recommends a large-scale use of remote sensing
technology in the agricultural insurance programme for timely settlement of
claims including for on account payments, the introduction of new distribution
channels like post offices and micro insurance agencies and the creation of a
nationally consistent database with timely dissemination of information from crop-
cutting-experiments and cleaning of historical data, etc.
• The insurance need for agriculture cannot be over emphasized, as it is a highly
risky economic activity, on account of its critical dependence on weather
conditions. To design and implement an appropriate insurance program for
agriculture, is therefore a very complex and challenging task. The idea of crop
insurance emerged in India, during the early part of the twentieth century. Yet, it
was not operated in a significant way till the nineties. It is still evolving in terms of
scope, spread and structure
Government schemes and policies to support farmers
1. E-NAM: - National Agriculture Market (eNAM) is a pan-India
electronic trading portal which networks the existing APMC mandis
to create a unified national market for agricultural commodities.

17. Small Farmers Agribusiness Consortium (SFAC) is the lead agency
for implementing eNAM under the aegis of Ministry of Agriculture
and Farmers' Welfare, Government of India.
MISSION & VISION
To promote uniformity in agriculture marketing by streamlining of
procedures across the integrated markets, removing information
asymmetry between buyers and sellers and promoting real time
price discovery based on actual demand and supply.
Integration of APMCs across the country through a common online
market platform to facilitate pan-India trade in agriculture
commodities, providing better price discovery through transparent
auction process based on quality of produce along with timely online
payment.
2. National Mission for Sustainable Agriculture (NMSA)
National Mission for Sustainable Agriculture (NMSA) has been formulated
for enhancing agricultural productivity especially in rainfed areas focusing
on integrated farming, water use efficiency, soil health management and
synergizing resource conservation.
NMSA will cater to key dimensions of 'Water use efficiency', 'Nutrient
Management' and 'Livelihood diversification' through adoption of
sustainable development pathway by progressively shifting to
environmentally friendly technologies, adoption of energy efficient
equipment’s, conservation of natural resources, integrated farming, etc.
Schemes under NMSA: -
• Rainfed Area Development (RAD): RAD is being implemented by RFS Division
• Soil Health Management (SHM): SHM is being implemented by INM Division
• Sub Mission on Argo Forestry (SMAF): SMAF is being implemented by NRM
Division
• Paramparagat Krishi Vikas Yojana (PKVY): PKVY is being implemented by INM
Division
• Soil and Land Use Survey of India (SLUSI): Being implemented by RFS Division
• National Rainfed Area Authority (NRAA): Being implemented by RFS Division
• Mission Organic Value Chain Development in North Eastern Region
(MOVCDNER): Being implemented by INM Division
• National Centre of Organic Farming (NCOF): Being implemented by INM
Division
• Central Fertilizer Quality Control and Training Institute (CFQC&TI): implemented
by INM
3. Pradhan Mantri Krishi Sinchai Yojana (PMKSY):-

18. Har Khet ko Pani "Prime Minister Krishi Sinchayee Yojana"
Government of India is committed to accord high priority to water conservation and its
management. To this effect Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) has
been formulated with the vision of extending the coverage of irrigation 'Har Khet ko pani'
and improving water use efficiency 'More crop per drop' in a focused manner with end to
end solution on source creation, distribution, management, field application and
extension activities.
4. Paramparagat Krishi Vikas Yojana (PKVY): -
The Paramparagat Krishi Vikas Yojana (PKVY), an initiative to promote organic
farming in the country, was launched by the NDA government in 2015. According
to the scheme, farmers will be encouraged to form groups or clusters and take to
organic farming methods over large areas in the country.
The aim is to form 10,000 clusters over the next three years and bring about five
lakh acres of agricultural area under organic farming. The government also
intends to cover the certification costs and promote organic farming through the
use of traditional resources.
To avail the scheme, each cluster or group must have 50 farmers willing to take
up organic farming under the PKVY and possess a total area of at least 50 acres.
Each farmer enrolling in the scheme will be provided INR 20,000 per acre by the
government spread over three years’ time.
5.Pradhan Mantri Fasal Bima Yojana (PMFBY):-
Pradhan Mantri Fasal Bima Yojana (PMFBY) is the government sponsored crop
insurance scheme that integrates multiple stakeholders on a single platform.
Objectives: -
1.To provide insurance coverage and financial support to the farmers in the event
of failure of any of the notified crop as a result of natural calamities, pests &
diseases
2. To stabilize the income of farmers to ensure their continuance in farming.
3. To encourage farmers to adopt innovative and modern agricultural practices.
4. To ensure flow of credit to the agriculture sector.
6.Gramin Bhandaran Yojana: -

19. Objective of this Scheme: -
• Create scientific storage capacity with allied facilities in rural areas.
• To meet the requirements of farmers for storing farm produce, processed farm
produce and agricultural inputs.
• Promotion of grading, standardization and quality control of agricultural produce
to improve their marketability.
• Prevent distress sale immediately after harvest by providing the facility of pledge
financing and marketing credit by strengthening agricultural marketing
infrastructure in the country.
7.Livestock insurance Scheme: -
This scheme aims to provide protection mechanism to the farmers and cattle
rearers against any eventual loss of their animals due to death and to
demonstrate the benefit of the insurance of livestock to the people and
popularize it with the ultimate goal of attaining qualitative improvement in
livestock and their products.
8.PM-KISAN (Pradhan Mantri Kisan Samman Nidhi) Scheme: -
This scheme promises to pay all poor farmers (small and marginal farmers
having lands up to 2 hectares) Rs 6,000 every year in 3 installments through
Direct Bank Transfer. It would reportedly benefit around 14.5 crore farmers all
over India.
9.Pradhan Mantri Kisan Pension Yojana: -
To address the problems of farm sector distress, the Modi 2.0 Cabinet has
approved a proposal to provide small and marginal farmers with a minimum Rs
3,000 per month fixed pension, costing Rs 10,774.5 crore per annum to the
exchequer.
The eligible farmers in the 18-40 years age group can participate in this voluntary
and contributory pension scheme.
Once the beneficiary of the pension dies, the spouse will be entitled to receive
50% of the original beneficiary's pension amount.
10.Jan Dhan Yojana: -
Pradhan Mantri Jan Dhan Yojana is a National Mission on Financial Inclusion
which has an integrated approach to bring about comprehensive financial
inclusion and provide banking services to all households in the country. The
scheme ensures access to a range of financial services like availability of basic

20. savings bank account, access to need based credit, remittances facility,
insurance and pension.
11. Scheme on Fisheries Training and Extension
It was launched to provide training for fishery sector so as to assist in
undertaking fisheries extension programmes effectively.
12. Micro Irrigation Fund (MIF)
The government approved a dedicated Rs5,000 crore fund to bring more land
area under micro-irrigation as part of its objective to boost agriculture production
and farmers income.
The fund has been set up under NABARD, which will provide this amount to
states on concessional rate of interest to promote micro-irrigation, which currently
has a coverage of only 10 million hectares as against the potential of 70 million
hectares.
13.National Scheme on Welfare of Fishermen
This scheme was launched to provide financial assistance to fishers for
construction of house, community hall for recreation and common working place.
It also aims to install tube-wells for drinking water and assistance during lean
period through saving cum relief component.