This document provides an overview of crop insurance in India, including the various approaches, concepts, types of crop insurance schemes, and the evolution of crop insurance in India. It discusses the National Agricultural Insurance Scheme and its key challenges, as well as the Weather Based Crop Insurance Scheme. It also briefly covers livestock insurance schemes in India.

1. Bablu Hrangkhawl
CAU/CPGS/B17/02
B.Sc. Agri. 3RD Year
COA-KYRDEMKULAI CAU(I)
Crop, Livestock &
Machinery Insurance

2. Crop insurance in India - Changes and
Challenges
Content
Introduction
Risk in agriculture
Approaches to crop insurance
Concepts used in crop insurance
Types of Crop insurance
Evolution of crop insurance schemes in India
National Agricultural Insurance Scheme and key Challenges
Weather Based Crop Insurance Scheme
Conclusion

3. Introduction
*India is an agrarian country where 60 per cent of the
population is engaged in agriculture and allied activities, for
their livelihood and contributing about 17.2 percent to the
country’s GDP.
*More people in developing countries like India earn their
livelihood from this sector than from all other economic
sectors combined.
*Agriculture production and farm incomes in India are
frequently affected by natural disasters.
*According to the crop loss data for the period 1985-2020
more than 70 percent of the crop loss is a result of drought
and about 20 percent owing to excess rainfall.
*In recent times, mechanisms like contract farming and
future’s trading have been established which are expected
to provide some insurance against price fluctuations directly
or indirectly.

4. Risk in Agriculture Risk management
Production Avoiding
Market Preventing
Financial Sharing
Resource Transferring
Legal/Policy Taking
Spreading

5. Approaches to crop insurance
Individual approach
Area approach
Individual approach:
In this approach individual is focus of attention. The
normal output, level of premium and level of indemnity are
determined for each farmer individually.
Drawbacks of Individual Approach
It is very tedious job to collect yield data of individual
farmer, It is actually impracticable.
Regarding the premium rate it has to be calculated
separately for each insurer
The process of assessing indemnity separately for each
individual insurer will be administratively expensive and
practically tedious.

6. Area approach:
In this approach the normal output, premium rate and the
indemnity are determined for all the farmers in a given area
or region, which is agro climatically homogeneous.
Advantages of Area approach over Individual Approach
Calculation of normal output in the area, premium rate in
the area and indemnity payable is practicable and
administratively easier.
Compulsory insurance will not be necessary when there is
selective participation, which is essential in individual
approach.
Drawbacks of Area Approach
When the actual yield of the area is above normal yield and
if a particular farmer has obtained a yield less than the
normal then he will not get any indemnity or compensation.
A farmer is eligible for compensation even though he gets a
yield more than the normal yield.

7. Concept
Crop insurance : It is protecting the farmers / cultivars
against financial loss on the account of anticipated crop loss
arising out of practically all natural factors beyond there
control such as natural factor, weather ,flood, pest and
diseases.
Actuarial: Describes the calculations made by an actuary.
Essentially this is a branch of statistics, dealing with the
probabilities of an event occurring.
Catastrophe: A severe, sudden and unexpected disaster
which results in heavy losses.
Claim: The application for indemnity (payment) after an
insured event has occurred.

8. Gross Premium/ Premium rate: The premium paid by the
insured, which is aggregate of components including risk
premium plus operating expenses, commissions, reserves
and other expenses paid by the insured.
Indemnity: It is the compensation payable to the insured
farmers for a crop loss resulted by the insured causes. It is
determined by the quantity by which the yield falls short of
the coverage.
Guaranteed Yield: The expected physical yield of a crop
stated in the insurance policy, against which actual yields
will be compared when adjusting any losses.
Loss Cost: Claims expressed as a percentage of the total sum
insured or total liability
Premium: This is the fixed amount that an insured or farmer
pays to the insurance agency this is also called as average
annual loss cost. The premium rate is fixed or determined
based on the variations in yield during past years.

9. Pure premium rate: It is the definite amount payable to
the insurer by the insured for the insurance protection
offered to him.
Insured: Insured is the party (farmer) who as to be
indemnified by the insurance agency by the insurer when is
incurred due to insured causes.
Coverage: This is the insurance protection offered. It can
be distinguished in to
level of coverage: When expressed as percentage of the
long- term average yield
Quantum of coverage: When expressed in terms of
physical units Ex: tones
Monetary coverage: Coverage of a crop insurance scheme
expressed in monetary terms.

10. Types of crop insurance
1. Based on Perils insured
Single Peril insurance
All Peril insurance
2. Based on Object insured
Single crop insurance
Multiple crop insurance
3. Based on administration
 Public insurance
 Private insurance
4. Based on Scope & Application
 Voluntary insurance
 Compulsory insurance

11. Evolution of crop insurance schemes in India
1. First Individual Approach Scheme 1972-1978
An ad-hoc and scattered scale of agricultural insurance scheme was
started from 1972-73.
GIC of India introduced a Crop Insurance Scheme on H-4 cotton in
Gujarat.
This scheme was based on “Individual Approach” and later included
groundnut, wheat and potato.
Implemented in the states of Andra Pradesh, Gujarat, Karnataka,
Maharashtra, Tamil Nadu and West Bengal.
It continued up to 1978-79
Total farmers covered : 3110
Total premium collected (lakhs): Rs.4.54
Total Claims (lakhs): Rs.37.88
Claims to premium ratio: 8.34

12. Pilot crop insurance scheme
It was introduced on the basis of report of Prof. V.M. Dandekar
Based on Homogenous Area approach
The scheme covered cereals, millets, oilseeds, cotton, potato and
chickpea
The scheme was available to lonee farmers only & on voluntary basis
The Insurance premium ranged from 5 to 10 per cent of the sum insured
The premium paid was shared between the GIC of India and State
Governments in the ratio of 2:1.
The maximum sum insured was 100 per cent of the crop loan, which was
later increased to 150 per cent.
Premium charges payable by small / marginal farmers were subsidized by
50 per cent shared equally between the state and central governments
Pilot Crop Insurance Scheme launched in 1979 continue till 1984-85 and
was implemented in 13 states Pilot Crop Insurance Scheme (PCIS) 1979-
1984

13. 2. Comprehensive Crop Insurance Scheme (CCIS) 1985-99
This scheme was linked to short term credit
Implemented based on the “homogenous area
approach”.
Till Kharif 1999, the scheme was adopted in 15
states and 2 UT’s.
Compulsory for loanee farmers in the participating
states/UTs

14. *Main Features of the Scheme were:
a. It covered farmers availing crop loans from Financial Institutions,
on compulsory basis.
b. The coverage was restricted to 100 per cent of the crop loan
subject to a maximum of Rs.10, 000/- per farmer.
c. The premium rates were 2 per cent for cereals and millets and 1
per cent for pulses and oilseeds.
d. Half of the premium payable by small and marginal farmers was
subsidized equally by the Central and State Governments.
e. Burden of Premium and Claims was shared by Central and State
Governments in a 2:1 ratio.
f. The scheme was a multi agency effort, involving GOI, State
Governments, Banking Institutions and GIC.
g. This scheme is optional to state government

15. National Agricultural Crop Insurance
Scheme (NAIS) 1999 – till Date
NAIS was introduced in the country from the rabi season of
1999-2000
This scheme is available to both loanees & non-loanees. And
compulsory for lonee farmers availing crop loan from financial
institution
It covers all food grains, oilseeds and annual horticultural /
commercial crops for which past data available for an adequate
number of years.
Among the annual commercial and horticultural crops,
sugarcane, potato, cotton, ginger, onion, turmeric, chilies,
coriander, cumin, jute, tapioca, banana and pineapple, are
covered under the scheme.
The scheme is operating on the basis of both “area approach”,
for widespread calamities, “individual approach”, for localized
calamities such as hailstorm, landslide, cyclone and floods.

16. No. in lakh
Maharashtra 15.8%
MP 12.8%
Kartaka 6.40%
Gujarat 6.30%
Bihar 3.10%
AP 13.50%
WB 5.50%
UP 10.80%
TN 2.50%
Rajasthan 7.80%
Odisha 6.70%
State wise covered under NAIS – 1999-

17. Key challenges in NAIS
 The most important one is ‘basis risk’ as the area (insurance unit) is
rarely homogenous.
Presently efforts are made to lower the size of the area in order to
minimize the basis risk.
The insurance cover primarily operates from ‘sowing till harvesting’,
and for this reason pre-sowing and post-harvest losses are not
reflected in the yield index. Yet another challenge is the
infrastructure and manpower required to conduct over a million crop
cutting experiments across the country to estimate the yields of each
specific crop in an area.
The process also contributes to delay in settlement of indemnities as
the yield estimates’ compilation takes almost two to three months
after the harvest season.

18. Weather based crop insurance
In India, weather-based insurance was first introduced in 2003 by ICICI
Lombard with technical assistance from the World Bank for groundnut
and castor farmers of Mahbubnagar district in Andhra Pradesh.
About 154 groundnut farmers and 76 castor-bean farmers participated in
the scheme in 2003 followed by 430 farmers in the following year for an
average sum insured of Rs 6,000.
WBAIC were implemented in the selected areas on a pilot basis in Kharif
2003
It provides payout against adverse rainfall incidence (both deficit and
excess) during kharif and adverse incidence in weather parameters like
frost, heat, relative humidity, unseasonal rainfall etc., during rabi.
It operates on the concept of area approach
This scheme is available to both loanees (compulsory) and non-loanees
(voluntary).
The risk period under weather insurance products extends from sowing
to harvesting and thus varies from crop to crop.

19. The WBCIS is based on actuarial rates of premium
(with a cap at the rate of 8%-10% for food crops and
oilseeds and 12% for commercial crops) but to make
it affordable, the premium actually charged from
farmers has been fixed “as par” with the NAIS.
The scheme operates with upfront premium
subsidy contribution by the government (central
and state), with the same level of financial support
to the public and private insurers, while the entire
claims are borne by the insurers Premium rates for
different crops under WBCIS

20. Weather Based Crop Insurance Scheme (WBCIS)
WBAIC were implemented in the selected areas on a pilot
basis in Kharif 2003
It provides payout against adverse rainfall incidence
(both deficit and excess) during kharif and adverse
incidence in weather parameters like frost, heat, relative
humidity, unseasonal rainfall etc., during rabi.
It operates on the concept of area approach
This scheme is available to both loanees (compulsory)
and non-loanees (voluntary).
The risk period under weather insurance products
extends from sowing to harvesting and thus varies from
crop to crop.

21. PRESENT AGRICULTURAL INSURANCE SCHEMES
2015-16
National Agricultural Insurance Scheme
Pradhan Mantri Fasal Bima Yojana
Bio-Fuel Tree / Plant Insurance
Cardamom Plant & Yield Insurance
Potato Crop Insurance
RulpWood Tree Insurance Policy
Rainfall Insurance Scheme For Coffee (RISC)- 2011
Rubber Plantation Insurance
Varsha Bima / RainFall Insurance
Weather Insurance (RABI)

22. Livestock insurance
What is Livestock Insurance ?
Livestock insurance is a contract by which the Insurer agrees
to identify the insured against such loss or damage as he may
sustain by reasons of injury to or the death of livestock by the
happening of the perils specified.
OR A contract to pay a certain sum of money on the death of
an animal from disease or accident.

23. Cattle and livestock are the bread and butter for
billions of farmers in India and cross the world.
With this regard the insurance policy covers
animals such as cows, buffaloes, bullocks, sheep
and goats owned by the different individuals and
which are used for commercial and for personal
purposes against the risk of permanent total
disablement or death due to accident and/or any
diseases which the animal may contract during the
policy period.

24. The policy covers death caused by:
Accident inclusive of fire, lighting, flood, storm,
hurricane, earthquake, cyclone, tornado etc.
Diseases contracted or occurring during the period of the
policy.
Surgical operation.
Riot and strike taking place which cause to death.
The policy also provides cover against permanent total
disablement suffered by the cattle due to any accident or illness.

25. The policy does not cover the following:
Willful injury or neglect, overloading, unskillful
treatment or use of animal for purpose other than
stated in the policy.
Accidents occurring and/or diseases contracted
prior to commencement of policy period.

26. Pashudhan Bima Yojna 2015-16
Deal with New India Insurance Company
1st August to 15th August 2016 celebrated a
awareness about the livestock insurance.
1 Family – 1 Livestock Unit
Insurance for 1 year or 3 year
Insurance interest rate for 1 yr. 2.45 % and for 3
years 6.40 % of the cost.
Subsidy, open 50%, BPL holders and backward
classes it is 70%.

27. Price of Animals – Depend on Quantity of Milk.
1 liter = 3000 Rs. For Cow
1 liter = 4000 Rs. For Buffalo
Insurance claim will be given when the animal dies within the
time period of the insurance. (death due to ill-ness, accident,
fire, thunder lighting, flood, earthquake, drought, or due to
fights).
Premium based on cost of animal.
The cost of animal is decided by Farmer, Doctor and insurance
agent.

28. Identification of insured animal
Ear tags made of suitable material are applied to
the ear of the animal and the code number is
entered into the veterinary health certificate.
Photographs of animals may be insisted by the
insurance company in case of high value animal.

29. Applying procedure
Animal within a specified age
groups are accepted for insurance.
Sum insured under the policy will
be the market value of the animal.
The sum of money paid for
compensation by the company is
limited to 75% of sum insured.

30. Claim procedure
Duly completed claim form.
Death certificate obtained from
qualified veterinarian.
Postmortem report if required by the
company.
Ear tag applied to the animal should
be surrendered. The condition of “
NO TAG- NO CLAIM” will be applied if
the tag is not surrendered.

31. Subsidies for Farmers in India for Selected
Machinery
The government of India, as well as the state
governments, initiate several schemes that assist to
diminish the plight of the farmers.
Thus, it focuses on every segment of the agricultural
scheme. Such as, each subdivision from raw material
procurement to the transport and marketing of the
produce, subsidies are available.
Further, Haryana, the highest agricultural producer in
the country is adopting modernized machinery to
encourage agricultural advancements.
Thus, few schemes like RKVY, crop diversification,
State plan, NFSM, are ISOPOM aiding the cause.

32. Focusing on Machinery Subsidies
Recently, the government provided an 80% subsidy
on machinery and equipment for farmers to
maintain the stubble.
Thus, the subsidy would help to buy paddy straw
chopper, happy seedier, straw management system
and so on that would otherwise cost a fortune.
Besides, the government provides subsidies through
state plans for purchasing mulcher, cutter, and
spreader, rotavator plough, etc.
Rotavator

33. Common Objectives of Subsidiary
Schemes Promoting Machineries
To adapt newer and faster machines
Further, to facilitate machine purchasing
Helping to decrease the cost of cultivation
Additionally, to ensure the timeliness of
cultivation timing
Most importantly, to improve the livelihood of
the farmers

34. 1. Rashtriya Krishi Vikas
Yojana (RKVY)
In this scheme, the government offers a 100% subsidy
depending on the ongoing project.
Further, aims to assist the advancement of the farming
sector.
Additionally, this is a state plan scheme, that is the state
official committee grant the subsidy are verifying the
farmer’s proposal.
Moreover, the governments initiated this as a part of the
National Agriculture Development Programme.
Despite other segments, it focuses on, it significantly
works on Agriculture Mechanization. Extra information is
available the schemes official portal.

35. 2. National Food Security
Mission (NFSM)
This scheme is for improving the machinery rather than
their purchasing.
Further, this scheme aids in maintaining machines such as
tractor, tillers, and so on in good condition.
Therefore, increasing the productivity on the farm. Even
though, it’s main aim was to increase productivity, it assists
several clusters to attain the aim.
Accordingly, one such cluster that was immensely benefited
from the scheme was machines that aid the cultivator.

36. 3. Sub-Mission on Agricultural
Mechanization (SMAM)
SMAM strives to assist the small and marginal farmers by
creating hubs that aid in the purchase of equipment.
Further, this is initiative is in every state of the country.
Moreover, this was a response to the extreme air pollution
seen during stubble burning.
Thus, mechanization adaptation was feasible to reduce the
pollution in Haryana, Delhi, Punjab, and Uttar Pradesh.
Furthermore, the scheme promotes Farm Machinery Training
and Testing Institutes (FMTTIs), financial assistance, and
encourage farm machinery.

37. 4. NABARD loans in India
This scheme offers every farmer the opportunity to purchase
necessary machines, importantly tractors.
However, they expect a down payment of 15% of the tractors
or machinery cost.
Nonetheless, NABRAD provides 30% of the cost as a subsidy
for tractor
Tractor

38. 6. List of Certain Subsidies in the
Respective States
Tractors, a chief machine that serves well in the
agricultural sector.
Further, its absolute necessity as well their ability to
ease the work of farmers is commendable.
Hence, many states in India offer subsidiaries for the
tractor.
Besides, the above- mentioned machines help the
cultivator achieve increased production. Accordingly,
few of them are mentioned here-on:

39. Yantra Laxmi Scheme
Available in Telangana offers a 50% subsidiary for buying a
tractor.
Further, being under Farm Mechanization Scheme, it aids
the purchasing of other farm apparatuses.
Additionally, provide a 100% subsidiary to SC/ST.
Besides, a loan is also available from SBI if the applicant is
an eligible bachelor with insurance and collateral security.
Also, the agricultural loan can be short term or long term
with 12% interest per annum.
Nevertheless, this subsidy holds good for purchasing
rotators, Mini Tractors, Power Weeders, and Trans-
planters.

40. Subsidies in Assam
Chief Minister Samafre Gramya Unnayan Yojana (CMSGUY)
is responsible for tractor subsidy in Assam.
Thus, CMSGUY offers a 70% subsidy up to Rs 5.5 lakhs.
However, it necessary for the cultivator to be eligible.
Accordingly, the eligible farmer must own 2 acres of
land. Nevertheless, a group (8-10) of farmers could also
avail the benefits of the scheme.
Following approval, 70% is offered as a subsidy, 20% in
the form of a loan, and 10% would be the farmer’s share.
That apart, SBI also provide loan to assist in the purchase
of other machines.

41. Information and Documents Necessary to
Avail the Benefits of the Schemes
1. Aadhar card
2. Voter card
3. Copy from the bank (statement)
4. Account details
5. PAN card
6. Contact information
7. Name and date of birth
8. Application letter
9. Payment receipt

42. Conclusion
In conclusion, efforts are at the full swing from
the government to ease the life of farmers.
Consequently, ranging from the raw material
procurement to the complex marketing and
infrastructure, the center assists all along the
way.
Additionally, all the schemes are easy to avail
thereby making their life simpler.
As an result, the bigger picture would be the
improvement of the Indian economy.

43. THANKYOU