This document discusses agricultural risk and crop insurance in India. It begins with background on the increasing frequency and impact of natural disasters on Indian agriculture. This has contributed to increased farmer debt, bankruptcies, and suicides. Crop insurance is presented as a means to help farmers cope with production risks outside their control. The document then covers different types of crop insurance approaches and the evolution of crop insurance schemes in India over the past century. It provides details on current flagship schemes like Pradhan Mantri Fasal Bima Yojana and Restructured Weather Based Crop Insurance Scheme, including their implementation and parameters. The role of crop insurance in providing protection to farmers and stability to agriculture is emphasized.

1. DEPARTMENT OF AGRICULTURAL EXTENSION 1

2. DEPARTMENT OF AGRICULTURAL EXTENSION 2
WHAT ABOUT CROPS?

3. DEPARTMENT OF AGRICULTURAL EXTENSION 3
The International Disaster database has found
that the number of disasters in India went up
from three in the decade of 1900-1909, to as
many as 186 a century later. And in the past
two decades (2000-2019), India has already
seen 321 natural disasters.
Number of disaster reported per country/ territory (2000-2019)
(CRED, 2020)

4. DEPARTMENT OF AGRICULTURAL EXTENSION 4
“Indian agriculture is a gamble on the monsoon”
Sir. Guy Fleetwood Wilson
The erratic and uneven distribution of monsoon rains perpetuated yield/price
volatility and hence increased farmer’s exposure to risk and uncertainty.
(Reddy, 2004)

5. NIRANJAN SURESH
2019-11-229
CHAIRMAN: Dr. G. S. SREEDAYA
ASSISTANT PROFESSOR ( Sel. Grade)
DEPARTMENT OF AGRICULTURAL EXTENSION
COLLEGE OF AGRICULTURE, VELLAYANI
DEPARTMENT OF AGRICULTURAL EXTENSION 5

6. DEPARTMENT OF AGRICULTURAL EXTENSION 6
CONTENT
Risk & Sources of Risks in Agriculture
Strategies for Risk Management in Agriculture
Comprehensive Agricultural Risk Management Model
Agricultural Insurance & Need for Crop Insurance
Classification of Crop Insurance
Evolution of Crop Insurance Schemes in India & Kerala
Case Studies
Constraints and Suggestions
Conclusion

7. RISK
“The potential for consequences where something of value is at stake and where the
outcome is uncertain, recognizing the diversity of values”
and cite the formula
Risk = Probability of Events or Trends x Consequences
Risk results from the interaction of
◦ vulnerability, exposure and hazard
(Oppenheimer et al., 2015)
DEPARTMENT OF AGRICULTURAL EXTENSION 7

8. DEPARTMENT OF AGRICULTURAL EXTENSION 8
Hazard: type of risk being considered.
The quantification of the hazard is then undertaken by assessing three sub
variables:
◦ Frequency,
◦ Severity,
◦ Spatial extent
Vulnerability: Estimation of what the impact of the realized risk
Exposure: Identification of the location of crops, livestock, and farm holdings
that may be directly impacted by the hazard.
Source:
Nijs, 2014; The Handbook of Global Agricultural Market

9. AGRICULTURAL RISK
If one has to break down the portfolio of agricultural risks, one could
use the following categorization:
Risks prevalent at the farm level and
Risks prevalent within supply chains.
DEPARTMENT OF AGRICULTURAL EXTENSION 9
(Nijs, 2014)

10. SOURCES OF RISK IN AGRICULTURE
Production risks
Market & price risk
Financial & credit risk
Institutional risk
Personal risk
DEPARTMENT OF AGRICULTURAL EXTENSION 10
(Kahan, 2008)

11. Production risk
External events like- weather, pest and diseases, animal attacks etc.,
Adverse events- during cultivation i.e. harvesting or threshing etc.,
Production loss
DEPARTMENT OF AGRICULTURAL EXTENSION 11

12. Market and Price Risk
Input and output price volatility
Endogenous and exogenous market
shocks
Locally – supply and demand conditions
Internationally – international production
dynamics
DEPARTMENT OF AGRICULTURAL EXTENSION 12
Image source: The Financial Express

13. Financial and Credit
Risk
Anticipated expenses
Potential cash inflow problems
Lack of access to insurance services
Credits
High cost of borrowing
Recuperates once the product is marketed
DEPARTMENT OF AGRICULTURAL EXTENSION 13

14. Institutional RISK
Unexpected changes in regulations that influences farmers’ activities
Changes in regulations and policies
Changes in financial services
Level of pricing/ income support payments
Subsidies
Mainly observed in
Import/ export regimes
Dedicated support schemes etc.
DEPARTMENT OF AGRICULTURAL EXTENSION 14
Image source: New Indian Express

15. PERSONAL RISK
Life and wellbeing of people who work on
the farm
Labour and health-related risks: illness,
death, injury, incapacity to work
Asset risks from floods, cyclones and
droughts
Damages or theft etc
DEPARTMENT OF AGRICULTURAL EXTENSION 15

16. AGRICULTURAL RISK
MANAGEMENT
What is the probability of impact & the economic damage it
may cause?
Who is the best party involved, who can minimise that risk at
the lowest cost possible?
DEPARTMENT OF AGRICULTURAL EXTENSION 16

17. RISK MANAGEMENT STRATEGIES
Risk management strategies are broadly classified into
 Informal strategies
 Formal strategies
and between ex-ante & ex-post strategies
(World Bank, 2005)
DEPARTMENT OF AGRICULTURAL EXTENSION 17

18. DEPARTMENT OF AGRICULTURAL EXTENSION 18
Informal Mechanism Formal Mechanism
Market Based Publicly provided
On farm • Avoiding exposure to risk
• Crop diversification
• Mixed farming
• Diversification of income source
• Buffer stock accumulation or liquid
asset
• Advanced cropping techniques
• Agricultural extension
• Supply of quality
seeds, inputs etc.,
• Pest management
systems
• Infrastructures (road,
dams, irrigation
systems)
Sharing risk
with others
• Crop sharing
• Sharing of agricultural equipments,
irrigation sources etc
Contract
marketing
Hedging
Futures markets
etc.,
Ex- Ante Risk Management Strategies in Agriculture

19. DEPARTMENT OF AGRICULTURAL EXTENSION 19
Informal Mechanism Formal Mechanism
Market Based Publicly provided
Coping with
shock
• Reduced consumption patterns
• Sale of assets
• Migration
• Reallocation of labour
• Mutual aids
Credits • Social assistance
(Calamity relief funds)
• Rescheduling loans
• Agricultural
insurance
• Relaxation in grain
procurement
procedures etc.,
Ex- Post Risk Management Strategies in Agriculture

20. DEPARTMENT OF AGRICULTURAL EXTENSION 20
COMPREHENSIVE AGRICULTURE RISK
MANAGEMENT FRAMEWORK
Financial Input &
Calamity Relief
(Direct initiative)
• Agricultural Credit
• Input Subsidies
• Calamity Funds
Production & Asset
Protection
(Indirect initiative)
• Area Yield- based
Crop Insurance
• Weather- based Crop
Insurance
• Microinsurance
Marketing & Price
Assurance
(Govt. & market approach)
• Agricultural Price Risk
Management
Instruments
• Commodity markets
• Contract Farming
Source: FAO, 2008

21. What is agricultural insurance?In general, insurance is an equitable transfer of a risk of loss from one entity to another in exchange for a
premium or a guaranteed and quantifiable small loss to prevent a large and possibly devastating loss.
Agricultural insurance is a special line of property insurance applied to agricultural farms.
Agricultural insurance is not limited to crop insurance, it also applies to livestock, bloodstock, forestry,
aquaculture, and gre enhouses.
DEPARTMENT OF AGRICULTURAL EXTENSION 21
Source: https://cropinsurance101.org/
Source: cropinsurance101.org/

22. DEPARTMENT OF AGRICULTURAL EXTENSION 22
WHY CROP INSURANCE ?

23. DEPARTMENT OF AGRICULTURAL EXTENSION 23
When freak becomes the norm
Hailstorms and unseasonal rains destroyed large swathes of rabi crops in 2013, people thought to
be freak weather events. But they hit again in 2014 and then in 2015, each time with more
intensity and causing more damage.
Source: Centre for Science and Environment (CSE), 2015

24. DEPARTMENT OF AGRICULTURAL EXTENSION 24
More than 14.4 million hectares (ha),
roughly seven per cent of India’s
gross cropped area, was affected by
natural calamities in the 11 months
through February 20, 2020.

25. DEPARTMENT OF AGRICULTURAL EXTENSION 25
Kerala witnessed the worst ever flood in history
since 1924 in August 2018. Around 1.08 million
farmer households had been affected and damaged
around 2.36 lakh ha cultivated area (11% state area
under agriculture). Total crop loss was estimated at
Rs 18,545 crores.
Source: Rebuild Kerala Initiative, 2019

26. DEPARTMENT OF AGRICULTURAL EXTENSION 26
According to the National Crime Records Bureau report of 2015,
38.5% farmers committed suicide due to bankruptcy or indebtedness.
(Sundaram, 2019)
Agricultural crop failure due to natural disasters leads to lower
agricultural income. As a result, farmers are unable to repay their
loans, which eventually lead to higher incidence of farmer suicides.
(Parida et.al., 2018)

27. DEPARTMENT OF AGRICULTURAL EXTENSION 27
Farm operations
continues
Non-insured farmer
Insured farmer
Receives
indemnity for
crop loss

28. DEPARTMENT OF AGRICULTURAL EXTENSION 28
(AIC, 2008)

29. DEPARTMENT OF AGRICULTURAL EXTENSION 29
Source: cropinsurance101.org

30. DEPARTMENT OF AGRICULTURAL EXTENSION 30
(Nijs, 2014)
CROP INSURANCE
Crop-Yield based
Crop Insurance
Crop Insurance
Multi-peril Crop
Insurance
Index based Crop
Insurance
Area- Yield
Index Insurance
Weather Index
Insurance

31. DEPARTMENT OF AGRICULTURAL EXTENSION 31
•Crop insurance
•a.k.a. Damage
based indemnity Insurance
•Insurance claim is calculated
by measuring percentage damage
in field
•Multiperil crop insurance
•a.k.a. Yield based Crop Insurance
•Coverage not limited to one risk
•Insured yield is established as a percentage of
farmers’ average yield
Crop-Yield Insurance

32. DEPARTMENT OF AGRICULTURAL EXTENSION 32
Index based Crop Insurance
Area-Yield Index Insurance
Insured Yield (Index) is established
as a percentage of the average yield
for the unit area.
Weather Index Insurance
Based on a specified weather
parameter measured over a period of
time at a particular weather station
Indemnity is paid when the realised
value of index exceeds the prescribed
threshold.

33. DEPARTMENT OF AGRICULTURAL EXTENSION 33
Crop Insurance Approaches
Area Approach
Based on “defined areas”
Actual yield/ ha (AY) is based on Crop
Cutting Experiments (CCEs) measured as
part of General Crop Estimation Survey
(GCES)
If AY < Guaranteed yield( Threshold
Yield), Indemnity is paid
Indemnity: 70%, 80%, 90% based on high,
medium & low risk area
Individual Approach
Assessment of loss is made
separately for each farmer
For individual plot/ farm
Involves high administrative costs
(Raju and Chand, 2008)

34. DEPARTMENT OF AGRICULTURAL EXTENSION 34
1915
RAIN INSURANCE SCHEME
• Shri J.S. Chakravarthi of Mysore state
• Insurance for drought
1947
Special study was
commissioned by Dr. Rajendra
Prasad for the purpose of Crop
& Cattle insurance
1970
1965
Crop Insurance bill & Model
Scheme of Crop Insurance
Dr. Dharin Narain
Committee
1972
First ever CIS by
“General Insurance”
• H-4 cotton in Gujarat
• Individual approach
• Covered only 3110
farmers for a premium
of 4.54 lakhs against
claims of 37.88 lakh.
(Nisha & Singh, 2020)
EVOLUTION OF CROP INSURANCE SCHEMES IN INDIA

35. DEPARTMENT OF AGRICULTURAL EXTENSION 35
1979
PILOT CROP INSURANCE SCHEME
• Homogeneous Area Approach
• Risk- GIC: State 2:1
• Covered 13 states
• Premium 5-10% of Sum Ins.
1985
COMPREHENSIVE C. I. S.
• Covered farmers availing crop
loan
• Premium rates were 2% & 1%.
• Multi agency scheme
1999
1997
EXPERIMENTAL C. I. S.
NATIONALAGRICULTURAL INSURANCE
SCHEME
• Agricultural Insurance Company of India Ltd
• 10% subsidy to small & marginal farmers
• 24 states & 2 UTs
2000
PILOT SCHEME ON SEED C. I.
• Boosting seed industry
• Seed producing organisation
• Farmers growing foundation &
certified seed.
• Only for all small / marginal
farmers with 100% subsidy
• 14 districts of 5 States

36. DEPARTMENT OF AGRICULTURAL EXTENSION 36
Dec 2002
A. I. C of India ltd.
Took over GIC
.
2003-04
2010-11
MODIFIED N. A. I. S
• Minimum indemnity level increased
to 70% from earlier 60%.
• Participation of private sectors
2009-10
FARM INCOME I. S.
• Protection against market fluctuations
• Rice & Wheat
• To protect farmers’ income & to reduce govt.
expenditure on procurement at MSP.
2007
PILOT WEATHER BASED C. I. S.
• Based on Area approach
• Compensation to crop loss was
decided by weather data
Pilot Coconut Palm I. S.
• Administered by the CDB &
implemented by AIC
• Premium- 50%: 25%: 25%
2013-14
National Crop Insurance
Programme /Rashtriya Fasal
Bima Karyakram
Merging NAIS, WBCIS,
MNAIS & CPIS

37. FLAGSHIP CROP INSURANCE SCHEMES
Pradhan Mantri Fasal Bima Yojana(PMFBY), 2016
◦ Yield based C. I. S.
Restructured Weather Based Crop Insurance Scheme (RWBCIS), 2016
◦ Weather Index based C. I. S
DEPARTMENT OF AGRICULTURAL EXTENSION 37

38. DEPARTMENT OF AGRICULTURAL EXTENSION 38
Source: pmfby.gov.in

39. DEPARTMENT OF AGRICULTURAL EXTENSION 39
Source: PMFBY

40. DEPARTMENT OF AGRICULTURAL EXTENSION 40
IMPLEMENTATION OF SCHEME
• Based on “Area Approach”
•The State Level Coordination Committee
on Crop Insurance (SLCCCI) oversee
implementation of PMFBY.
•Sum Insured is based on
Notional value of Average Yield =
(Notional Avg. Yield or TY x MSP)
•Premium: Govt cap premium
subsidy to 30%
•Claim: AY < TY
Kerala
Rice: Alappuzha, Pathanamthitta &
Kottayam
Tapioca & Banana: All 14 districts

41. RWBCIS
Based on “Area approach”
State govt. notify Reference Unit Area
(RUA) & Reference Weather Stations
(RWA)
Use defined weather parameters as
Index / Proxy for crop yield
SI is based on scale of finance
Compulsory for loanee farmers &
voluntary for non loanee farmers
In Kerala
23 Crops – All districts except Alappuzha
& Pathanamtitta
DEPARTMENT OF AGRICULTURAL EXTENSION 41
(AIC, 2020)

42. DEPARTMENT OF AGRICULTURAL EXTENSION 42
OTHER INSURANCE SCHEMES
Source: https://www.aicofindia.com/

43. STATE CROP INSURANCE SCHEME OF KERALA
Karshika Vila Insurance
DEPARTMENT OF AGRICULTURAL EXTENSION 43

44. DEPARTMENT OF AGRICULTURAL EXTENSION 44

45. DEPARTMENT OF AGRICULTURAL EXTENSION 45
CASE STUDIES

46. Bankura, West Bengal under PMFBY Kharif 2018
HDFC ERCO GIC LTD is implementing PMFBY
“Acquired 454% growth in non loanee enrolment”
They noticed huge scope of coverage of non loanee farmers in the district and
enrolled
◦ 91983 non loanee farmers insuring 41400ha agricultural land (638%)
DEPARTMENT OF AGRICULTURAL EXTENSION 46
Source: https://www.hdfcergo.com

47. DEPARTMENT OF AGRICULTURAL EXTENSION 47
They achieved it through extensive
promotional activities like
Organising meetings & awareness camps
Providing training related to PMFBY schemes
& agri portal
Conducted 4 district level workshops
Conducted around 1150 village level meetings
Farmers awareness meeting
Van campaign Village level non loanee form fillingGram panchayath level farm meeting

48. VILA INSURANCE: BANANA FARMERS IN KERALA
Name: Binu. M
Place :Urukunn, Kottayam
12 Jan 2020
KB: Thenmala
Cause of crop loss: Cyclone
Crop: Banana – 2100 nos
Premium: Rs 3/ banana
No. of banana lost- 1712
Claim: Rs 5,13,600 (Rs 300/ banana)
DEPARTMENT OF AGRICULTURAL EXTENSION 48
Directorate of Agriculture, TVPM

49. PMFBY: RICE FARMER IN KERALA
Name: Samir – Kilimanur, TVPM
Cause of damage: Loss due to non-availability
of irrigation water was not notified under
PMFBY 16-17.
Insurance claim rejected
Loss per individual plot is overshadowed due to
“Area approach”
DEPARTMENT OF AGRICULTURAL EXTENSION 49
Season Threshold
Yield (kg/
ha)
Actual
Yield
(kg/ha)
Shortfall
(kg)
Rabi
2016-17
10129 12758 0
(AIC, 2018)

50. DEPARTMENT OF AGRICULTURAL EXTENSION 50
LESSONS FOR INDIA: GLOBAL PERSPECTIVE

51. DEPARTMENT OF AGRICULTURAL EXTENSION 51
CHINA
 Heavy subsidy programme by govt. of China lead to a coverage of 69% of total crop
area under insurance from 2007-2016.
 Raised govt. payable subsidy from 50%-80%
USA
 Insured area has increased from 52% to 89% in 2015 as a result of increasing govt.
share of premium subsidy to 70%
 Premium rates and crops insurance claims are based on individual plots
KENYA
 Efficiency in settlement of claims within 2-4 days by Kilimo Salama
(Safe Agriculture) weather based C. I. – through use of mobile tech. called M-psa
(ICRIER, 2018)

52. DEPARTMENT OF AGRICULTURAL EXTENSION 52
BENEFITS OF CROP INSURANCE
Increase risk taking behaviour of farmer
Helps increase credit rating of the farmer
Avoids fluctuations and brings stability in the farm incomes
Bridges the gap between income and consumption
requirements
(Jayabalasingh & Nisha, 2020)

53. DEPARTMENT OF AGRICULTURAL EXTENSION 53
About 60 per cent of the farmers agreed that PMFBY helped in adopting the modern
technologies in crop production
(Lakshmanan & Ashok, 2019)
Non- insured farmers borrow
• friends and family (34%),
• bank loan (28%),
• sale their livestock (14%),
• borrow from money lender (11%),
• seek government relief (10%)
• sale the gold (3%)
(Soni & Trivedi, 2013)
to square the loss is risky affair

54. CONSTRAINTS IN CROP INSURANCE SCHEMES
DEPARTMENT OF AGRICULTURAL EXTENSION 54
Lack of awareness and knowledge about the insurance schemes
High rate of premium associated with lesser compensations
Lack of proper interaction at local level
Insurance is voluntary for non loanee farmers and enrolment is very less

55. CONSTRAINTS IN CROP INSURANCE SCHEMES
DEPARTMENT OF AGRICULTURAL EXTENSION 55
Non-availability of adequate land records is hindering the registration of farmers
in crop insurance schemes
Delay in settlement of claim

56. DEPARTMENT OF AGRICULTURAL EXTENSION 56
SUGGESTIONS
Popularise crop insurance among farmers
Digitization of land records should be encouraged
Use of latest technologies
Avoid delay in claim settlement
Policies to attract non-loanee farmers
Inclusion of tenant farmers
Ensure competency in market

57. CONCLUSION
Farmers play an important role in risk management in
agriculture and with efficient insurance schemes, losses in
agriculture can be minimised. Once farmer is satisfied they will
bring more wealth to the nation.
“CROP INSURANCE IS LIFE INSURANCE TO FARMERS”
DEPARTMENT OF AGRICULTURAL EXTENSION 57

58. DEPARTMENT OF AGRICULTURAL EXTENSION 58