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Government run crop yield insurance scheme, procurement at minimum support prices and calamity relief funds are the major instruments being used to protect the Indian farmer from agricultural variability. However, crop insurance covers only about 10% of sown area and suffers from an adverse claims to premium. There are problems with both the design and delivery of crop insurance schemes. These problems could be overcome with rainfall insurance with a well developed rainfall measurement infrastructure. Private and public insurers are currently experimenting with rainfall insurance products. Given the current levels of yield and rainfall variability the actuarially fair premium rates are likely to be high and in many cases unattractive or unaffordable. Instead of adopting the easy and unsustainable route of large subsidies, in the long term the government should consider risk mitigation through improvements in the irrigation and water management infrastructure.

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