Case3-May-2017
Agriculture in India is a gamble against nature. It is an adventure filled with unexpected twists and turns. There are several risks and uncertainties in different phases of agriculture, from production to marketing. There are numerous factors that contribute to these risks. They include variability in weather, frequent natural calamities, issues related to access to institutional credits, quality and timely availability of inputs, timely solutions for cropping-related issues, limited storage facilities, inadequate rural infrastructure facilities, exploitative markets and so on. Farmers use a variety of formal and informal techniques to manage and mitigate risks which include the use of drought-resistant crops, reduced consumption, sale of assets, migration to other places and alternative livelihoods.
The Government of India and state governments have devised and implemented various schemes to address agriculture risk management. They range from community development initiatives in 1952 to IRDP to National Rural Livelihoods Mission (NRLM) in 2011. On the other hand, pro-agriculture financial sector policies were introduced to increase the flow of credit in the agriculture sector. They include adaptation of priority sector lending norms by commercial banks, Kissan Credit Card, interest subvention scheme and debt waiver scheme. Initiatives such as relief measures against natural calamities have been undertaken by the state with the view of supporting farmers to mitigate risk.
Many schemes were introduced in the insurance sector as well to protect the farmers against financial losses arising out of uncertainties, especially in agricultural production. From the comprehensive crop insurance programme introduced in 1985 (which transformed to National Agriculture Insurance Scheme in 1999 subsequently) to PMFBY in 2016, we have come a long way in agriculture insurance. While newer versions of the insurance schemes have imbibed new knowledge gained from past experiences making use of prevailing technological breakthroughs, some of the challenges continue to remain unaddressed.
This article tries to highlight what is improved and what remains unchanged with respect to the PMFBY scheme. The comparison is largely with its previous version of the National Agriculture Insurance scheme (NAIS). An attempt is made to study the role of various stakeholders to work on the challenges to promote further improvement. The central government announced PMFBY in January 2016 and the programme started with Kharif 2016 (July-September). The scheme involved huge premium subsidy by the government (central and state in the ratio of 75:25). The premium was capped at 2% of the sum Insured for Kharif season and 1.5% for Rabi 2016 for the field crops. It is 5% for the annual commercial crops for both the seasons. While the actuarial premium of some of the crops was estimated to be even 30% of the sum insured, the burden of farmers has been drastically reduced by way of premium subsidies. This is one of the welcome features benefitting farmers. Although the previous scheme of NAIS had premium subsidies, the premium varied from crop to crop making it difficult for the farmers to understand and plan.
Secondly, in PMFBY, the estimation of yield loss is done through crop cutting experiments (CCE) at revenue village level instead of Firka level as in the case of NAIS. Like the previous NAIS scheme, PMFBY is also an areaindexed programme. The unit area for yield estimation was Firka, which comprised 15 to 20 revenue village and even more in some cases. In the previous scheme of NAIS, the CCEs were taken up at Firka level and average yield of Firka was considered as the standard yield for all the revenue villages within the Firka. However, due to the variation in soil type and climatic conditions, topography, etc., there were huge variations in the yields of different revenue villages in the same Firka. This was a disadvantage for the farmers, especially small/marginal farmers practising rainfed farming. The current PMFBY programme assures four CCEs in each revenue village for each crop. Thus, the average yield of the revenue village would be more likely to be representative of the yield of the farmers in that revenue village.
Thirdly, the PMFBY allows the lesee and tenant farmer and share croppers also to get protected under this scheme. which was not available in the previous NAIS scheme. Fourthly, PMFBY covers five types of risks – prevented sowing, failed sowing, mid-season adversities, yield loss and post-harvest losses. However, the conditions for availing such benefits are found to be more complex except for the risk of protection against yield loss which is decided on basis of the CCEs. For other risks, the estimation of loss is to be decided by the District-Level Planning Committee (DLPC) constituted for this purpose. The effectiveness of these triggers could be better known only after observing the outcomes of the scheme for few more seasons. While the above can be considered as positive changes, PMFBY is faced with many challenges too.
The scheme largely relies on the land and cultivation records of the revenue department. Ultimately, it boils down to the level of village administrative officer (VAO) to register the crop cultivation details and issue the certificates (Adangal certificate in Tamil Nadu) to the cultivating farmers as the proof of ownership/tenant rights. However, it is a well-known fact that these records are not properly updated. This is also due to the fact that the maintenance of other revenue records of the village and issue of birth/death certificates and community certificates, etc. are all to be done by the same VAO. Equipping the village office with competent personnel and undertaking other measures such as digitisation of revenue records through the e-governance initiatives have to go hand–in-hand to achieve a hasslefree process including the insurance. In this background, it has become almost a common norm for farmers to spend money for obtaining the required certificates from the village administration which is a real dampener of PMFBY.
Secondly, as stated earlier, the scheme aims to assess the yield loss through revenue village-level CCEs. Take an example in the state of Tamil Nadu with about 17,000 revenue villages, at least 68,000 CCEs have to be conducted for just one crop. The total number of CCEs required may run into lakhs. With some of the revenue villages having more than 5 notified crops, we can imagine the volume of human labour needed to conduct these CCEs. However, neither the state governments nor the central government shared any plan about how they are going to complete such a herculean task. The PMFBY scheme document of the government had stated that technology such as satellite imageries would be used for assessing the yield in future. (This again needs to be analysed, may be in a separate article.) But for now, the issue remains unaddressed.
Conducting CCE is ultimately vested with the agriculture officers (on behalf of Department of Agriculture) and village administrative officers (on behalf of Department of Revenue). From our field interactions, we could see that only the existing manpower is being used for this task which raises serious concerns on the quality of CCE conducted. CCEs are more important for determining the claim amount of the farmers insured in the prevailing season. Also, it has a say in the future claims as the threshold yield is determined from the average yield data of the last 7 years.
Conducting CCE is ultimately vested with the agriculture officers (on behalf of Department of Agriculture) and village administrative officers (on behalf of Department of Revenue). From our field interactions, we could see that only the existing manpower is being used for this task which raises serious concerns on the quality of CCE conducted. CCEs are more important for determining the claim amount of the farmers insured in the prevailing season. Also, it has a say in the future claims as the threshold yield is determined from the average yield data of the last 7 years. sporadic tasks. The clause that the produce has to remain in the field until the assessment of loss is carried out by DLPC is not practical as the farmers would always attempt to save whatever they can.
In some of the revenue villages, farmers complained that some of the extensively cultivated crops are not notified by the government. The thumb rule for notification is that the crop should have been cultivated in more than 20 hectares in the previous season. However, since the cultivation records are not properly maintained and in practice, the land under cultivation is recorded as land left fallow favouring the real estate.
Finally, there are voices being raised from several parts of the country demanding a solution against the menace of wild animals. It is imperative that an efficient solution with a mechanism to differentiate the menace caused by wild animals needs to be formulated adequately.
The government’s report on the performance of PMFBY shows significant increase in terms of number of farmers covered, extent of crops covered and total sum insured.
“The performance this season has improved by 18.50% in
terms of farmers coverage, 15% in terms of area coverage
and 140% in terms of sum insured in comparison to
Kharif 2015, which happened to be one of the worst
drought affected seasons when the number of farmers
covered was 309 lakh (22.33%), total coverage area
was 339 lakh ha. and sum insured was र 69,307 crore.
Furthermore, there has been a quantum jump of more
than six times in the coverage, of non-loanee farmers
from 14.88 lakh in Kharif 2015 to 102.6 lakh in Kharif
2016.” Source: Press Information Bureau, Government
of India, Ministry of Agriculture.
Despite the delay in announcing the cut-off dates, the government claims that the coverage in Kharif 2016 is higher than Kharif 2015. The same might be expected in Rabi 2016 also. As the enrolment is still in progress for Rabi 2016, a clear picture would emerge by March or April 2017. Since more farmers are purchasing this policy including non-loanee farmers, it is important to see that appropriate measures are taken up by the government agencies, insurers, and civil society organisations to resolve the challenges related to the enrollment in the scheme as well as claim. So, the government has to create mechanisms in tune with the promises made in the new features of PMFBY. This becomes a great cause of concern for the farming communities and civil society organisations advocating efficient social security measures. The involvement of private insurance companies to administer the scheme has put the scheme in jeopardy. If the claim process, especially the yield loss assessment is not properly done, it would result in poor claims, thus favouring the insurers (both private and public owned) at the cost of public money in the form of premium subsidy.
Although it is hard to judge the success of the new version of agriculture insurance with just the passage of two seasons, the governments should show their intent to initiate action to address the challenges that are obvious. This is a crucial step that would determine the success of risk management strategy in the form of PMFBY in the future.