CROP INSURANCE PROGRAMME OF GOI Perspective of MNAIS - RAJENDRA KUMAR TIWARI Joint Secretary, Department of Agri. & Coop. Ministry of Agriculture, GOI

Risks affecting Agriculture production– A Major Challenge Vagaries of weather - rainfall - temperature - humidity - wind - cyclone - hailstorm Pest & diseases Fire Quality of inputs Soil Market prices

Objectives of Crop Insurance To provide insurance coverage and financial support to the farmers in the event of prevented sowing & failure of any of the notified crop as a result of natural calamities, pests & diseases. To encourage the farmers to adopt progressive farming practices, high value in-puts and higher technology in Agriculture. To help stabilize farm incomes, particularly in disaster years.

HISTORICAL BACKGROUND OF CROP INSURANCE IN INDIA LIC introduced first scheme based on individual approach in 1972 for cotton in Gujarat, Continued up to and covered 3110 farmers premium of Rs lakhs and paid claims of Rs lakhs. In 1979 Pilot Crop Insurance Scheme (PCIS) was introduced. homogenous area approach limited to loanee farmers. 13 States implemented till ,covering 6.27 lakh farmers Premium of Rs lakhs and claims of Rs lakhs. From Kharif 1985, Comprehensive Crop Insurance Scheme (CCIS) was introduced which continued till Kharif The claims ratio was 1 : CCIS was criticized for limited coverage of farmers, crops and risks. For covering farmers, yield and price, Farm Income Insurance Scheme (FIIS) was also Piloted during Rabi and Kharif 2004 seasons in selected districts

Existing Crop Insurance Schemes I.NAIS: yield based; non-actuarial premium except horticultural crops / annual commercial crops; underwriting of losses by Central & State Govt. on 50:50 ratio II.WBCIS: weather based ; actuarial premium with premium subsidy shared equally by Central & State Govt. III.CPIS: plant based; actuarial premium IV.MNAIS: yield based; actuarial premium with premium subsidy shared equally by Central & State Govt.

NATIONAL AGRICULTURAL INSURANCE SCHEME (NAIS) For improving the scope and content of CCIS a broad based NAIS was introduced from Rabi NAIS provides for greater coverage of farmers, crops and risk commitment. Premia-structure has been rationalized and the scheme is required to operate at smaller unit area of insurance. Subsidy to Small and Marginal farmers. It is presently being implemented by 25 States & 2 Union Territories In last 22 Crop Season: Farmers Covered : crore ( Av. not more than 15% farmers) Premium Collected: Rs crore Claims Paid : Rs crore Claim ratio : 3.29 Loss cost : 9.86%

State-wise farmers benefited under NAIS (in lakhs)

Performance of NAIS during XIth Plan Particulars (Kharif only) Claims (Rs.in crore) Under process Farmers Covered (in Lakh Farmers Benefited (in Lakh) Under process

Limitations of NAIS Large insurance unit area Delay in payment of claims due to late submission of yield data & availability of Govt. funds Pre-sowing/ planting Risk is not covered Unattractive basis of calculation of threshold yield, Low indemnity level, Localised calamities are not covered Post Harvest Losses are not covered Different seasonality discipline for loanee & non- loanee farmers Lack of competition

Main Recommendations of JG Report Actuarial premium regime with suitable subsidy Reduction in insurance unit area to Gram Panchayat Basis of calculation of threshold yield –best 5 of 7 years yield Higher indemnity levels of 80% & 90% Coverage of: Pre-sowing & post-harvest losses Perennial crops Personal accident Package insurance policies covering other assets of farmers, including Animal Husbandry Private insurers to be encouraged, Exemption from Income Tax & Service Tax so that an adequate Catastrophic Reserve Fund can be built

Recommendations of other Committees National Mission on Sustainable Agriculture (NMSA) recommended for the following in respect to crop insurance program: Improvements in the existing NAIS w.r.t. calculation of threshold yield, reduction of insurance unit, on account payment of claims, etc. Promotion of blended/mixed insurance scheme. Comprehensive insurance products to address all the needs of different farming systems. Design of Insurance products using weather index. Weather Insurance products based on climate change. Prime Ministers Council on Trade & Industry- Sub-Committee on enhancing Agri Production & food Security has recommended to Link Agriculture credit with crop insurance to manage default risks

Major Modifications in NAIS Sl. No. ParametersNAIS Modified NAIS 1 Insurance Unit The defined area may be a Gram Panchayat, Mandal, Hobli, Circle, Phirka, Block, Taluka etc declared by GOS Village Panchayat for major crops 2 Threshold yield Moving average yield of preceding 3 years for Rice & wheat and 5 years for other crops Average yield of last 7 years excluding upto 2 years of declared natural calamities 3 Indemnity levels 60%, 80% & 90% 70, 80% and 90% 4 Pre- sowing/ Planting Risk Presently not covered Prevented/Failed Sowing Risk to be covered upto 25% of SI

Major Modifications in NAIS … Cont. Sl. No. ParametersNAIS Modified NAIS 5 Post Harvest Losses Presently not covered Post harvest losses on account of cyclones in coastal areas to be covered 6 Early Settlement The claims are settled based on the final yield estimates submitted by GOS On account settlement of claims upto 25% of likely total claims 7 Localized calamities Presently not covered Individual assessment of claims in case of hailstorm and landslide 8 Seasonality Discipline Different for loanee and non-loanee farmers Uniform seasonality discipline for loanee and non-loanee farmers 9 Implementing Agency AIC Private insurance companies with adequate infrastructure and experience are also allowed alongwith AIC

Subsidy & Net Premium for Farmers under MNAIS Sl.N o Actuarial Premium (% of SI) Subsidy to Farmers (equally shared by Central and State Govt.) Premium payable by farmers 1Upto 2%NILUpto 2% 2>2-5%40% subject to minimum net premium of 2% of SI 2-3% 3>5-10%50% subject to minimum net premium of 3% of SI 3-5% 4>10-15%60% subject to net premium of 5% of SI 5-6% 5>15%75% subject to minimum net premium of 6% of SI =>6

MNAIS- Present Status Implemented in 34 districts covering 22 States during Rabi season The scheme would be on actuarial regime in which insurance company will receive premium on commercial basis and will be responsible for all claims GOI & State Govts. will provide premium subsidy upto a max. of 75% at different slabs of actuarial premium to make the scheme affordable for farmers The coverage in Pilot MNAIS is expected to 25% of total farmers of 50 districts.

Area Yield Index and Weather Index: Advantage and Challenges Area Yield IndexWeather Based Index All peril covers (drought, excess rainfall, flood, pest & diseases)- resulted yield Single or sometimes multiple perils cover- rainfall – (excess & deficit), temperature, relative humidity Easy to designTechnical challenges in index design (peril, crop, farming practices, agro-meteorological zone etc.) Low start-up costsHigh start-up costs High loss assessment costs (CCEs) Lower loss assessment costs Slow claims settlementFaster claims settlement

Major Challenges in implementation of MNAIS Assessment of crop yield at Gram Panchayat level – Strengthening of Crop Cutting Experiments (CCEs) to increase their accuracy, reliability and timeliness; Standardization of procedures and manuals (sample size, numbers, process etc.), proper manpower allocation/outsourcing, capacity building/ training of field staffs, supervision and monitoring of process, real time reporting of CCEs -through SMS, internet etc., computerization of yield data/reporting of CCEs result etc. Alternative method for yield/loss assessment – Use of remote sensing technology Normalized Differential Vegetative Index MoU was signed between DST and AIC for launching a Pilot project on Remote sensing technology in Bihar, Karnataka, Rajsthan & UP No progress could be achieved due to transfer of concerned experts of DST Methodology for yield assessment of multi-picking crops (horticultural & Commercial)

Major Challenges in implementation of MNAIS...cont Adequate Automatic Weather Stations (AWSs) – for on- account payment Existing AWSs (based on uniform distribution), Required AWSs Fiscal Management- shifting of liability from financing post losses to pre-loses financing i.e. advance subsidy in premium Product Designing- risk classification (basis risk, Threshold Yield, Indemnity level), appropriate weighting/calculation of basis risk (risk rating), multi-optional products for the farmers based on their need/choice (pre-sowing, planting, post-harvest losses) Benchmarking/registration before providing government support Rationalization & Standardization of premium rates Development of new products – for uncovered crops/areas

Major Challenges in implementation of MNAIS …cont Evaluation & Monitoring for proper implementation and further planning & Policy decision Grievance redressal mechanism Publicity & awareness, Coordination amongst all stakeholders Clerical mistake

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