Crop insurance

Since decades, agriculture has been a prime source of livelihood in a country like India. According to financial report for year 2018, the gross value added by agriculture, forestry, and fishing was estimated around Rs.18.53 trillion. Over the years, food industry in India has witnessed a huge growth with its increasing contribution to world food trade as well.

According to the Department for Promotion of Industry and Internal Trade (DPIIT), the Indian food processing industry has cumulatively attracted FDI (Foreign Direct Investment) equity inflow of about US$ 8.57 billion between April 2000 and December 2018.

Hence, agriculture sector is undoubtedly the most significant sector for a better economic growth of a country. Even a marginal dip in the production has potential to drag down the whole economy.

However, with the risk of unfavourable conditions like weather variations, pest attacks, rainfall, humidity, and temperature the agricultural production is hugely affected; ultimately shattering the Indian economic growth. Thus, looking at the need of an hour, crop insurance comes as a rescue solution to secure the yield and yield-related losses.

What is crop insurance?

Basically, as the name suggests, crop insurance is an agreement which guarantees to cover certain risks for agricultural businesses. The insurance policy protects from unfavourable conditions or financial fallout affecting the crops including natural calamities, market inflation for agricultural products, and pest attacks.

With the growing risk of pest attacks, the pesticide industry is growing as well and is open to innovations every day. Pesticides are considered as one of the significant tool to protect crops from the pest attacks. Just like the pesticide industry, the crop protection sectors like agriculture insurance are also fast developing industry.

With the growing population and food supply needs, the financial sector is flooded with affordable crop insurance schemes, which works as protection against spoilage crop conditions. Several programs and campaigns have been launched by the government to encourage and educate the farmers about the importance of crop insurance.

History of agri insurance policies:

One cannot deny the importance of agriculture and its production. Thus, in 1985, the Indian government initiated a widespread Comprehensive Crop Insurance Scheme (CCIS), which was later replaced by the National Agriculture Insurance Scheme (NAIS). However, the schemes were not much successful then due to its failure to address adverse selection, arbitrary premiums, and the area approach.

In later years, NAIS was modified and anon, Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in 2016. Several changes were made with the modification of the schemes for agricultural productivity and farmer welfare. Farming has come a long way since then in terms of improved food quality and production.

Need of crop insurance in India:

If reports to be believed, 78 disasters were caused between 2003 and 2013 by all types of natural hazards including climatic fluctuations. In a span of just 10 years, it has affected lives of around 1.9 billion people.

According to the Food and Agricultural Organization of United Nations (FAO), agriculture is the single most affected sector by natural calamities, absorbing about 84% of the entire economic impact. This fall down poses growing threat to food security and supply.

Weather instability – There are certain events those are out of manual control and weather instability is one of such events. The weather is unpredictable, while one state may witness good climate conditions, disconcertingly bad-tempered to another. This weather inconsistency in different parts of the country affects the entire agricultural economy and food supply.

Crop diseases – Besides droughts and floods, there are other risks as well including crop diseases. Pest attacks or crop diseases have always been a serious concern to the agricultural production by destroying standing crops or production quality, and thereby reducing farmer’s income. Loss of crops due to plant diseases may also trigger severe conditions of hunger and starvation, especially in drought-affected areas.

Technology advancements – Agri technology is advancing on a swift mark, but the farmers still rely on traditional methods. Even if they have adopted the technology, they are not aware of the methods to use the tech. Insurance companies work along with agri platforms and advanced technology to enhance agriculture practices and reduce farmer’s losses.

Benefits of agri insurance:

Stability in income – The primary source of income for most farmers is agriculture, and crop failure or damage can lead to huge financial losses raising the concerns of survival of life. Here, agriculture insurance acts as a rescue tool allowing farmers to survive the crop failure by providing financial assistance in the name of agri compensation.

Minimal debts – Traditionally the poor farmers borrow loans or credits from local lenders (rasukhdaars), and if the farmers suffer crop failure, higher interest is charged by the lenders. However, with crop insurance, they can repay their loans or credits even if the crop fails. This gives them a peace of mind.

Yield protection – Crop policy provides protection to farmers against production loss caused due to natural calamities like floods, droughts, and cyclone, and pest attack. It also offers preventive planting and safety production measures and knowledge to the farmers.

Technology advancement – Technical knowledge to farmers is essential as it helps them understand and adopt latest technology in order to improve their crop production and quality.

Provides awareness – Several government and non-government campaigns have been launched to aware farmers about the importance of crop insurance and to help them understand the severe effect of natural calamities and measures to deal with pest attacks and crop diseases.

What is covered under agri insurance policy?

Crops covered:
a. Major food crops (Wheat, Soybeans, Corn, and Cereals)
b. Horticulture or commercial crops (Cotton, Dry peas, Blueberries, Citrus, Pumpkins, Walnuts, Seasonal fruits, vegetables, flowers, etc.)

Perils covered:
a. Rainfall – Excess rainfall, Deficit Rainfall, Unseasonal Rainfall, flood, drought, Dry days
b. Relative Humidity
c. Temperature fluctuations
d. Wind Speed
e. A combination of the above
f. Hailstorms and cloud-burst may also be covered as Add-on coverage for those farmers who have already taken normal coverage under WBCIS.