Agriculture sector, which is the largest and the most diverse sector in India, has a significant position in the Indian economy providing livelihoods to millions of its citizens. Despite India being the top producer of several food grains such as rice, wheat, pulses, cotton and sugarcane, the agricultural output has been fairly volatile due to low yields. Many factors are at play here – but such variance in growth can be primarily attributed to agriculture’s susceptibility to natural disasters such as droughts, floods, cyclones, storms, landslides and earthquakes.
The farmer’s problems are further compounded by the unexpected outbreak of epidemics and human interference in the form of fire, fake seeds, adulterated or sub-standard pesticides and market price crashes.
The solution is simple and right here –Crop Insurance, a robust agriculture insurance system to reduce risks. Crop insurance can help farmers stabilize their income plus guard against the disastrous effect of losses due to natural hazards or poor market prices. Crop insurance cushions the shock of losses by providing farmers with monetary protection with stability in income.
What is Crop Insurance?
Crop insurance is a type of safety policy that covers farmers against unexpected loss of crop yields or sales at the market. It is a multi-disciplinary approach with a yield-based policy meant to compensate farmers’ losses. The Government of India offers crop insurance with its Pradhan Mantri Fasal Bima Yojna, which covers all food crops, including cereals, pulses, millets
In line with 'One Nation – One Scheme' theme, the Pradhan Mantri Fasal Bima Yojana (PMFBY) is a crop insurance scheme envisioned by the Government of India. The scheme was launched in 2016, and aims to provide financial aid to farmers in case of produce loss or damage. The scheme covers risks related to prevention of sowing or planting of seeds, damage to the standing crop due to non-preventable natural disaster-related risks like drought, flood, cyclones, landslide, etc. along with post-harvest losses. Over the years, the PMFBY scheme has been continually revised and updated by the Government of India to benefit the farmers. A few highlights of the current scheme are:
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A uniform premium of 2% is paid by farmers for all Kharif crops, and 1.5% for all Rabi crops. For commercial and horticultural crops, the premium to be paid by farmers has been fixed at 5%. The Government has fixed the premium rates to be paid by farmers at the lower side and the balance is paid by the Government to provide full insured amount benefit to the farmers. There is no upper limit on Government subsidy. For example, if the balance premium is 90%, it will be borne by the Government.
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Previously, the government had placed a cap on the premium rate which resulted in low claims being paid to farmers. In the revised scheme, the capping has now been removed and farmers can get claim against full sum insured, without any reduction.
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Government has encouraged the use of innovative technologies by boosting practices such as satellite imagery coupled with smart phone use to capture and upload real-time data from sowing to harvest. The use of technology has also helped in avoiding unnecessary delays in claim payment to farmers. In the latest update, the scheme also proposes digitization of land records to minimize any area inconsistency in coverage.
Types of Crop Insurance
Multiple Peril Crop Insurance: This is the most common form of crop insurance, and as the name suggests it provides the farmer financial coverage to manage risks for a number of naturally occurring perils. These include weather-related losses to farmers from floods, cyclones, drought, etc.
Actual Production History: This crop insurance covers losses due to wind, hail, insects, etc., and includes coverage for lower yield. Farmers are compensated basis the difference between the estimate production and the real production.
Crop Revenue Coverage: This crop insurance provides revenue protection based on price and yield expectations. The coverage guarantees a certain level of revenue to the farmer, especially in the case where there is a drop in crop price. Here, the difference is covered by the insurance.
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