April 05, 2020

Changes in Crop Insurance Scheme - For Whose Benefit?

Ajit Nawale

THE central government has made major changes in crop insurance scheme. The scheme is now going to be ‘voluntary’ for all farmers. Changes have also been made in the way of determining the amount of compensation. The states have been given freedom in respect of providing more protection to farmers. The union agriculture minister Narendra Kumar Tomar claims that this will enable farmers to face risks involved in production of crops; that famers’ income will be stabilised and insurance claims will be properly settled due to the speedy and accurate method of assessing production. However, the All India Kisan Sabha (AIKS) and opposition parties have termed these changes as patently anti-farmer. In this background, we need to examine who will really benefit from these changes.

Of the total number of farmers in the country 58 per cent are loanee farmers. Till now, crop insurance was compulsory for loanee farmers. The new changes have made insurance voluntary. Superficially, this appears to be beneficial to famers. The reality however is different. In the erstwhile scheme the farmers paid a premium of 1.5 per cent for the rabi season, 2 per cent for kharif and 5 per cent for fruit cultivation and other cash crops. The government bore the responsibility of paying the rest, ie, 98.5 per cent for rabi, 98 per cent for kharif and 95 per cent for fruits and cash crops. As the insurance is made ‘voluntary’ now, many farmers will not insure their crops and will save 1.5 to 5 per cent. The government will save a whopping 95 to 98.5 per cent. The farmers, as a consequence, will be deprived of the insurance protection of crores of rupees. Looking at the uncertainty of the climate in our country, it is essential that all farmers are brought under the insurance umbrella. The Swaminathan Commission also has underlined this need. The government itself had resolved to do so. By making insurance voluntary, this resolve is going down the drain. This decision, thus, increases the risk of the farmer and slashes the financial responsibility of the government.


Since insurance is made voluntary, the farmers falling in regions where there are less regular calamities, will not buy insurance. The government in its turn will not bear its portion of the premium. This will result in a shortfall in the financial provision for this scheme. Being well aware of this consequence of its own decision, the government has hastened to take care that it will not be required to make any additional  monetary provision. It has therefore already issued a communique making it clear that the central government will bear only 30 per cent of the premium for dry-land crops and only 25 per cent for irrigated crops. Looking at the precarious financial health of the state governments and their reluctance to bear any more burden, it will fall on the famers themselves to make up this ‘loss’ through increase in their share of premium. 


Having made insurance voluntary, the insurance companies have entered a hyperactive mode. The AIKS had suspected that the companies would adopt a stance claiming that they would not be in a position to run the scheme unless either premium amount is increased or their risk is considerably reduced. This suspicion is coming true. There are five companies active in crop insurance in the country today. AICIL has been given a licence to implement the crop insurance scheme. All these companies have raised in chorus the demand to increase the premium amount.


Farmers all over the country, in view of the unethical practices of the insurance companies, had been demanding to make the process credible and transparent. They had therefore demanded fixing the ‘village’ as the basic unit and make compulsory three crop cutting experiments, conducted publicly and transparently in every survey number. The government has gone against this demand and decided to adopt a ‘two stage’ method of determining damages resulting in reduction in number of crop cutting experiments. The field ‘under disaster’ will now be ‘selected’ in the first stage on the basis of a ‘trigger’ derived from the climate index and data collected from satellites. In the second stage, crop cutting experiments will be conducted in only these ‘selected’ fields, identified as ‘disaster affected’. The communique further generally promises an effective determination of damages by using ‘smart sampling techniques’ and increasing the number of crop cutting experiments. But all this will be confined ‘only’ to the area already declared as ‘disaster affected’. The fields not included in ‘disaster-affected’ areas will be made ineligible for compensation in the very first stage. This is a matter of grave worry for farmers.

The current practice for determining compensation for natural disasters has been based on averaging production in a zone or circle for the previous seven years, or in disaster-affected zones or circles, for five years excluding two years affected by natural disaster. This average production is multiplied by the risk factor to arrive at the ‘threshold yield’ or ‘guaranteed yield’ in that zone. If, in the crop cutting experiments, the production falls short of the threshold yield, compensation is paid according to the deficit. Due to the new changes the crop cutting experiments will be carried out only in areas ‘selected’ on the technical basis given above. These crop cutting experiments will not be conducted in the ‘excluded’ areas. Hence, threshold yield will not be ascertained in these excluded areas for the following season. The government does not explain in the communique how this problem will be solved. 


In order to make the insurance scheme more effective, farmers expected that ‘village’, and not ‘area’ or ‘zone’ will be made the ‘unit’ for insurance; risk level will be raised to 90 per cent; ‘average production’ of the respective crop in the state will be declared as ‘minimum production’ for fixing compensation; more crops will be brought under the insurance umbrella; and an impartial ‘third party’ ombudsman will be instituted for grievance redressal. All these expectations have been thwarted by the government’s announcement. The state governments have been given more ‘freedom’ of taking responsibility of sharing the risk. But the financial burden too has been pushed on to the states. Looking at the financial straits in which the states find themselves, they will not take on this extra burden. The intention of introducing a new insurance scheme for 151 dry-land districts has been cursorily mentioned, but there is no clarity about this.


Indices derived from the data collected from climate observation and satellites will be used to determine damages. The experiment of using technical knowhow, rather than involving human faculties, for determining damages has been in use since the introduction of the Drought Management Code of 2016. In December 2016 the central government, in a planned manner, changed the Drought Management Code which had been in operation since 2009. The well established practice of fixing production on visual, physical inspection of crops was changed to a system that is based on the data related to rainfall, levels of water bodies, condition of flowing water bodies, underground water tables, condition of crops, humidity, remote sensing etc.

This technological methodology was used for drought determination by the Fadnavis government in Maharashtra. Since this technology was still in a developing stage, and the basic unit held was not village but taluka, several actually drought affected villages were excluded from the list of the drought hit villages. This generated a great deal of dissatisfaction, anger and agitations among the farming community in the state. The government was forced to abandon the ‘stage’ based methodology and undertake direct, physical inspection which resulted in including many new villages in the list of drought hit villages. It proved beyond doubt that the ‘trigger’ based stage system, which excluded peoples’ participation was not only unreliable but also faulty.

Despite this, the government’s insistence on pushing this same unreliable methodology gives rise to grave suspicions about its intentions. It is feared that the new system will be detrimental to the interests of the farmers and is aimed at filling the coffers of the insurance companies. It has given rise to a legitimate doubt as to whether the changes in the 2016 Drought Management Code were not the first step in the direction of making changes in determining crop damages, which would then help crop insurance companies to amass greater profits.

To conclude, the new changes in the crop insurance scheme will greatly raise the risk for farmers, reduce the financial responsibility of the central government and boost the profiteering of the insurance companies. That is why these changes will be opposed tooth and nail by the AIKS and by the peasant movement in our country.