Mar 31, 2015

Neither giving farmers an economic price nor taking care of crop losses.

In the midst of the widespread damage to standing crops from unseasonal rains, a National Crop Income Insurance Scheme has been introduced on a pilot basis. What is being perceived as a long-term solution to the prevailing agrarian crisis, and is being pushed as an insurance against weather-related disasters as well as provide an assurance against any income shocks will only end up acerbating the crisis.

The cure being suggested is worse than the disease itself.

For nearly 25 years, I have watched with dismay the reluctance on the part of successive governments to provide for any meaningful crop insurance plan for farmers. While in urban areas, Insurance companies have appropriate plans to provide cover for every individual, house and automobile, for farmers the crop losses are assessed only at the block level. A farmer at best can get compensation for an average crop loss suffered in a block even if his own loss in his crop field is several times higher. This is primarily the reason why farmers have never been enthused to take a crop insurance package.

If your car gets a hit, you can claim the damage. If your house is burnt down, the insurance company will pay a compensation irrespective of whether other houses in the colonies suffered or not. Why then an average in a block or a taluka is taken as a measure for crop losses suffered by a farmer in a village is something I have never been able to understand. It is simply the failure of the government to make it obligatory for the insurance companies to provide per unit coverage to farmers that has left the farming community helpless.

So when I first learnt about a new income and crop insurance scheme being introduced, my curiosity was obvious. This scheme – called the National Crop Income Insurance Scheme (NCIIS) – has been launched on a pilot basis in one district in each of the States. As the name suggests, the scheme is designed to provide income security as well as insurance against crop losses suffered from any eventuality. Killing two birds with one stone, isn’t it?

Let’s first look at the insurance against price fluctuation. The scheme is basically an alternative to the Minimum Support Price (MSP) system that prevails, and which the government wants to dismantle. The Economic Survey 2015 makes it explicitly clear that already fruits and vegetables have been withdrawn from the APMC mandis and the next target is to take out wheat and rice from its purview. Fixation of MSP for 24 crops will continue under the new system but the government will withdraw from procurement. For the time being, this scheme is for those areas that don’t get the benefit of MSP.

The guaranteed income at a time of fluctuating prices that the farmers will get under the new insurance scheme would be to a maximum of 20 per cent of the loss a farmer suffers. To work out the guaranteed yield or a threshold yield, the average yield for past 7 years in a district is calculated. In other words, if the wheat MSP is Rs 1450 per quintal, and the farmer gets only Rs 900 by selling it openly in the market, the assured price that the farmer will get is Rs 900 plus 20% of the gap between market price and MSP. Against Rs 1450, a farmer under the new insurance scheme can expect a maximum of Rs 1110 per quintal. The price that a farmer gets would be still lower considering the way a threshold price is calculated.

In case of yield losses from natural calamities, compensation would be based on 70 per cent of the average loss in a district. If a farmer’s yield is 4 tonnes/hectare, and indemnity being 70 per cent, the compensation would be worked out based on 2.8 tonnes only. If the MSP for wheat is Rs 1450, and the average yield is calculated as 2.8 tonnes/hectare, the compensation that a farmer gets will automatically be less than his actual loss. In other words, crop insurance too does not meet farmers per unit losses. If after 25 years of indecision, this is what the government has come up with, only gods can save farmers. #

Source: New Crop Income Insurance Scheme -- a cure worse than the disease.
ABPLive. Mar 31, 2015.

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