AGRICULTURAL INSURANCE

Crop insurance refers to insurance services brought by farmers against loss or damage to
growing crops. Damages can be dual to natural disasters such as drought, hail, floods or either
due to decline in prices of the agriculture commodity.

 The first insurance program was introduced in 1972-73 by LIC on cotton in Gujarat.
 The comprehensive crop insurance scheme was introduced in 1985 by GOI.
 CCIS was eventually discontinued in 1999 and replaced by the improved and expanded
National Agriculture Insurance Scheme (NAIS).
 Later “National Crop Insurance Program” was launched in 2013.
 Since 2016, Pradhan Mantri Fasal Bima Yojana is being implemented.

Difficulty in Crop Insurance Schemes

 Ex ante risk assessment and ex post assessment for individual farmers are costly.
 Crop insurance is mandatory only for farmers who have taken short-term crop loan.
 The premium of crop insurance is deducted from the loan amount for loanee farmers,
 Thus only around 26% farmers have been covered in 2017 so far.

Reason for the low demand for crop insurance

 In India, demand for crop insurance is highly price sensitive.
 Majority of the farmers lack awareness about crop insurance schemes.
 Lengthy and complex system of claim settlement discourages farmers.
 PSBs do not have any incentive to sell it to non-loanee farmers.

Problems Highlighted by CAG

 Delayed payments by state government
 Difficulty in cross checking
 Missing records of beneficiaries
 The low inclusion of Small and Marginal farmers
 Low coverage of non-loanee farmers
 Lack of awareness
Pradhan Mantri Fasal BIma Yojana (PMFBY)
 Started in the Kharif season of 2016
 To reduce the burden of crop insurance on farmers.
 In line with ‘One Nation – One Scheme’ theme
 State government to decide whether they want PMFBY in their states.
 It incorporates the best features of all previous schemes and at the same time, all
previous shortcomings/weakness have been addressed.
 Premium has been kept at a maximum of 1.5% for Rabi, 2% for kharif and 5% for annual
horticultural/commercial crops.
 The scheme is open to all farmers irrespective of whether they are loanee or not.
 Covers localized losses due to floods.
 It covers post-harvest losses.
 Use of modern tech for quicker assessment and claim settlement.