The government's new crop insurance scheme improves on the models that have been tried out with limited or no success since the 1970s. Such schemes are crucial; the absence of ways to hedge risk has been a major contributor, historically, to farmer distress. But so far, farmers have not derived benefits from insurance schemes commensurate with the cost of the premiums they have had to pay (despite government subsidy). In addition, procedures for taking out the policies and claiming compensation have been cumbersome. Unsurprisingly, barely 23 per cent of cultivators opted for insurance cover. Coverage in agriculturally advanced states like Punjab and Haryana has been even poorer, because insurance plans did not reimburse even a fraction of the actual losses incurred by the farmers due to bad weather or other factors.
The new scheme, named the Pradhan Mantri Fasal Bima Yojana (PMFBY), has sought to remove some of these obstacles. Farmers will have to pay the lowest-ever premium - just two per cent for kharif crops, 1.5 per cent for rabi crops and five per cent for horticultural crops - and yet get full insurance cover without any cap on the sum insured. What also sets it apart from many previous schemes is the coverage of prevented sowing as well as post-harvest damage to the produce within two weeks of harvesting. The scheme hopes to short-circuit implementation problems by emphasising the use of technology, including satellite imaging, to expedite loss assessment and settlement of claims. In cases where actual crop cutting results are necessary to measure output losses, the data will be uploaded through smart phones to minimise time lags. Some previous schemes were, in effect, by-products of crop loans - they were needed to take such loans, and the compensation amount, however little, went to the banks to be adjusted against loan repayments. In the new scheme, compensation will go directly to the farmers' bank accounts. The stipulation that the subsidy on premium would be shared equally by the Centre and the states might be a problem - some states may falter on this account. But the Centre has at least expressed a willingness to step in to meet up to 90 per cent of the total cost. Even if half the relevant farmers are insured under this scheme, the total annual financial liability may be Rs 8,800 crore.
Problems remain, however. For example, insurance cover cannot be held hostage to the possession of unflawed land title - that will limit farmers' access, given poor records and the frequent need to bribe officialdom to prove title even when legality is unquestioned. Further, success depends on how sincerely insurance companies implement the scheme. It is unclear as to how the programme will be monitored; close supervision is imperative to eliminate malpractices at different levels, which had contributed to the failure of earlier insurance schemes. If this can be assured - and this is a big 'if' considering that the scheme is likely to be run by the same set of agencies and personnel who operated the earlier ones - the new farm insurance scheme will be a big step forward.
