If the central government approves certain recommendations of the The National Centre for Agricultural Economics and Policy Research (NCAP), the agricultural economics research institution under the aegis of Indian Council of Agricultural Research (ICAR), farmers may have the option to shop insurance products of their choice, just the way one scans a number of plans before buying a health insurance scheme.
At present, insurance in agriculture is mostly based on area approach, like the National Agriculture Insurance Scheme (NAIS), where payouts are made on yields in defined areas (unit area of insurance).
In view of long delays in claim settlement in NAIS, in 2003, the government had launched the weather-based crop insurance schemes (WBCIS) on a pilot basis, whereby the insurance cover is given against losses incurred due to unfavourable weather conditions such as deficit, excess or untimely rainfall and variations in temperature.
Last year, the government also permitted two private insurers, ICICI Lombard General Insurance and Iffco Tokio General Insurance , to offer weather-based insurance.
While weather insurance facilitates faster settlement of claims, and also provides high level of flexibility to the farmers to decide the level of indemnity and coverage, the initiative is limited to few farmers and crops, and has not gained much popularity.
NCAP has suggested government heavy investment of meteorological laboratories, and is examining relationship between effect of weather conditions on crops like rice and wheat.
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The cost of setting up each lab, equipped with satellite-imaging facilities, will be close to Rs 70,000.
"Right agriculture product is lacking in India, as most agriculture insurance is on the basis of area approach. Thus , if one farmer loses his crop, and the other does not, the latter is not eligible for claim settlement.
The farmers should have the choice to buy the insurance product, based on their needs. We propose to evolve weather insurance in the lines of health insurance. " said said P K Joshi, director, NCAP.
In this regard, NCAP has also suggested that the Union finance ministry provide funds for setting up meteorological laboratories,
"Such facilities can also be set up by private companies, which can sell its data to the insurance company. Like the existing schemes, the burden of premium will have to be shared by the government, as farmers are mostly reluctant to buy insurance policies," said Joshi.
NCAP has suggested that initially the scheme should be rolled out for debt-ridden farmers of Vidarbha in Maharashtra. Subsequently, it could be taken to 100 other poverty-ridden districts, and gradually to other places, said Joshi.
"The insurance will be crop, region and eventuality-specific, and would also be available as comprehensive packages," he added.
It is in this backdrop, National Agricultural Innovation Project (NAIP), has also initiated a study along with Yes Bank, NCAP, Punjab Agricultural University (PAU), Tamilnadu Agricultural University (TNAU), Indian Agricultural Statistics Research Institute (IASRI) and Gokhale Institute of Politics and Economics for risk assessment in agriculture.
The main objective of this study is to develop and validate demand-driven, farmer-friendly innovative insurance products after reviewing the existing risk assessment models and identifying existing insurance products and assessing their efficacy, said Tushar Pandey, country head, strategic initiatives and advisory-government, Yes Bank.