Agri Mirror: Future India Vol 1 Issue 4: August 2020

Crop Insurance: Need, Advantages and Nature in India

Ankit Moharana
Article ID: 47
1
Ph.D. Research Scholar, Dept. of SST, Odisha University of Agriculture and Technology,
Odisha
Corresponding Author: moharanaankit@gmail.com

Need of Crop Insurance

Every year, in one a part of India or the opposite food crops are suffering from natural
calamities, “Crop yield instability is that the normal condition and agriculture continues still
to be which the farmer’s fortunes are exposed, is practically the same as before. In fact, good
years and bad years, wet weather and drought or floods and frost, low yields and bumper
crops are to be expected in mixed succession. The total loss due to natural calamities (like
flood, drought and plant diseases) is estimated as high as Rs. 1,000 crores every year. The
man behind the plough has to be assured that he will be compensated for such loss in crops.
Otherwise, he cannot be drawn into the campaign to increase productivity of land under his
plough,”
The need for shielding the farmer from natural hazards arises for the subsequent reasons:
(1) In our country Nature has always been unthinkable. “She is unpredictably generous to one
state and disconcertingly bad-tempered to another. This fickleness of weather in several parts
of the country upsets the whole agricultural economy, and makes one part bountiful, while
the other starves.”
(2) Droughts, floods, locusts, plant diseases, weeds have always been a big enemy to our
agriculture by destroying crops and thereby reducing farmers’ income.
(3) Majority of the holdings are tiny, from which the farmers get marginal surplus in good
years and incur heavy deficits in the bad ones.
(4) Farming is more hazardous than the other enterprise. The weather can make all the
difference between success and failure. Consequently, many farmers, particularly the tiny
ones, feel shy of adopting new techniques.
The fear of loss is so overwhelming that even when convinced of the gain accruing from the
application of science and technology, they prefer to go along the traditional track of low
productivity. Once free of fear by crop insurance they will quicken the pace to high
productivity.
The Fourth Plan reported, “many problems are there to the farmers by failure resulting from
drought, floods and other natural disasters. This risk is likely to get accelerated under
conditions of large investments in fertilizers, pesticides, improved seeds and other inputs
which are proposed to be used on a large scale during the Fourth Plan. One of the important
means of alleviating distress arising out from natural calamities might be the organisation of
crop insurance.”

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Advantages of Crop Insurance

Ø It provides protection to farmers against losses caused by failure and thereby ensures
stability in farm income,
Ø It also strengthens the position of co-operatives and other institutions that finance,
agriculture to the extent it enables the farmer members to repay their loans in years of
crop failure,
Ø By protecting the economic interest of the farmers against possible risk or loss, it
accelerates adoption of latest agricultural practices,
Ø It minimizes the matter of rural indebtedness, which is traceable to the frequent failure
of crops,
Ø It also reduces, to some extent, government expenditure incurred on relief measures
extended to satisfy the havoc caused by natural calamities,
Ø It may act as anti-inflationary measure, by locking up part of the resources in rural
areas.
Speaking of the various advantages flowing from the crop insurance, a politician of
the U.S. Federal Crop Insurance Corporation said that it's “fundamentally for the aim of
making catastrophic insurance and is meant to insure a minimum return to the farmer which
enables him to stay in business in case of severe loss. The justification for the govt insurance
isn't alone the necessity of protection, of the individual farmer and his continued income and
buying power. This affects vitally like labour, industry, trade, banking and therefore the
entire community of which the farmer may be a part.”
According to S. K. Patil, “Crop insurance is the Mangna Charta of the Indian
agriculturists. It will mitigate rural poverty and can change the psychology of the Indian
farmer during a radical manner.”
Nature of Crop Insurance
Crop insurance makes up the loss or damage to growing crops resulting from a spread
of causes like hail or drought frost, flood and disease. The cultivators pay a premium and
protection is given to them on an equivalent basis as in other insurance. When the production
from an insured acreage falls below the insured coverage, the tiller is entitled to an
indemnity.
Coverage and premium rates are settled on the basis of productivity and susceptibility
to risk of the lands under cultivation in the same, area. Besides an all-risk crop insurance,
there are three other main sorts of insurance to hide the danger from fire, hail and flood.
Scenario of Crop Insurance in India
The very idea of crop insurance in India was initiated about 30 years ago, when a
Sub-Committee on “Land Policy, Agricultural Labour and Insurance,” inter alia, had
recommended a national scheme of cattle and’ crop insurance with agriculturist, the village or
the district and therefore the nation collectively contributing to its successful operation.

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The first absolute step towards introduction of the insurance scheme was initiated by
the govt. in 1948, when a special officer Dr. G.S. Priolker was appointed to research a
scientific and scientific a basis for formulating an experimental pilot scheme.
Dr. Priolker in his Report, 1949, recommended a pilot scheme covering 4 crops,
(cereals, cotton and sugarcane). In Tamil Nadu (Paddy and cotton), Maharashtra and Gujarat
(cotton), M. P. (cotton, wheat and rice) and U.P. (wheat, rice and sugarcane) were suggested
for experimentation.
The financial responsibility of the State Governments was to the extent of paying:
(a) Entire expenses of administration,
(b) Direct subsidy, and
(c) Operating deficits.
The scheme was examined by an expert committee, which suggested the introduction
of the scheme at 12 centres. In 1952 the four States of Maharashtra and Gujarat, Uttar
Pradesh, Tamil Nadu and M. P. were asked whether they would be able to implement the
scheme by sharing 50% cost on State level organisation.
While M.P. was willing to try the scheme if the entire cost were borne by the Centre,
the other States were not willing to undertake it. The scheme was later examined by the FAO
Working Committee meeting at Bangkok in 1956. Experts in insurance and agriculture
considered it preferable for doing implementation. On account of financial stringencies,
however, the Government of India decided to defer the introduction of the scheme.
Punjab Experience
In 1961 Punjab Government decided to implement a modified version of the pilot
scheme in certain selected areas of Punjab. According to the scheme, two of the four major
crops like wheat, gram, cotton and sugarcane are to be taken care of.
It is compulsory, that's to mention, all the cultivators who grow any two of the insured
crops will need to participate within the scheme. All natural hazards are covered under the
scheme. For the purpose of indemnities and premium rates a block is divided into a number
of areas homogeneous regarding soil, cultivation practices and production risks. Indemnities
and premium rates are to be fixed separately for each crop and each homogeneous area.
Crop failures are to be visualised objectively and if the indemnities become payable in
respect of an insured crop, every cultivator growing that crop within the area will get
subsidies whether or not he suffered loss of yield in respect of that crop. Indemnities are
payable when the seasonal yield calls below 75% of the traditional yield. The maximum
subsidy to be paid just in case of total loss of crop are going to be 50% of the traditional
yield.
The premium rates for a crop in a given area will be such that the premia collected
over a number of years balance the indemnities payable over that period. Seasonal yields for
the determination of indemnities will be fixed by an objective method of crop-cutting
experiments by the field staff provided under the scheme. The administrative cost of the

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scheme will be shouldered by the Govt. The scheme is to be administered by a Crop

Insurance Board which can include agricultural exports and insurance experts as members.
The Punjab scheme has several limitations. The key principle of insurance requires
that indemnity will correspond with the loss but the Punjab farmer, under this pilot scheme is
assured of indemnity irrespective of his having suffered an actual loss or not Premium rates
have been fixed in, such a way that, collected over a number of years, the amount will
balance the indemnities payable over the period.
If his presupposes that the farmer will have to shoulder the losses due to natural
calamities, this might make the farmers feel that they are bearing a new tax burden, a feeling
that should be avoided. The administrative cost which is to be shared by the Central and
therefore the State Govts, on a 50: 50 basis are going to be about Rs. 7 lakhs per year, which
comes to about 17.5% of the premia collected.
The cost seems to be on the very high side. Nevertheless, within the Third Plan, a sum
of Rs. 40 lakhs were allotted for the purpose. The programme might be put into operation due
to the constitutional hitch insurance being a central ‘subject, a State Govt. cannot run even a
pilot scheme without an enabling legislation by the Parliament. Therefore, in July, 1967, a
Bill known as a Crop Insurance Bill was drafted and the pilot scheme for the introduction of
compulsory crop scheme was forwarded to the State Governments for support.
Punjab has collected requisite data in selected area. The scheme covers wheat, gram,
cotton and sugarcane, and will be extended to cover other crops and other areas in the State.
During the Fourth 5-year Plan, crop insurance scheme was extended to other States and union
territories. Legislation was organised for the introduction of crop insurance on a compulsory
basis by the States. To give credit money to the scheme, a Crop Insurance Fund of about Rs.
100 crores have been contemplated.
The main difficulty in introducing crop insurance scheme is that the non- availability
of essential data like loss rates in several year, heavy financial resources, bad luck of
experienced and trained personnel.
There are certain areas in some States where pilot schemes can be introduced. For
example, we could suggest 2 or 3 districts in Punjab, Tamil Nadu, Maharashtra and Gujarat
for selected crops. More particularly, crop insurance is often experimented within those areas
where the crop loan system has been introduced and met with a hit.
Conclusion to Crop Insurance Scheme
To conclude, it may be said that one of the basic objectives of our economic planning
is to step up farm production. This can be achieved by adopting crop insurance schemes.
Crop insurance schemes will assure the farmers that they're going to be compensated for
losses against natural calamities. These schemes won't only spread the losses geographically
but also spread them over the time. Therefore, the earlier the scheme is put into operation, the
better it will be for the farmers and for the nation.

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