agro project

8/7/2019 Agro Project

1/74

A) To compare the situation of agro-insurance at block level in West Bengal with the

national situation.

B) What is the actual situation of agro-insurance at block level?

C) What is the actual knowledge base of farmers regarding agro-insurance?


2/74

Risks in Agriculture

Risk Measurement

Possible Ways of Meeting Agro-Risk

Areas of Agro Risk in India

History of Agro-Insurance in India


3/74

Agriculture in developing countries like India, is the main or core sector

providing the source of livelihood to a significant proportion in rural areas. Agriculture

has remained traditionally the most important economic activity in our country. Though

its share in the economy has declined over the years from 46% of the GDP at factor cost

and constant prices in 1970-71 to about 20% of GDP in 2004-05 (Handbook of Statistics

on the Indian Economy 2004-05) due to faster growth of the industrial and services

sectors, it still retains an important position in the Indian economy. Farming is the

principal means of livelihood for about 65 per cent of Indias population (National

Commission on Farmers, 2005).The distribution of population in agriculture can be

shown in following chart:

1951% 2001

%

Indian Population361mi

llionNA

1027million

NA

Rural Population299mi

llion 83742milli

on 72

Cultivator

70mi

llion 50

128milli

on 32

Agricultural Labour27mi

llion 20107milli

on 27

Other Workers43mi

llion 30167milli

on 41

Total Working Population140mi

llion 100402milli

on 100

Source: agricultural statistics at a glance (2002)

So, the vast involvement signifies that, there is a need to increase yields to the

highest level through appropriate investment, utilization of resources and related

activities. In such a context it can be noted that, apart from Government expenditure,

agricultural growth is determined by many other variables in India like population, public


4/74

and total investment, credit, electricity, fertilizer use, rainfall, use of engineering products

and gross irrigation area.

Based on Cobb-Douglas production function for the value of agricultural output at

constant price in India has been framed as:

Y= . P .I gy. R. F

Or

Ln (Y) = + Ln (P) + Y Ln (Ig) + Ln(R) + Ln (F)

Where,

Y = value of agricultural output at current price

P = agricultural price

Ig = governments investment

R = rainfall

F = consumption of fertilizer

= technological change

, , , are the respective elasticities.

From the function it can be said that the most crucial factors affecting agricultural

performance in our country appear to be public investment, support of fertilizer use,

agricultural price, rainfall and technological change. Any little change of any of the

above parameters can change the agricultural output .So, the most obvious type of risk in

agriculture is variation in output caused by variation of any of the above. Generally six

types of risks are faced by farmers:-

a) Production risk


5/74

b) Price risk

c) Casualty risk

d) Technological risk

e) Risks caused by actions of others

Production risks are caused by variations in weather and by diseases, insects and

other biological pests, windstorms, hail, drought, flood etc. Production risks in crops are

concentrated particularly in those areas where weather is unstable. Livestock risks also

include production risk. Death losses due to different diseases of livestock and adverse

weather conditions are common. In brief natural calamities or hazards are to be

considered always risk consideration.

Like natural hazards, price fluctuations also a cause of risk to farmers. The effect

of product price fluctuation on farmers may be severe .The farmers are particularly

vulnerable to fluctuation in farm input and product prices. Property losses due to fire,

flood, windstorms etc., are the sources of risk to farmers. Another type of risk arises from

the development and adoption of new techniques or methods of production. New crop

varieties, chemicals, feed combination, model of machine and the like are continuously

being developed by researchers. The rapidity of technological change can also contribute

to uncertainty. The course of action followed by farms, people and agencies with whom

the farmer does business causes uncertainty or risk. If the farmer acquires part of his

capital by renting, the possible future action of the landlord creates uncertainty. The

landlord may decide to increase rent, rent to a relative or sell the farm .If such things

should occur; they might reduce the earning capacity of farmer and here by curtail risk

bearing ability.


6/74

No one knows what the future health of family members will be, i.e., when a

serious illness may occur or when death will take family members who are important to

the farms operation. Risk arising from family health is of major importance in the

business of farm.

To over come all these problems agricultural sector needs the help of insurance to

meet the agro-risk.

The fundamental character of insurance is the assumption and distribution of

risks. There is a growing realization on the part of all concerned that farmers and agro-

industries need as much protection as other occupation and industries. Three factors are

responsible for this change in agro-sector. Experiences of the great wars of this century

have brought home to most countries the great importance of agriculture. Agriculture

provides the base of all material and economic development of a people. Secondly

mechanization in agriculture has increases risk. Thirdly the growing social consciousness

of the need for securing a protection for all against accidental loss of life or property

those farmers should also be covered by such protection.

In view of this consideration, agricultural insurance is presently getting attention

and will get more attention than the present.


7/74

Risk in agriculture, as in life, is everywhere. Various uncertainties make the

agriculture an extremely risky activity. But dealing with it systematically, is very difficult

for farmers. One reason for the difficulty is confusion and difference of opinion about

what risk is and how it can be measured.

Risk analysis in agro sectors has become increasingly popular in recent years. But

accounting for risk in the analysis of farming system is much harder than pretending it

doesnt exist.

Agricultural sector remains a high risk prone area. Risk in agriculture has been and

continuous to be one of the major challenges to scientists and policy makers. Risk

analysis has also been avoided in the past because so many analysts were afraid to tackle

the evaluation of risky choices when too work out the required probability distribution

objectively.

In order to be insurable a farming risk, we must take the help of statistical

measurement to determine the risk. In risk measurement, here it is to be assumed for

simplicity that there is a single measure of outcomeX, more of which is always

preferred to less. This can be represented by:

P* = P (X X*)

Where P is the probability,

X is the uncertain outcome and

X* is minimum acceptable outcome level below which outcomes are regarded as

bad.

The application of this measure of risk requires specification of two parameters

P* and X*.


8/74

Newbery and Stiglitz have found it convenient to reflect risk using the co-efficient

of variation of X, CV=SD/E.

But the difficulty of measuring agro-risk is that the exact cause of loss is often

very hard to ascertain and due to uncertainties of nature itself.


9/74

For meeting agricultural risks there are different ways:

Firstly, to avoid those types of risks which are avoidable. But it is very difficult and it

has limited application. A farmer cannot change his farming place as per choice. Rather it

is becoming more difficult with the growing trends of population.

Secondly, the more important way of meeting risk is to prevent it .The prevention of

risks in agriculture means the reduction of uncertainties through improved techniques and

organizations. Research and development in agricultural techniques and organizations

can help the farmers to get rid of more gambles with the blind force of nature.

Thirdly, a farmer can insures him either through accumulation of funds or by operating

on a large scale, called self insurance.

The subject on uncertainty may without bearing the risk either individually or in a

group, therefore it to others who specialize in uncertainty bearing. Such transfer may

usually be affected through insurance, by which the subject of risk, in exchange for a

small known sum, transfers the entire or a major part of the risk to a third party. This is a

particular feature of insurance offered by the commercial insurance institutions.

The primary function of insurance is thus the elimination of the uncertain risk of

loss for the individual. The first essential condition for insurance is that the risk must be

uncertain. In fact, the basic content of risk is uncertainty. Under insurance, risk remains

uncertain and unpredictable, but the uncertainty is reduced and the risks become fairly

predictable when they are considered in the aggregate. The incidence of loss is broad

based through insurance so that the shock of even the heaviest impact of loss upon an

individual can be absorbed with little difficulty by the group as a whole.


10/74

Insurance distributes the risk or the burden of loss not only over space but also over time.

It accumulates reserve from the contributions of the insured person, called premium, in

normal period which is utilized in relieving any unusual loss burden occurring at an

unfavorable situation.

The premium is the price that one pays for security against a risk which is

unforeseen and unpredictable.

Summing up the essential features of insurance, it may be observed that insurance

is the best social device which aims at reducing the uncertainty of loss through

combination of a large number of similar uncertainties and through distribution of the

burden of loss, more generally by the use of accumulated fund.

Timely agro-advisory service and efficient risk mitigation mechanism can provide

stable income to the farmers. To provide timely agro-advisory efforts are going on to

develop a IT based cost effective personalized agro-advisory system, called e-Sagu.

This system has been developed by IIIT Hyderabad and Media Lab Asia. It is a system

which is being developed to provide high quality personalized (Farm-specific)

agricultural expert advice to each and every farm in a timely manner at the farmers

doorstep without asking a question by farmers. The advice is provided once in a week

from sowing to harvesting.

AGRICULTURALEXPERTS

AGRICULTURALINFORMATION

SYSTEM


11/74

Insurance provides cover against the risk of loss of produce or assets or health of

the borrower and his family members. Thus, availability of insurance products goes a

INTERNET

COORDINATOR

COORDINATOR

COORDINATOR

FARMERS

FARMERS

FARMERS


12/74

long way in creating a sense of security amongst the farmers. The insurance facilities

available in India at present to the farmers may broadly be divided into following

categories:

(a) Crop Insurance

(b) Farm-income Insurance

(c) Weather Insurance

(d) Asset, Livestock etc. Insurance

(e) Life and Health Insurance

(f) Insurance for distressed farmers

(A)Crop Insurance:

Crop Insurance in India under NAIS is administered by AICIL. The Scheme

was introduced from the Rabi season in 1999-2000 by expanding the scope and content

of the earlier CCIS. It is primarily based on area approach and covers all farmers,

compulsory for farmers borrowing from the banking system and - on voluntary basis in

respect of non-borrowing farmers. At present, it covers 13 crops and is implemented in

23 states and two Union Territories. NAIS envisages area approach for wide-spread

calamities and individual approach for localized calamities such as hailstorm, landslide

and flash floods (the latter is to be on an experimental basis). Each participating state/UT

was to bring down the unit of insurance to village panchayat. However, due to financial

and infrastructural constraints, this could not be possible till Kharif 2006. The sum

insured for the borrowing farmers is the amount of loan availed. This can be increased up


13/74

to value of guaranteed yield and further up to 150 per cent of the average yield. For non-

borrowing farmers, the sum insured is value of guaranteed yield, which can be extended

up to 150 per cent of the average yield. Premium rates vary between 1.5% and 3.5%

depending on the type of crop insured. The premium in case of small and marginal

farmers is subsidized by 10 per cent, which is shared equally by the Central and the

State/UT governments. Three levels of indemnity for low-risk, medium-risk and high-risk

areas are available for different crops. Further, the scheme envisages sharing of risk by

the Central and State/ UT governments as per pre-defined formula. The scheme for Rabi

season of 2005-06 covered about 18 million farmers (source: AICIL) and thus, has

become the largest crop insurance programme in the world. AICIL has, as on December

31, 2005, settled claims amounting to Rs.5917 crore.

A study undertaken by NABARD in eight Districts in Chattisgarh in the year 2005, on

implementation of NAIS revealed the following.

(a) The scheme enabled the farmers to take risks in changing cropping patterns.

(b) Due to the compensation available under the scheme, farmers could repay their bank

loans resulting in improved recovery.

(c) As very few non-borrowing farmers insure their crops, most of such farmers do not

benefit from the scheme.

(d) Due to delayed/inappropriate crop cutting experiments/declaration of annawari, due

compensation from the scheme was not available to the farmers.

(e) The method of assessment of crop yield by the insurance companies i.e. average of

last three years' yield was considered inadequate, resulting in farmers getting less amount


14/74

of compensation.

(f) Despite the service charges given to the banks by the AICI and other insurance

companies, bankers have not been active in selling the product to non-borrowing farmers

as it increases their paper work.

(g) The scheme does not cover a substantial number of farmers (only about 150 lakh

farmers are covered every year.

The Government of India had set up a Working Group to examine various aspects

related to crop insurance. The Working Group in its report has suggested several

refinements, some of which are indicated below:

(a) Insurance unit should be reduced to the level of village panchayat for major crops. To

counter scope for possible interference and manipulation in the conduct of crop cutting

experiments (CCEs), certain checks and balances have been suggested. The costs of

CCEs are shared by the Government of India and State in equal proportion. States can use

existing manpower/re-deploy surplus manpower of other departments or out-source

manpower for additional CCEs.

(b) Guaranteed yield should be based on average of the best five out of the preceding

seven years, as it is more appropriate.

(c) Indemnity levels should be 90% for low risk areas/crops and 80% for others.

(d) Settlement of insurance claim must be made mandatorily be done before the start of

the next crop season.

The report of the Working Group is under the consideration of the Government of India.


15/74

Apart from implementing NAIS, the AICI has introduced the following other insurance

schemes.

(B) Farm-Income Insurance Scheme (FIIS):

Apart from the above scheme, which protects farmers against only yield

fluctuations, the AICIL has introduced Farm Income Insurance Scheme (FIIS) during

Rabi season 2003-04 on a pilot basis.

Farm income insurance scheme has been formulated to provide income protection to the

farmers by integrating the mechanism of insuring production as well as market risk. The

scheme also aims at sustainable production in the agricultural sector. This scheme has

been designed to take care of variability in both yield and market price. The objective of

FIIS is to provide financial support to farmers in the event of loss in income from adverse

incidence of crop yield (on account of natural calamities, pests and diseases) and market

price fluctuations. The Scheme also aims to encourage farmers to adopt prudent and

progressive farming practices, enhance food and livelihood securities of the farming

community and stabilize farm incomes; particularly in disaster years. A premium subsidy

of 75% is proposed to be given in case of small farmers and marginal farmers and 50%

for other farmers. The scheme has been implemented in 21 districts of 13 states in Rabi

2003-04.Asper information available, more than 27,329 farmers and risk commitment of

about Rs.22crore are covered so far, under the scheme.

(C) Weather Insurance:


16/74

Weather Insurance is a relatively new concept. Yet, it has assumed importance in

the Indian context because weather, particularly rainfall, has an overriding influence on

productivity of crops. The basis of weather insurance is the estimation of percentage

deviation in crop output due to the deviations in weather conditions. This estimate is

thereafter linked with the financial losses suffered by farmers and indemnities payable.

The ICICI-Lombard General Insurance Company Ltd. is the first insurance company to

introduce a rainfall insurance based on composite rainfall index in 2003 in some parts

of Andhra Pradesh. The rainfall index insurance and other weather-based insurance

schemes have been extended to several crops and areas beginning with Kharif 2004

season. Similarly, IFFCO-Tokyo General Insurance Company has come up with their

rainfall insurance called Baarish Bima since 2004. The AICIL also launched Varsha

Bima in 2004 with different options viz. seasonal rainfall insurance, sowing failure

insurance, rainfall distribution insurance and catastrophe option for the farming

community. Varsha Bima has been fine-tuned and extended to 150 locations in 15 states

during Kharif 2006. At present it covers about 12% of farmers and about 10% of area of

cultivation.

(D) Asset, Livestock etc. Insurance:

Asset insurance is provided in India by the General Insurance Companies in both

public and private sectors.

(a) Asset insurance is provided in India by the General Insurance Companies in both

public and private sectors. Asset insurance concentrates on insuring the productive assets

of the farmers like livestock, stock of grains in warehouses (Khalihan) or otherwise, fish


17/74

in ponds, animal carts, failed wells, dwelling units, pump sets, etc.(Kisan Package Policy

of the Oriental Insurance Co. Ltd.).

(b) Cattle & Livestock Insurancepolicies are offered by General (non-Life) Insurance

Companies (viz. National Insurance Companies Ltd., New India Assurance Company

Ltd., Oriental Insurance Company Ltd., United India Insurance Co. Ltd.) covering all

indigenous/cross breed/ exotic animals in the prescribed age groups, duly fixing the value

and certifying the health of the proposed animal by a qualified veterinary doctor. Animal

owners/private dairies/cooperative dairies/ NDDB-owned dairies are eligible to take out

insurance. The risks covered are Death due to accidents including fire, lightning, flood

and cyclone or disease contracted during the currency of the policy period and permanent

total disability of the cattle due to total incapacity to conceive or yield milk to be covered

by paying extra premium.


18/74

(c)Poultry Insurancepolicies are offered by insurance companies covering layer birds

and hatchery birds in a poultry farm in the age group of 1 day old to 72 weeks and

broilers in the age group of 1 day to 8 weeks. Ducks and Quails are also insured under

the policy. Poultry farmers/financing bank are eligible to insure the birds. Policy

provides indemnity against death of birds due to fire, lightning, flood, cyclone, strike,

riot, civil commotion, terrorism, earthquake and disease contracted or occurred during the

policy period (a few specified diseases are, however, excluded and can be covered

subject to vaccination).

(d) Agricultural Pump Set Insurancepolicies are offered by insurance companies

covering all kinds of pump sets like centrifugal, jet and submersible (both electrical and

diesel) up to 30 HP of approved makes. Owners of pump sets or financing banks and

manufacturers of pump sets can insure under Pump Set Package Policy. The risks

covered are -

Fire and lightning; Theft burglary;

Progress ofLiveStockInsurance

No. of AnimalsInsured

% of LiveStock

Insurance

Years

1988-89

1998-99

2004-05

18.60 million

23.50 million

32.18 million

4.20

4.84

6.58

[Source: Basic Animal Husbandry Statistics, GOI]


19/74

Mechanical or Electrical breakdown;

Terrorist attacks; and

Flood.

(E) Life and Health Insurance:

Life insurance is provided in India by the life insurance companies (both private

and public sectors) and Health insurance is provided by the general insurance

companies. During 1993-94, rural share of LIC accounted 45.30% in no. of policies and

40% in sum assured. Life insurance primarily endeavors to compensate a farmer for

possible loss of life, while health insurance is primarily targeted towards the medical

expenses of the farmer and/or his dependents. Personal accident cover is another popular

insurance option. In some cases of health insurance, as in the case of Universal Health

Insurance Scheme of the Oriental Insurance Company Ltd., Central Government provides

premium subsidy. Payment of service tax by these agencies has also been exempted.

(F) Insurance for Distressed Farmers:

Govt. of West Bengal has introduced a scheme for insuring the farmers below the

poverty level. No premium is to be paid by the farmers. It will subsidized by the Govt.

The amount of insurance is Rs. 20,000 (twenty thousand only). The premium to be paid is

Rs. 100 per annum. Agricultural Department will pay the premium in favour of the

farmer. At present it is the very scheme to be introduced for the Districts- Murshidabad,

Bardwan, Kochbihar and Hooghly. The facility will be available to the farmers whose

income is below Rs. 15000 per annum.

(Source: Ananda Bazar Patrika, Page- 6, Issue of November 2008)


20/74


21/74

then Minister of Food and Agriculture, Dr. Rajendra Prasad gave an

assurance that the government would examine the possibility of crop and

cattle insurance. Some committees were formed and discussions and

deliberations continued. In October 1965 the Government of India decided

to introduce a Crop Insurance Bill and a Model Scheme of Crop Insurance in

order to enable the States to introduce, if they so desire, crop insurance. In

1970 the draft Bill and the Model Scheme were referred to an Expert

Committee headed by Dr. Dharm Narain. Thus for over two decades the

issue of crop insurance continued to be debated and discussed. In 1965, the

Government introduced a Crop Insurance Bill and circulated a model

scheme of crop insurance on compulsory basis to constituent State

governments for their views. The bill provided for the Central Government

framing a reinsurance scheme to cover indemnity obligations of the States.

However, none of the States was in favour of the scheme because of very

high financial obligations. On receiving the reactions of the State

governments, the subject was considered in detail by an Expert Committee

headed by the then Chairman, Agricultural Price Commission in July, 1970

for full examination of the economic, administrative, financial and actuarial

implications of the subject.


22/74

Different experiments on crop insurance on a limited, ad-hoc and scattered scale

started from 1972-73. The first crop insurance program was on H-4 cotton in Gujarat. All

such programs, however, resulted in considerable financial losses. The program(s)

covered 3110 farmers for a premium of Rs. 4, 54,000 and paid claims of Rs. 3.79

millions. It was realized that programs based on the individual farm approach would not

be viable in the country.

An All-Risk Comprehensive Crop Insurance Scheme (CCIS) for

major crops was introduced in 1985, coinciding with the introduction of the

Seventh-Five-year Plan and subsequently replaced by National Agricultural

Insurance Scheme (NAIS) w.e.f. 1999-2000. These Schemes have been

preceded by years of preparation, studies, Planning, experiments and trials

on a pilot basis.

Evolution

The question of introduction of a crop insurance scheme was taken up for

examination soon after the Indian independence in 1947. Following an

assurance given in this regard by the Ministry of Food and Agriculture in the

Central Legislature to introduce crop and cattle insurance in the country, a

special study was commissioned in 1947-48. The first aspect regarding the

modalities of crop insurance considered was whether the same should be on


23/74

an Individual approach or on Homogenous area approach. The former

seeks to indemnify the farmer to the full extent of the losses and the

premium to be paid by him is determined with reference to his own past

yield and loss experience. The 'individual approach' basis necessitates

reliable and accurate data of crop yields of individual farmers for a

sufficiently long period, for fixation of premium on actuarially sound basis.

The 'homogenous area' approach envisages that in the absence of reliable

data of individual farmers and in view of the moral hazards involved in the

'individual approach', a homogenous area comprising villages that are

homogenous from the point of view of crop production and whose annual

variability of crop production would be similar, would form the basic unit,

instead of an individual farmer.

The study reported in favour of a 'homogenous area' approach even as

various agro-climatically homogenous areas treated as a single unit and the

individual farmers in such cases pay the same rate of premium and receive

the same benefits, irrespective of their individual fortunes. The Ministry of

Agriculture circulated the scheme, for adoption by the State governments,

but the States did not accept.

First ever-Individual approach scheme:


24/74

Different experiments on crop insurance on a limited, ad-hoc and scattered scale

started from 1972-73. In 1972-73, the General Insurance Department of Life Insurance

Corporation of India introduced a Crop Insurance Scheme on H-4 cotton. Later in 1972,

general insurance business was nationalized and, by an Act of Parliament, the General

Insurance Corporation of India (GIC) was set up. The new Corporation took over the

experimental scheme in respect of H-4 cotton. This Scheme was based on Individual

Approach" and later included Groundnut, Wheat and Potato and implemented in the

states of Gujarat, Maharashtra, TamilNadu, Andhra Pradesh, Karnataka and West Bengal.

It continued up to 1978-79 and covered only 3110 farmers for a premium of Rs. 4.54

lakhs against claims of Rs. 37.88 lakhs.


25/74

In this term paper report, to know the clear and actual picture secondary data

collected from different books, journals, websites and Government publication. The

Block Barrackpore-1 under the subdivision of Barrackpore of North 24 Parganas in West

Bengal has been selected as the block of my study.

The methodology used in this term paper was planned on the basis of three points

and they are:-

A. Sources of Data :- Secondary.

Secondary data collected from different books, journals, websites and Government

publication.

B. Analysing The Collected Data:- Tabulation process is followed and statistically

all the data are interpreted.

C. Furnishing The Report:- The report is prepared step by step to reach the

ultimate findings and conclusion.


26/74

Agro-Insurance Schemes in India

Agricultural Position in West Bengal

Position of Agro-Insurance at Barrackpore

Block-1


27/74

National Agricultural Insurance Scheme (NAIS) (Rashtriya

Krishi Bima Yojana - RKBY)

NAIS was introduced fromRabi1999-2000season, replacing CCIS which was

in operation since 1985.

A) Objectives:

The objectives of the NAIS are as under:-

1. To provide insurance coverage and financial support to the farmers

in the event of failure of any of the notified crop as a result of natural

calamities, pests & diseases.

2. To encourage the farmers to adopt progressive farming practices,

high value inputs and higher technology in Agriculture.

3. To help stabilize farm incomes, particularly in disaster years.

B) Salient Features of the NAIS Scheme :


28/74

1. CROPS COVERED:

The Crops in the following broad groups in respect of which i) the past yield

data based on Crop Cutting Experiments (CCEs) is available for adequate

number of years, and ii) requisite number of CCEs are conducted for

estimating the yield during the proposed season:

a. Food crops (Cereals, Millets & Pulses)

b. Oilseeds

c. Sugarcane, Cotton & Potato (Annual Commercial crops)

d. Ginger, Onion, Turmeric, Chilies, Pineapple, Banana, Jute, Tapioca

(Annual Horticultural crops)

2. STATES AND AREAS TO BE COVERED:

The Scheme extends to all States and Union Territories. The States / UTs

opting for the Scheme would be required to take up all the crops identified

for coverage in a given year.

Exit clause: The States / Union Territories once opting for the Scheme will

have to continue for a minimum period of three years.


29/74

3. FARMERS TO BE COVERED:

All farmers including sharecroppers, tenant farmers growing the notified

crops in the notified areas are eligible for coverage.

The Scheme covers following groups of farmers:

(i)On a compulsory basis: All farmers growing notified crops and availing

Seasonal Agricultural Operations (SAO) loans from Financial Institutions

i.e. Loanee Farmers.

(ii) On a voluntary basis: All other farmers growing notified crops (i.e.,

Non-Loanee farmers) who opt for the Scheme.

4. RISKS COVERED & EXCLUSIONS:

Comprehensive risk insurance will be provided to cover yield losses due to

non preventable risks, viz.:

a. Natural Fire and Lightning

b. Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane,

Tornado etc.

c. Flood, Inundation and Landslide

d. Drought, Dry spells

e. Pests/ Diseases etc.


30/74

Losses arising out of war & nuclear risks, malicious damage & other

preventable risks shall be excluded.

C) SUM INSURED / LIMIT OF COVERAGE:

The Sum Insured (SI) may extend to the value of the Threshold Yield (TY)

of the insured crop at the option of the insured farmers. However, a farmer

may also insure his crop beyond value of Threshold Yield level upto 150%

of Average Yield (AY) of notified area on payment of premium at

commercial rates.

In case of Loanee farmers the Sum Insured would be at least equal to the

amount of crop loan advanced.

Further, in case of Loanee farmers, the Insurance Charges shall be an

additionality to the Scale of Finance for the purpose of obtaining loan.

In matters of Crop Loan disbursement procedures, guidelines of RBI /

NABARD should be maintained.

D) PREMIUM RATES:


31/74

S.No. Season Crops Premium rate

1. Kharif Bajra & Oilseeds 3.5% of SI or Actuarial rate,

whichever is less

Other crops (cereals, other millets

& pulses)

2.5% of SI or Actuarial rate,

whichever is less

2. Rabi Wheat 1.5% of SI or Actuarial rate,

whichever is less

Other crops (other cereals,

millets, pulses & oilseeds)

2.0% of SI or Actuarial rate,

whichever is less

3. Kharif &

Rabi

Annual Commercial / Annual

Horticultural crops

Actuarial rates

Transition to the actuarial regime in case of cereals, millets, pulses & oilseeds would be

made in a period of five years. The actuarial rates shall be applied at District / Region /

State level at the option of the State Govt./UT.

E) PREMIUM SUBSIDY:

50% subsidy in premium is allowed in respect of Small & Marginal farmers, to be shared

equally by the Government of India and State/UT Govt. The premium subsidy will be

phased out on a sunset basis in a period of three to five years, subject to review of the

financial results and the response of the farmers at the end of the first year of the

implementation of the Scheme.

The definition of Small and Marginal farmer would be as follows:

SMALL FARMER: A Cultivator with a land holding of 2 hectares (5 acres) or less, as

defined in the land ceiling legislation of the concerned State/ UT.


32/74

MARGINAL FARMER: A Cultivator with a land holding of 1 hectare or less (2.5

acres).

F) SHARING OF RISK:

Risk will be shared by Implementing Agency (IA) and the Government in the following

proportion:

Food crops & Oilseeds: Till complete transition to actuarial regime in a period of

five years takes place, claims beyond 100% of premium will be borne by the

Government. Thereafter, all normal claims, i.e., claims up to 150% of premium

will be met by IA and claims beyond 150% shall be paid out of Corpus Fund for a

period of three years. After this period of three years, claims up to 200% will be

met by IA and above this ceiling, out of the Corpus Fund.

Annual Commercial / Annual Horticultural crops: Implementing Agency shall

bear all normal losses, i.e. claims up to 150% of premium in the first three years

and 200% of premium thereafter subject to satisfactory claims experience. The

claims beyond 150% of premium in the first three years and 200% of premium

thereafter shall be paid out of Corpus Fund. However, the period of three years

stipulated for this purpose will be reviewed on the basis of the financial results

after the first year of implementation and the period will be extended to five years

if considered necessary.


33/74

To meet catastrophic losses, a Corpus Fund shall be created with contributions from the

Government of India and State Govt. / UT on 50:50 bases. A portion of Calamity Relief

Fund (CRF) will be used for contribution to the Corpus Fund.

G) AREA APPROACH AND UNIT OF INSURANCE:

The Scheme would operate on the basis of 'Area Approach' i.e., Defined Areas for each

notified crop for widespread calamities and on an individual basis for localised calamities

such as hailstorm, landslide, cyclone and flood. The Defined Area (i.e., unit area of

insurance) may be a Gram Panchayat, Mandal, Hobli, Circle, Phirka, Block, Taluka etc.

to be decided by the State/UT Govt. However, each participating State /UT Govt. will be

required to reach the level of Gram Panchayat as the unit in a maximum period of three

years.

Individual based assessment in case of localised calamities, to begin with, would be

implemented in limited areas on experimental basis initially and shall be extended in the

light of operational experience gained. The District Revenue administration will assist

Implementing Agency in assessing the extent of loss.


34/74

H) SEASONALITY DISCIPLINE:

a. The broad seasonality discipline followed for Loanee farmers will be as under:

Activity Kharif Rabi

Loaning period April to September October to next March

Cut-off date for receipt

of Declarations

November May

Cut-off date for receipt

of yield data

January / March July / September

b. The broad cut-off dates for receipt of proposals in respect of Non-loanee farmers will

be as under :

Kharif season: 31st July

Rabi season: 31st December

However, seasonality discipline may be modified, if and where necessary in consultation

with State / UT and the Govt. of India.

I) ESTIMATION OF CROP YIELD:

The State/UT Govt. will plan and conduct the requisite number of Crop Cutting

Experiments CCEs for all notified crops in the notified insurance units in order to assess

the crop yield. The State / UT Govt. will maintain single series of Crop Cutting

Experiments (CCEs) and resultant Yield estimates, both for Crop Production estimates

and Crop Insurance.


35/74

Crop Cutting Experiments (CCEs) shall be undertaken per unit area /per crop, on a

sliding scale, as indicated below:

S.No. Unit Area Minimum number of CCEs required to be

done

1. Taluka / Tehsil / Block 16

2. Mandal / Phirka / any other smaller unit areacomprising 8-10 villages

10

3. Gram Panchayat comprising 4-5 villages 08

A Technical Advisory Committee (T.A.C.) comprising representatives from N.S.S.O.,

Ministry of Agriculture (G.O.I.) and IA shall be constituted to decide the sample size of

CCEs and all other technical matters.

J) LEVELS OF INDEMNITY & THRESHOLD YIELD:

Three levels of Indemnity, viz., 90%, 80% & 60% corresponding to Low Risk, Medium

Risk & High Risk areas shall be available for all crops (cereals, millets, pulses & oilseeds

and annual commercial / annual horticultural crops) based on Coefficient of Variation

(C.V.) in yield of past 10 years' data. However, the insured farmers of unit area may opt

for higher level of indemnity on payment of additional premium based on actuarial rates.

The Threshold yield (TY) or Guaranteed yield for a crop in an Insurance Unit shall be the

moving average based on past three years Average Yield in case of Rice & Wheat and

five years Average Yield in case of other crops, multiplied by the level of indemnity.

K) NATURE OF COVERAGE AND INDEMNITY:


36/74

If the 'Actual Yield' (AY) per hectare of the insured crop for the defined area [on the

basis of requisite number of Crop Cutting Experiments (CCEs)] in the insured season,

falls short of the specified 'Threshold Yield' (TY), all the insured farmers growing that

crop in the defined area are deemed to have suffered shortfall in their yield. The Scheme

seeks to provide coverage against such contingency.

'Indemnity' shall be calculated as per the following formula:

(Shortfall in Yield = 'Threshold Yield - Actual Yield' for the Defined Area).

L) INDEMNITY IN CASE OF LOCALISED RISKS:

Loss assessment and modified indemnity procedures in case of occurrence of localized

perils, such as hailstorm, landslide, cyclone and flood where settlement of claims will be

on individual basis, shall be formulated by IA in coordination with State / UT Govt.

The loss assessment of localized risks on individual basis will be experimented in limited

areas initially and shall be extended in the light of operational experience gained. The

District Revenue administration will assist IA in assessing the extent of loss.

M) PROCEDURE FOR APPROVAL & SETTLEMENT OF CLAIMS:

Shortfall in Yield

Threshold yieldX Sum Insured for the farmer


37/74

Once the Yield Data is received from the State/UT Govt. as per the

prescribed cut-off dates, claims will be worked out and settled by IA.

The claim cheques along with claim particulars will be released to the

individual Nodal Banks. The Banks at the grass-root level, in turn, shall

credit the accounts of the individual farmers and display the particulars of

beneficiaries on their notice board.

In the context of localized Phenomenon viz. Hailstorm, landslide, cyclone

and flood, the IA shall evolve a procedure to estimate such losses at

individual farmer level in consultation with DAC/State/UT. Settlement of

such claims will be on individual basis between IA and insured.

N) FINANCIAL SUPPORT TOWARDS ADMINISTRATION &

OPERATING (A&O) EXPENSES:

The A&O expenses would be shared equally by the Central Government &

respective State Government on sunset basis [100% in 1st year, 80% in 2nd

year, 60% in 3rd year, 40% in 4th year, 20% in 5th year and 'zero'

thereafter].

O) CORPUS FUND:


38/74

To meet catastrophic losses, a Corpus Fund shall be created with

contributions from the Government of India and State / UT on 50:50 basis.

A portion of Calamity Relief Fund (CRF) shall be used for contribution to

the Corpus Fund.

The Corpus Fund shall be managed by Implementing Agency (IA).

P) REINSURANCE COVER:

Efforts will be made by IA to obtain appropriate reinsurance cover for the

proposed NAIS in the international Reinsurance market.

Q) MANAGEMENT OF THE SCHEME, MONITORING AND

REVIEW:

In respect of Loanee farmers, the Banks shall play the same role as under

CCIS.

In respect of non-Loanee farmers, Banks shall collect the premium along

with the Declarations and send it to IA within the prescribed time limits.

However, in areas where IA has requisite infrastructure, a non-loanee farmer

will have option to send premium along with Declaration directly to IA

within the time limits.


39/74

Selection of the Banks will be on the basis of Service Area Approach (SAA)

of RBI or at the option of the Banks (where Co-operative Banks have good

network). The Department of Agriculture, Agricultural Statistics, Directorate

of Economics and Statistics, Department of Co-operation, Revenue

Department of the State Government will be actively involved in smooth


The Scheme will be implemented in accordance with the operational

modalities as worked out by IA, in consultation with Department of

Agriculture & Co-operation.

During each crop season, the agricultural situation will be closely monitored

in the implementing States / Union Territories. The State / UT Department

of Agriculture and district administration shall set up a District Level

Monitoring Committee (DLMC), who will provide fortnightly reports of

Agricultural situation with details of area sown, seasonal weather conditions,

pest incidence, stage of crop failure (if any) etc.

The operation of the Scheme will be reviewed annually, and modifications

as may be required would be introduced. Periodic Appraisal Reports on the

Scheme would be prepared by Ministry of Agriculture, the Government of

India / Implementing Agency.


40/74

R) IMPLEMENTING AGENCY (IA):

An exclusive Organization would be set up in due course, for

implementation of NAIS. Until such time as the new set up is created, the

'GIC of India' will continue to function as the Implementing Agency.

S) BENEFITS EXPECTED FROM SCHEME:

The Scheme is expected to be a critical instrument of development in the

field of crop production, providing financial support to the farmers in the

event of crop failure. Encourage farmers to adopt progressive farming

practices and higher technology in Agriculture. Help in maintaining flow of

agricultural credit. Provide significant benefits not merely to the insured

farmers, but, to the entire community directly and indirectly through spill-

over and multiplier effects in terms of maintaining production &

employment, generation of market fees, taxes etc. and net accretion to

economic growth. Streamline loss assessment procedures and help in

building up huge and accurate statistical base for crop production.

In terms of the number of farmers covered, it is the largest crop insurance program in the

world. Its covering more than 35 different crops during Kharif and over 30 crops during


41/74

Rabi season. Since inception (till Rabi 2005-06) the scheme covered 78.96 million

farmers growing crops in 128.99 million hectares with a sum insured of Rs. 755.81

billions, earning a premium of Rs. 23.27 billions. The claims finalized for the period were

Rs. 72.18 billions. The details of season-wise coverage till Rabi 2005-06 are as follows:

season No.of

covered

States/UTs

Farmers

covered

(millions)

Area

covere

(mln.

Hec.)

Sum

Insured

(Rs. Blns)

Premium

(Rs. Blns)

Claims (Rs.

Blns)

Farmers

Benefited

Kharif

2000 17 8.41 13.22 69.03 2.07 12.22 3635252

2001 20 8.70 12.89 75.02 2.62 4.93 1741873

2002 21 9.77 15.53 94.32 3.25 18.22 4296882

2003 23 7.97 12.36 81.14 2.83 6.50 1704419

2004 25 12.69 24.27 131.70 4.59 10.36 2659376

2005 25 12.64 20.84 134.54 4.48 9.78 2448065

TOTAL 60.18 99.11 585.75 19.84 62.01 16485867Rabi

1999-

009 0.58 0.78 3.56 0.05 0.08 55288

2000-

01 18 2.09 3.11 16.03 0.28 0.59 526697

2001-

0220 1.96 3.15 14.98 0.30 0.65 453325

2002-

0321 2.33 4.04 18.38 0.39 1.89 926408

2003-

04 22 4.42 6.47 30.49 0.64 4.91 2072892

2004-

0523 3.53 5.34 37.74 0.76 1.60 772729

2005-

06 23 3.87 6.99 48.88 1.01 0.45 42305

TOTAL 18.78 29.88 170.06 3.43 10.17 4849644


42/74

Grand Total 78.96 128.99 755.81 23.27 72.18 21335511

Note: 2005-06 figures are provisional and doesnt include claims .

Role Played by Various Agencies

(A). ROLE & RESPONSIBILITIES OF FINANCIAL INSTITUTIONS (FIs):

For the purpose of the Scheme, the Scheduled Institutions engaged in disbursing SAO

loans as per the relevant guidelines of NABARD / RBI will be reckoned as Financial

Institutions.

Each scheduled Commercial bank shall with concurrence of IA fix Nodal points which

would deal with IA on behalf of branches in the division / district / state. The Nodal

points for Commercial banks will be minimum one level above the Branch office. The

Nodal points for Cooperative banks will be DCC Banks and those for RRBs, their Head

Office.

Nodal points would be designated for implementation and these banks would attend to

the following functions:

1. On receipt of the communication on notification of crops and areas from the State

Govt. / UT, the Nodal banks will communicate the same to the branch offices

under their control.

2. The FIs would advance additional loan to Loanee farmers to meet requirement of

Insurance charges / premium as applicable up to the extent of crop loan.


43/74

3. Each such Nodal point would submit crop-wise, defined area-wise, monthly Crop

insurance Declarations to the Office of IA, in the prescribed format, along with

Insurance charges payable on all crop loans coming under the purview of the

Scheme in case of Loanee farmers and based on Proposals received in case of

other farmers.

4. The Apex FIs shall issue appropriate instructions to Nodal banks as well as crop

loan disbursing branches to ensure smooth functioning of the Scheme.

5. For insurable crop loans disbursed under Kissan Credit Card (KCC), the FIs shall

maintain all controls and records as required under the Scheme.

Other Responsibilities of FIs will be:

To educate the farmers on the Scheme features.

To guide the farmers in filing the proposal forms and collecting the required documents.

Following the guidelines while disbursing crop loans and ensuring proper end-use of loan

disbursed.

To prepare the consolidated statements for Loanee and Non-Loanee members,

forwarding the same to the branch along with the premium amount.

Maintaining the records of proposal forms, other relevant documents, statements for the

purpose of verification by the district committee or representative of the insurer.

Special conditions for FIs / nodal banks / loan disbursing points:


44/74

1. FIs will submit Crop Insurance Declarations to IA on monthly basis, where sum

insured is on the basis of amount of loan disbursed and within one month time

from cut-off date for receipt of proposals, where sum insured is on any other

basis.

2. Claims received by the Nodal points, will be remitted to individual

branches/PACS with all particulars within seven days and these branches/PACS

will in turn credit the Accounts of beneficiary farmers within seven days. The list

of beneficiary farmers with claim amount will be displayed by the branch / PACS.

3. The IA will have access to all relevant records/ledgers at the Nodal

point/Branch/PACS at all times.

4. The IA will be provided with all the norms / guidelines relating to SAO crop loan

disbursements as formulated by RBI / NABARD. Any amendments /

simplification of procedures / norms from time to time will be duly made

available to IA by the concerned institutions. In the absence of such

communication, IA shall be free to not take cognizance of such modifications.

5. In case a farmer is deprived of any benefit under the Scheme due to errors /

omissions / commissions of the Nodal Bank/Branch/PACS, the concerned

institutions only shall make good all such losses.

6. If the farmer is adopting mixed cropping, the sum insured of a crop should be on

the basis of it's proportionate area in the mixed cropping.

(B). Role & responsibilities of state government / UT administration:


45/74

1. The State Government / UT will notify crop wise notified areas and premium

rates as applicable (in case of commercial/horticultural crops) well in advance of

each crop season.

2. The State Government / UT administration would, in advance provide to the IA,

Unit Area-wise yield data of immediate past 10 years for all crops notified under

the Scheme.

3. To the extent possible, the State Government / UT administration would notify

smaller defined areas for various crops, keeping in mind that smaller areas will be

more homogeneous and would be more reflective of all crop losses, including

localized perils like hailstorm, landslide etc.

4. The State Government shall issue the requisite Notification and communicate to

all participating FIs during every crop season. The Notification of the State

Government may essentially contain the following information:

1. Crops and Defined areas notified in various districts.

2. Premium rates and subsidy, if and as applicable for various groups of

farmers and crops.

3. The cut-off dates for collection of proposals and remittance of premium

with Crop Insurance Declarations to IA.

5. The State / UT administration will release it's contribution to Corpus Fund

as per the scale and dates fixed by MOA, the Government of India.

6. The State / Union Territory administration would ensure that Crop

Estimation Surveys (CES) in general, and estimation procedures in case of

multiple picking crops in particular be strengthened in order to furnish


46/74

accurate estimates of yield. Further, the State / UT administration will

assist IA in assessing the extent of crop loss of individual insured farmers

due to operation of localized perils.

7. To set up various monitoring Committees as required.

8. The final Yield data in the standard format for all Unit Areas for notified

crops for the crop season will be furnished to IA within the stipulated date.

9. In case, the State /UT administration fail to furnish yield data based on

requisite number of CCEs or fail to furnish yield data within the stipulated

date, responsibility of such claims, if any arising out of such data will

totally rest with State / UT administration.

10. The IA will be allowed unrestricted access to records of CCEs at grass

root / District / State level.

11. State Government / UT admn. Shall set up District Level Monitoring

Committee (DLMC), headed by the District Magistrate. The members will

be District Agriculture Officer, DCCB, Lead Bank representative and IA.

The committee will monitor implementation of Scheme by providing

fortnightly crop condition reports and periodical reports on seasonal

weather conditions, loans disbursed extent of area cultivated, etc. The

DLMC shall also monitor conduct of CCEs in the district.

12. As the Scheme is optional to Non-loanee farmers, adequate publicity will

be provided to ensure maximum coverage of farmers through all means

available at the disposal of State / UT administration.


47/74

(C). Role and responsibilities of the Implementing Agency (IA):

1. Implementing Agency of the Scheme.

2. The IA shall open separate Accounts to deal with Corpus Fund and also premiums

received under the Scheme.

3. Building up crop yield database and preparation of Actuarial premium rates

through a Professional agency.

4. Underwriting and Claims finalization.

5. Responsibility for claims to the extent mentioned in the Scheme.

6. Negotiating Re-insurance arrangement in the international market.

7. Co-ordination in organizing training, awareness, publicity programmes.

8. Providing returns / statistics to the Government of India.

9. Examining and exploring possibilities of setting up separate agency for


(D). Duties of farmers:

1. As the Scheme is compulsory for all Loanee farmers availing SAO loans for

notified crops, it is mandatory for all Loanee farmers to insist on coverage of all

eligible loans (as per the Scheme provisions) under the Scheme.

2. If the farmer is adopting mixed cropping, the proportion of different crops in a

mixed cropping will have to be compulsorily declared.

3. In respect of Non-loanee farmers, the Proposals will be accepted only up to

stipulated cut-off date, which will be decided in consultation with State

Government / UT admn.


48/74

The important duties in case of Non-loanee farmers are as follows:

o The farmer desiring coverage should have an Account in the branch of the

designated bank.

o The farmer must approach the designated branch / PACS and submit the

proposal form in the prescribed format.

o The farmer must provide documentary evidence in regard to the

possession of cultivable land (copy of the pass book, 7/12 / land extract or land revenue

receipt should be enclosed).

o The farmer must furnish area sown confirmation certificate, if required.

NAIS - BUSINESS STATISTICS OF 12 SEASONS FROM RABI 1999-

2000 TO KHARIF 2005 (25 States and Union Territories)

FARMERS COVERED Millions 75.08AREA Million HA 121.99

SUM INSURED Rs. Billion 706.91PREMIUM Rs. Billion 22.25SUBSIDY Rs. Billion 2.40TOTAL CLAIMS Rs. Billion 64.71CLAIMS PAID Rs. Billion 58.95CLAIMS PAYABLE Rs. Billion 5.76FARMERS BENEFITTED Millions 19.74

FARM INCOME INSURANCE

The objective of FII scheme is to provide financial support to farmers in the event

of loss in income from adverse incidence of crop yield (on account of natural calamities,

pests and diseases) and market price fluctuations. The Scheme also aims to encourage


49/74

farmers to adopt prudent and progressive farming practices, enhance food and livelihood

securities of the farming community and stabilize farm incomes; particularly in disaster

years. A premium subsidy of 75% is proposed to be given in case of small farmers and

marginal farmers and 50% for other farmers. The scheme has been implemented in 21

districts of 13 states in Rabi 2003-04.Asper information available, more than 27,329

farmers and risk commitment of about Rs.22crore are covered so far, under the scheme.

Rainfall Insurance (Varsha Bima) - 2005

Background

Sixty five percent of Indian agriculture is heavily dependent on

natural factors, particularly rainfall. Studies have established that rainfall

variations account for more than 50% of variability in crop yields. Its known

that yields are variable, however, its now being realized that the weather,

particularly rainfall is also becoming increasingly unpredictable and

uncertain. Although there is no way of controlling weather-factors, there is

now a hope of mitigating the adverse financial effects that rainfall can have

on the rural economy, particularly farm incomes.

Scope


50/74

Varsha Bima covers anticipated shortfall in crop yield on account of

deficit rainfall. Varsha Bima is voluntary for all classes of cultivators who

stand to lose financially upon adverse incidence of rainfall can take

insurance under the scheme. Initially Varsha Bima is meant for cultivators

for whom National Agricultural Insurance Scheme (NAIS) is voluntary.

Period of Insurance

The insurance operates during June to September for short duration

crops; June to October for medium duration crops; and June to November

for longer duration crops. Further, these periods are state-specific. In case of

Sowing Failure option its from 15th June 15th August.

How to Buy Varsha Bima

Proposal forms are available at all the loan disbursing outlets viz

PACs branches of all Cooperative/ Commercial/ Rural banks. The coverage

under Varsha Bima at the grass-root level shall be made mostly through the

existing network of Rural Finance Institutions (RFIs) as in NAIS,

particularly Cooperative Sector Institutions. AIC shall also directly market /

provide insurance subject to the availability of its network. The network of


51/74

formal and informal institutions working in the rural areas, such as NGOs,

Self Help Groups (SHGs), Farmers Groups could also be utilized for

delivery of Varsha Bima. The cultivators proposed for insurance under

Varsha Bima is required to have a Bank Account at the RFI Branch, which

will facilitate his / her insurance transactions.

Insurance Buying Period

A cultivator can buy Varsha Bima only up to 15th June for sowing

failure option and 30th June for other options

Coverage Options

Options - I: Seasonal Rainfall Insurance

Coverage is against negative deviation of 20% and beyond in Actual

Rainfall (in mm) from Normal Rainfall (in mm) for the entire season.

Actual Rainfall is the monthly cumulative rainfall from June to November

(with June to September or October for short & medium duration crops).

The pay-out structure is designed in such a way that the yield is correlated to

various ranges of adverse deviation in rainfall. The sum insured per hectare

is the maximum pay-out corresponding to the maximum potential loss. The


52/74

claim pay-out shall be on a graded scale (in slabs), corresponding to

different degrees of adverse deviation in Actual Rainfall.

Options - II: Rainfall Distribution Index

Coverage is against adverse deviation of 20% and beyond in Actual

Rainfall Index from Normal Rainfall Index for the entire season. The

index is constructed to maximize the correlation, for weekly rainfall within

the season. The indices vary from IMD station to station and crop to crop.

The sum insured per hectare is the maximum pay-out corresponding to the

maximum potential loss. The claim pay-out shall be on a graded scale (in

slabs), corresponding to different degrees of adverse deviation in Actual

Rainfall Index.

Options - III: Sowing Failure

Coverage is against adverse deviation in Actual Rainfall (in mm)

from Normal Rainfall (in mm) beyond 40% between 15th June and 15th

August. The sum insured per hectare is the maximum input cost incurred by

the cultivator till the end of the sowing period, and is pre-specified. The

claim pay-out shall be on a graded scale, corresponding to different degrees


53/74

of rainfall deviation. The maximum pay-out of 100% of sum insured is

available at deviations of 80% & above.

Sum Insured

Sum Insured is pre-specified and normally is between cost of

production and value of production. Incase of Sowing Failure option, it is

the maximum input cost incurred by the cultivator till the end of the sowing

period, which again is pre-specified.

Premium

Premium may vary from option to option and crop to crop. The

premium rates have been optimized vis--vis benefits, and starts from 1%.

Time Schedule and Procedure of Claim Payment

The procedure for working out Claims is automated i.e., there shall be

no necessity for submission of loss information or Claims intimation by

insured cultivator. Normally Claims are paid on the basis of Actual Rainfall

data within a month from end of Indemnity period.

Asset insurance concentrates on insuring the productive assets of the farmers


54/74

like livestock, stock of grains in warehouses (Khalihan) or otherwise, fish in

ponds, animal carts, failed wells, dwelling units, pump sets, etc.(Kisan

Package Policy of the Oriental Insurance Co. Ltd.).Performance of live stock

insurance can be illustrated by:

[Source: Ministry of Agriculture, Economic Survey, 2002-03]

LIFE AND HEALTH INSURANCE

LIC has taken several steps to procure business in rural areas. As a first step

towards intensive development of business in these areas and for building up

YEAR NO.OFANIMALS INSURED PREMIUM COLLECTED Claims1997-

98

22.83 MILLION Rs.137.06 crore Rs.102.75crore

1998-


1999-

00


2000-


2001-

02



55/74

effective organization. During 1993-94, rural share of LIC accounted

45.30% in no. of policies and 40% in sum assured. LIC has launched a

number of policies which cater the insurance needs o flow income groups.

From the annual reports of LIC, Rural business can be depicted by following

table:

YEAR NO.OF POLICIES SUM ASSURED(RS)1982-83 7.33 LAKHS 1037.98 CRORE

1983-84 8.30 LAKHS 1260.24 CRORE

1984-85 9.52 LAKHS 1596.62 CRORE

1985-86 12.77 LAKHS 2176.79 CRORE

1986-87 14.82 LAKHS 2916.04 CRORE

1987-88 18.28 LAKHS 3996.94 CRORE

1988-89 24.12 LAKHS 5818.22 CRORE

1989-90 30.48 LAKHS 8086.35 CRORE

1990-91 36.75 LAKHS 10294.55 CRORE1991-92 41.27 LAKHS 12439.93 CRORE

1992-93 44.39 LAKHS 14085.03 CRORE

1993-94 48.56 LAKHS 16680.41 CRORE

CROP INSURANCE vs. RAINFALL INSURANCE

Rainfall insurance presents several advantages relative to area-level crop

insurance:

1. Cost. Rainfall data is already collected at a disaggregated level for other

purposes by the Indian Meteorological Department (IMD), and readily


56/74

available at little or no cost. In contrast, area yield index insurance requires a

large sample of crop-yield measurements, involving significant fixed costs.

(These fixed costs are likely to be prohibitive for private insurers seeking to

develop alternative products to NAIS).

2. Availability of Historical Data. Reliable daily rainfall data is available at

the mandal level over a historical period of several decades. By modeling

this data, it is possible to generate a relatively accurate estimate of the

actuarial value of a wide variety of potential insurance contracts.

3. Objectivity of index construction. Maintaining a standardized

methodology for measuring crop yields is not trivial, since yields depend on

the seed type used, amount of fertilizer and other inputs applied to the crop

and other factors. This subjectivity also introduces the potential for

manipulation of the index. In contrast, the methodology for the measurement

of rainfall is relatively well-agreed upon.

4. Timely calculation and payment of returns. Since rainfall data becomes

available on an almost real-time basis, in principle it is possible to calculate

payouts and pay policyholders in a timely fashion. This feature is potentially

attractive to households; for example in situations where initial monsoon


57/74

rains are followed by an extended dry period, necessitating a replanting of

crops.

The primary disadvantage of index-based rainfall insurance is basis risk; that

is, rainfall is imperfectly correlated with household income and

consumption. Basis risk arises from several sources: (i) the relationship

between measured rainfall and crop yields varies with soil type, slope of the

plot, temperature and other factors (e.g. rainfall at night is more likely to

soak into the soil rather than evaporating); (ii) Rainfall measured at the local

weather station is not perfectly correlated with rainfall at an individual plot;

(iii) Crop yields at the plot level are affected by non-weather factors like

pests and disease that are not closely correlated with rainfall.


58/74

West Bengal agriculture has occupied around 3 percent of India's

productive land. More than 8 percent of India's foods are being generated by

the agricultural sector of West Bengal. Small and marginal farmers rule over

the West Bengal agriculture and cultivate more than 68 percent of the total

area.

The agriculture in West Bengal is one of the most significant means to

earn livelihood especially in the rural sectors. This has been enabled by

various schemes of the Green Revolution and the land reforms. West Bengal

comprises of 8 percent of India's population and the majority of them are

engaged in farming and other agricultural activities. The principal food crop

cultivated in West Bengal agriculture is rice. Other food crops of West

Bengal include maize, pulses, oil seeds, wheat, barley, potatoes, and

vegetables. The most vital cash crop of West Bengal is Tea and it is also

exported every year. Darjeeling tea is most well-known all over India. West

Bengal agriculture supplies about 66 percent of the jute requirements of

India. The soil and heavy rainfall witnessed by India are absolutely perfect

for jute cultivation. The two other crops that are cultivated highly in the

agricultural sector in West Bengal are tobacco and sugarcane.


59/74

The chances of increasing the area of cultivation are so less that the agricultural

department of West Bengal decided to increase the fecundity of various crops cultivated

over there by using superior quality seeds, fertilizers, various plant protection schemes as

well as improved packages of practice. The department of agriculture in West Bengal

also decided to distribute extra and vested land area to the actual agricultural laborers

with the help of land reforms. This will act an added advantage to the productivity of the

crops in West Bengal.

There has been a significant rise in the cropping of West Bengal from 131 percent

to 162 percent during the last 2 decades. West Bengal agriculture has been sustaining its

consistency in attaining a track record in food grains production. The state also ranks first

in producing rice among all other states in India. The agriculture in West Bengal also

witnessed a remarkable rise from 0.24 million tones to 0.55 million tones in the last

decade in its production of oil seeds. West Bengal agriculture also ranks second in potato

production in India as it produces about 28 percent of the total potatoes cultivated in

India. Apart from these food crops, West Bengal agriculture produces more than 60

percent of India's raw jute fiber.

West Bengal agriculture has been flourishing heavily and it has become one of the

most essential parts in West Bengal's economy as it has been fueling it with its high

productivity as well as export trade in some sectors.


60/74

RISK ZONES IN WEST BENGAL

For the application of effective agro insurance scheme in West Bengal, it needs to

classify the state in different region on the basis of vulnerability. In the following figure a

composite vulnerability appears to reflect the relative vulnerability across West Bengal in

qualitative terms. Broadly, the southeastern parts of the region are observed to be of

higher risk. The simple approach illustrated in this exercise can be readily adapted to

accommodate microzonation data pertaining to hazard and vulnerability, as and when


61/74

they become available. At that stage a more rigorous attempt can be made to estimate the

risk in terms of rupees at a Block or Panchayet level, covering the entire state.


62/74

BLOCK LEVEL STUDY ON AGRO INSURANCE IN

WEST BENGAL

In West Bengal, under Barrackpore subdivision, the block Barrackpore-1 is a block

which one has been selected for my study. It is nearer to Naihati, the place of birth of Sri

Bankim Chandra Chatterjee. In West Bengal more farmers are not so much familiar with

agro insurance. This can be represented by following presentation:

Farmers perception About Agro-Insurance in

Barrackpore Block-1:

To understand the farmers perception about the agro-insurance, I have conducted

a field study in Barrackpore Block-1.Views of the sample farmers were solicited on

various dimensions of insurance. These include motivation and experience with

agricultural insurance, opinions on premium rates and suggestions for further

improvement. Total study can be presented in the following division:

a) Perceptions of borrower of loan;

b) Perceptions of non-borrower of loan.

Perception of borrowers Response %

Motivation for going insurance -Due to bank competition 5

-financial security 76.67


63/74

-good experience sharing 1.67

-all the above 16.66

Perception of non-borrowers Response %

Awareness of insurance -Dont know 47.78

-Banks 30.00

-Fellow farmers 22.22

To know about the farmers financial situation I have visited rural & semi urban

branches of different banks like:

A) Allahabad Bank, Dogachia Branch,

B) UCO Bank, Mamudpur Branch,

C) State bank of India, Naihati Branch,

D) Bhatpara-Naihati Co-operative Bank, Naihati Branch.

General Information of Barrackpore-1 Block


64/74

SL.No. Subjects

Area in

Hectare/Numbers.

1 Geographical area of Block 7,622.07 hec

2 No of Green Panchayet 8 nos

3Population as per

census(2001),Male=80,499,female=76,5471,57,046 nos

4 Average Population Density/Sq.K.M. 1,409 nos

5 Net cultivated area 5,365 hec

6 Gross Cultivated Area 8,773 hec

7 Horticulture crop Area 215 hec

8 Crop Intensity 186%

9 Mono cropped Area 2,660 hec

10 Double Cropped Area 3,780 hec

11 Triple Cropped Area 2,333 hec

12 Orchard 215 hec13 Forest 53 hec

14 No. of marginal farmers 6101

15 No. of big farmers 785

16 No. of landless labour 27,695

17 No. of Seed Supply centre 22

18 Govt. Agricultural Seed Farms 01

19 Cold + Multi-Chambered cold storage Nil

20 Agricultural Credit Society 07

21 Commercial Baulls 11

22 No. of Farmers Club 15

23 No. of NGOs 02

24 No. of Co-operatives 01

25 No. of Market/Hat 05

26 No. of river Furnishing Approx. Length 35 Approx.


SL.No. Name of Crops Area in hectare Production in Kg

1 Tomato 43 hec 10,500 Kgs

2 Cabbage 97 hec 20,000 Kgs

3 Cauliflower 72 hec 17,000 Kgs

4 peas 34 hec 36,000 Kgs

5 Brinjal[R] 39 hec 8,800 Kgs

6 Brinjal[S] 41 hec 9,600 Kgs

7 Brinjal[W] 56 hec 13,000 Kgs


65/74

8 Onion 54 hec 21,000 Kgs

9 Lady's Finger[R] 28 hec 42,000 Kgs

10 Lady's Finger[S] 65 hec 6,595 Kgs

11 Lady's Finger[W] 71 hec 2,200 Kgs

12 Beans 62 hec 1,400 Kgs

13 Cucumber[S] 30 hec 4,090 Kgs14 Cucumber[R] 39 hec 3,350 Kgs

15 Cucumber[W] 21 hec 1,750 Kgs

16 Reddish[S] 30 hec 4,160 Kgs

17 Reddish[W] 37.5 hec 6,570 Kgs

18 Sweet Potato[R] 13 hec

19 Sweet Potato[S] ----

20 Elephant Foot Yan 11 hec

21 Kachu 48 hec 20,000 Kgs

22 Others Veg.[R] 30 hec

23 Others Veg.[S] 82 hec

24 Others Veg.[W] 30 hec25 Chili[R] 20 hec 405 Kgs

26 Chili[Bhadui] 20 hec 368.9 Kgs

27 Ginger 4 hec

28 Turmeric 10 hec


SL.No. Subjects

1 Source of Irrigation

(a) Heavy-Deep Tube well 31 nos.

(b) Medium-Deep Tubewell+Shallow 902 nos

(c) River lift Irrigation 1 no

2 Total no. of Shallow

(a) Govt.sponsored ---

(b) Private 902 nos

(c) Others 2 nos

3 Net Irrigated Area 2,879 hac

4 Total Irrigated Area 6,850 nos5 Percentage of Irrigation 60%

6 Irrigation through Surface Water 40%

7 Irrigation through Ground Water 60%



66/74

SL.No. Subjects (Fruits) Area in hectare Production in Kg.

1 Mango 170 hec 13,000 Kgs.

2 Banana 60 hec 16,750 Kgs

3 Papaya 36 hec 18,000 Kgs

4 Guava 47 hec 11,000 Kgs

5 Jack fruit 40 hec 4,200 Kgs6 Litchi 16 hec 1,900 Kgs

7 Others Citrus 33 hec 4,500 Kgs

8 Sapota 10 hec 2,050 Kgs

9 Coconut 106 hec 15,100 Kgs

10 Arccanut 33 hec 1,610 Kgs

Normal Coverage of Different Crops

Sl.No. Name of Crops Barrackpore-1

1 Jute 385 hec

2 Mesta

3 Aush(autumn)Paddy(HYV) 245 hec

4 Aman (winter)Paddy 3,985 hecA Broadcasted (Local) 15 hec

B Transplanted(HYV) 3,450 hec

C Transplanted(Local) 520 hec

5 Boro(Summer)Paddy 2,355 hec

6 Turmeric 10 hec

7 Bhadui Vegetables 225 hec

8 Bhadui Chilli 20 hec

9 Arahar 10 hec

10 Bhadui Kalai 35 hec

11 Rape and Mustard 245 hec

A Tori 60 hec

B Yellow Sarsoon 170 hec

C Rai 15 hec

12 Linseed 10 hec

13 Winter Vegetables 450 hec

14 Winter Chili 32 hec

15 Potato 105 hec


67/74

16 Wheat 195 hec

17 Onion(Bulb) 15 hec

18 Onion(Transplanted) 15 hec

19 Garlic 10 hec

20 Rabi Pulses 130 hec

A Lentil 80 hecB Khesari 35 hec

C Pea 15 hec

21 Gram 15 hec

22 Rabi spices-corriender 35 hec

23 Sugarcane

A New 6 hec

B Ratoon 3 hec

24 Summer Vegetables 35 ha

25 Summer Chili 20 ha

26 Rabi Summer Moong 25 ha

27 Summer Til 45 ha28 Summer Chili 20 ha

29 Coconut 40 ha

30 Arccanut 10 ha

Block Information

A. General Informations:

Barrackpore-1

(1) Geographical Area 7,622.07 hec

(2) No. of Gram Panchayet 7 no

(3) No. of Mouza 40 no

B. Land Use

(1) Net Area under cultivation 5,365 hec

(2) Area under orchard (Fruits) 215 hec

(3) Area under Orchard (Bamboo) 53 hec(4) Current Fallow Land 385 hec

(5) Area sown more than once 3,780 hec

(6) Gross cropped area 8,773 hec

(7) Non-Argil/Home stead land 2,625.07 hec(8) Cropping Intensity 186%

C. Irrigation

(1) Deep Tube wells 31 nos=930 hec

(2) River lift Irrigation 1 nos=40 hec(3) Shallow Tube wells 902 nos=1,804 hec

(4) Irrigation through Surface Water 10.43% & Ground water=38.67%


68/74

(5) Other Sources

Tanks -----

Canals 1 no=65 hecBeels 1 no.=40 hec

(6) Net Irrigated Area 2,879 hec(7) Gross Irrigated Area 6,850 hec

(8) Percentage of Area Irrigated 60%

D. Population as per 1991Sensus

(1) Total 2,19,956 nos(2) Male 1,13,935 nos

(3) Female 1,06,021 nos

(4) Scheduled Caste 53,694 nos(5) Scheduled Tribe 5,642 nos

(6) Landless Labourers 27,695 nos(7) Small Farmers 5,420 nos

(8) Marginal Farmers 3,520 nos(9) Bargaders 785 nos

(10) Patta Holders 1,166 nos

(11) No. of Argil Labourers(12) Big Farmers 785 nos

E. Fertilizers Status

(1) Organic carbon 0.6%(M)

(2) Average P2O5 84(M)

(3) Average K2O 265(M)(4) PH 6.9(N)

(5) E.C. 0.7(N)

Crop Damage Report under Barrackpore Block-1

SL.No

.

Name of

Crops

Dates of Natural Calamities


69/74

19.10.05

to

23.10.05

19.09.06

to

24.09.06

08.02.07

to

13.02.07

12.04.0728.06.07

to

08.07.07

21.09.07

to

24.09.07

25.01.08

to

30.01.08

1AmanPaddy 500 mt 881 mt --- --- --- --- ---

2

Bhadui

Veg. 285 mt 400 mt --- --- 166 hec 360 hec ---

3WinterVeg. 1,140 mt 750 mt 72 hec 437 hec --- 223 hec 224 hec

4

Winter

Chili 9 mt --- --- --- --- --- ---

5Oil Seed

14 mt --- --- --- --- --- ---

6Kalai

13 mt 16 mt --- --- --- 32 hec ---

7Papaya

10 hec 26 hec --- 20 hec --- 26 hec ---

8Banana

19 hec 44 hec --- 38 hec --- 26 hec ---

9Aus Paddy

--- 179 mt --- --- --- 112 hec ---

10BhaduiChili --- 9 mt --- --- --- --- ---

11

Boro

Paddy --- --- ---2,009

hec--- --- ---

12Potato

--- --- 38 hec --- --- --- 38 hec

13

Lentil

(Rabi

pulses)--- --- 31 hec --- --- --- 54 hec

14Onion

--- --- 21 hec --- --- --- 31 hec

15Mango

--- --- --- 115 hec --- --- ---

16Aman+Aus

seed --- --- --- --- 141 hec --- ---


70/74

Source: Office of Agricultural Development Officer, Barrackpore Block-1,

Govt. of West Bengal.

Unmarked Boxes represents non-availability of information from ADO

office.

Presently insurance companies are expanding their branch-offices in rural areas to

facilitate the activities and to capture the untapped rural insurance sectors .This type of


71/74

steps of insurance companies in the country is a great strength and it will help to convert

the agriculture into agro-business. But yet to day, insurance companies are not so far

designed to tap the untapped area throughout the country especially in west Bengal.

Public sector insurance companies looked at agro insurance as liability, not as business.

In just two years of its existence, the National Agricultural Insurance Company

of India has achieved many a milestone .They has set up the R&D department at HO to

design farmer friendly and affordable insurance products. The AIC product of NAIS

was implemented in 23 states and2 union territories, insuring 30crops during the Kharif

season and 25 crops during the Rabi season. Almost 18 million farmers were insured

during 2004-2005This is going to benefit six crore farmer by the year 2011-12 (The

Chartered Accountant, page-1196, Vol. 54, Feb2006).

Despite significant headways being made, the agriculture insurance is more or

less still a far cry in India. State Governments and the agencies who are participating in

various agricultural insurance schemes have to educate the farmers on the scheme

features, to guide them in filling the proposal forms and collecting the required

documents (ibid.pg.1196).

In West Bengal, farmers are also not so aware of agro-insurance. And for that

they are also presently facing the problem of agricultural loss. Govt. of West Bengal has

taken different measures to improve the situation of farmers out of which application of

agro- insurance is an important one. But in West Bengal, farmers are to be informed more

about the agro-insurance. They need help from Govt.Organisations and Non-Govt.

Organizations to know more about insurance and its impact on their livelihood.


72/74

Basic result of agro-insurance information collection is not satisfactory from my

part. Basically the farmers of Barrackpore Block-1 do not participate in the awareness

programmes of these agro insurances though it is very frequently found that crops of

huge quantity are damaged in those fields where they cultivate these crops. Actually they

are not informed about the matter due to lack of marketing effort from the part of the

insurance Companies. On the basis of the questions of my questionnaire, interview of ten

farmers have been taken and it is found that the maximum farmers are not aware of the

prevailing agro-insurance facilities in the rural market though they really need it.


73/74

Sl. No. Name of the Books Authors

1.Performance of Agriculture Insurance

schemes in India

V.B. Bhise, S.S. Ambhore, and

S.H. Jagdale

2.Indian Agricultural Commodity

Futures Markets A Performance Survey,

EPW, Vol. XXXVII, No. 30, July

Gopal Naik and Sudhir Kumar Jain

(2002)


74/74

27 August 2.

3.Farmers Distress Proof Beyond

Question, EPW, Vol. XL, Nos. 44 and 45,

November 4

R.S. Deshpande and Nagesh

Prabhu (2005)

4.

Farmers suicides in Maharashtra, EPW Vol.

XLI, No. 16,

April 22-28

Srijit Mishra (2006)

5.Analysis of farmer, EPW, Suicides in

Kerala, Vol. XLI, No. 16,m April 22-28

S. Mohankumar and R.K. Sharma

(2006)

6.

Political Economy of Agrarian Distress, EPW,

Vol. XLI, No. 16,

April 22-28

K.C. Suri (2006)

7.

Agriculture Insurance in India: Scope for

Participation of

Private Insurance, EPW, Vol. XXXIX, No.

25, June 19-25

Siddharth Sinha (2006)

8.Disaster Management Act, 2005

A Disaster in Waiting? EPW, Vol. XLI, No.

35, September 2-8

Subrahdipta Sarkar and Archana

Sarma (2006)

9.Crop Insurance in India Scope for

Improvement, EPW, Vol. XLI, No. 4 & 5,November 4-10

Vyas., V.S. and Singh Surjit

(2006)

10. The Chartered Accountant, vol. 54, Feb 2006

11. Fundamental of Risk and InsuranceVaughan &Vaughan (Wiley India

Ed.)

12. Agriculture in Economic DevelopmentRabindranath Ghosh (Vikash

Publishing House Pvt. Ltd)

13 Th E i Th f A i I i i P b B dh (O f d)

agro project

Documents