Why Social Protection?
Excess rains and floods in Kerala, deficit rainfall in eastern and north-eastern India, and associated large-scale crop losses have again highlighted the need for providing social protection to poor farmers.
- A highly subsidised Pradhan Mantri Fasal Bima Yojana(PMFBY) was launched in 2016 to provide insurance to farmers from all risks.
- Aiming to reduce basis risk and premium burden of the farmers, the scheme’s total expenses today are almost ₹30,000 crore.
- In comparison to earlier schemes, the PMFBY is more farmer friendly, with sums insured being closer to the cost of production.
- The scheme’s linkage with parallel programmes like the ‘Jan Dhan Yojana’ and ‘Digital India’ makes it a truly inclusive and welfare-based scheme.
- The scheme therefore led to increased coverage of 5.7 crore farmers in 2016 and the sum insured crossed ₹200,000 crore. However, notwithstanding its ambition and intent, the scheme since its operation has been scrutinised more for its misses than its hits.
Problems in the scheme:
- Outmoded method of crop loss assessment
- Inadequate and delayed claim payment
- High premium rates
- Poor execution
Consequently, in 2017, the expansive coverage of the scheme suffered some setback as seen in a drop of nearly one crore farmers in enrolment (about 17%). Such shortcomings inspired recent announcements such as that of Bihar to start its own scheme, the “Bihar Rajya Fasal Sahayata Yojna”.
Suggestions to make scheme more effective:
In order to make the PMFBY a sustained developmental action for a comprehensive climate risk protection for every Indian farmer, the following action points are suggested:
- Faster and appropriate claim settlement: The weakness of the PMFBY is the methodology deployed for crop loss assessment: the crop cutting experiments (CCEs).
- Crop Cutting Experiments: are periodic exercises conducted nationwide every season to determine crop yields of major crops. Sample villages are chosen through scientifically designed surveys, and crops are physically harvested to determine yields.
- Improvement in the efficacy of the PMFBY: technology use must be intensified. With options available today, such as detailed weather data, remote sensing, modelling and big data analytics, the exercise of monitoring crop growth and productivity can be not only more accurate and efficient but also resource saving. Hybrid indices, which integrate all relevant technologies into a single indicator, are good ways to determine crop losses.
- Creation of an online portal: the whole process of monitoring can be made accessible and transparent to farmers, policy-makers and insuring agencies alike through an online portal.
- Universal and free coverage for all smallholders: Farmers’ awareness about the scheme and crop insurance literacy remain low in most States, especially among smallholders in climatically challenged areas in most need of insurance. To increase insurance coverage a system should be thought of whereby every farmer automatically gets insured by the state.
- Improved and transparent insurance scheme design: Insurance companies are supposed to calculate actuarial rates, and based on tenders, the company quoting the lowest rate is awarded the contract. Science has the capacity today to characterise risks and reconstruct reasonably long-time series of yields. The premium rates, and hence subsidy load on the government, can come down significantly if we make greater use of such proxies and appropriate sum insured levels.
- If a comprehensive social protection scheme is implemented, there would be opportunities for further rationalisation of subsidies.
- The government today spends more than Rs. 50,000 crore annually on various climate risk management schemes in agriculture, including insurance.
- This includes drought relief, disaster response funds, and various other subsidies. Climate-risk triggered farm-loan waivers are an additional expense.
- All these resources can be better utilised to propel farm growth. Reinvigorating the crop insurance scheme will provide better social protection to every farmer.