Is it out of favour?

Down to Earth - - FRONT PAGE - BANJOT KAUR

LEELADHAR SINGH, a farmer from Mad­hya Pradesh’s Hoshangabad dis­trict, is los­ing pa­tience. Since 2016, when­ever he ap­plies for crop loan, the bank deducts a part of the amount as pre­mium for the Prad­han Mantri Fasal Bima Yo­jana (pmfby) be­fore dis­burs­ing it. “They say the manda­tory pro­vi­sion would in­sure me against crop losses. I have not re­ceived any money de­spite fac­ing losses in the past four suc­ces­sive crop­ping sea­sons,” he says.

Un­der pmfby, launched in April 2016, the gov­ern­ment ap­points an in­sur­ance com­pany, se­lected through bid­ding, to in­sure farm­ers in a clus­ter of dis­tricts against crop losses due to weather events, pest at­tacks or fire. The in­surer charges the pre­mium on

an ac­tu­ar­ial rate (an es­ti­mate of the ex­pected value of fu­ture loss). Farm­ers un­der pmfby pay a fixed 2 per cent of the sum in­sured for kharif crops and 1.5 per cent for rabi crops. The difference be­tween the ac­tu­ar­ial pre­mium rate and the rate of in­sur­ance payable by farm­ers is shared equally by the state and Union gov­ern­ments (see ‘Has crop in­sur­ance worked for the farm­ers’, Down To Earth, 1-15 Au­gust, 2017). Singh says he has to shell out al­most `6,000 ev­ery crop sea­son as

pmfby pre­mium. “Given an op­tion, I would like to opt out of it,” he adds.

Far away from Hoshangabad, Chama­rasa Mali Patil, a non-lonee farmer and pres­i­dent of the Kar­nataka State Farm­ers’ As­so­ci­a­tion, has al­ready stopped sub­scrib­ing to the scheme. “I was ex­cited when I heard about it and in­vested `6,000 as pre­mium in kharif 2016. A pro­longed dry sea­son ru­ined my gram and bar­ley crops. My claims are yet to be hon­oured,” he says.

A gov­ern­ment reply in Lok Sabha in March 2018 shows the num­ber of farm­ers un­der pmfby, both loa­nee and non-loa­nee, has sig­nif­i­cantly re­duced over the past years (see ‘Few tak­ers’). The num­ber of loa­nee farm­ers, who ac­count for over 70 per cent of those un­der pmfby since the in­sur­ance is a pre­req­ui­site for crop loans, has dropped by 20 per cent. The gov­ern­ment has a plau­si­ble rea­son for it. Ac­cord­ing to the Re­serve Bank of In­dia, agri­cul­tural credit saw less growth (3.8 per cent) in 2017-18 in com­par­i­son to 12.4 per cent in 2016-17. This brought down the num­ber of farm­ers un­der pmfby.

What’s wor­ry­ing is non-loa­nee farm­ers who had vol­un­tar­ily joined the scheme are opt­ing out of it—and there are some 0.8 mil­lion such farm­ers like Patil. Pr­erna Ter­way, a re­searcher with the In­dian Coun­cil for Re­search on In­ter­na­tional Eco­nomic Re­la­tions

(icrier), New Delhi, says, “The as­sess­ment of suc­cess of such a scheme de­pends on how many non-loa­nee farm­ers are in­ter­ested. Their num­bers go­ing down does not bode well for pmfby.”

As the scheme en­ters its third year, the gov­ern­ment is wor­ried about its am­bi­tious tar­get of cov­er­ing 50 per cent of the gross cropped area by March 2019. The ex­tent of in­sured farms has re­duced in last two years and only 30 per cent area is now cov­ered un­der pmfby (see ‘Tar­get missed?’).

So, where lies the prob­lem?

An­a­lysts say de­lay in pro­cess­ing of claims is the rea­son pmfby is los­ing favour with farm­ers. So far, in­sur­ance com­pa­nies have set­tled only 45 per cent of the pmfby claims made over the last three crop sea­sons. In May, dur­ing the meet­ing of the scheme’s Na­tional Level Mon­i­tor­ing Com­mit­tee, the gov­ern­ment ad­mit­ted that in the first year claim set­tle­ments were de­layed by over seven months. This has been re­duced to two months in the sec­ond year.

The de­lay is at­trib­uted to prob­lems as­so­ci­ated with the core mech­a­nism in­volved in claim set­tle­ment—the crop cut­ting ex­per­i­ment (cce). Ev­ery crop sea­son, a team of of­fi­cials from the state agri­cul­ture depart­ment and lo­cal in­sur­ance com­pany vis­its four ran­domly se­lected fields in a vil­lage to as­sess crop loss. Us­ing sam­pling method, they iden­tify small ar­eas on the fields and har­vest the pro­duce to as­cer­tain yield of the sea­son. This is cce. The state shares the crop yield data with the in­surer, which then de­cides the ex­tent of crop dam­age and the claim amount. Go­ing by pmfby guide­lines, in­sur­ance com­pa­nies are bound to set­tle the claims within three weeks of re­ceiv­ing the yield data. But a work­ing pa­per by icrier, pub­lished in Fe­bru­ary 2018, shows the gov­ern­ment in 2016-17 con­ducted 0.92 mil­lion cces against the need of 3 mil­lion. Be­sides, hardly any in­vest­ments have been made to make cces re­li­able and timely. A se­nior of­fi­cial at Agri­cul­ture In­sur­ance Com­pany of In­dia Ltd (aic), says,

“States do not have hu­man­power even to con­duct half of the tar­geted cces.” The May 2018 re­port of the Union agri­cul­ture min­istry shows most states de­layed send­ing the yield data for kharif 2017 by three months while states like Jhark­hand, West Ben­gal and Gu­jarat didn’t pro­vide any data.

The way of­fi­cials con­duct cce has been an­other bone of con­tention.

pmfby guide­lines say of­fi­cials must use mo­bile-based tech­nol­ogy with gps stamp­ing to im­prove trans­parency and qual­ity of cces. But a few states— Ma­ha­rash­tra, Gu­jarat, Kar­nataka, Odisha, Tamil Nadu, Te­lan­gana and Chhattisgarh—have done, on a caseto-case ba­sis. Most states do not have the re­quired num­ber of smart phones.

Once trans­parency is ques­tioned, the cred­i­bil­ity of cce data comes un­der fire. In early July, hun­dreds of farm­ers from Ma­harsh­tra’s Parb­hani dis­tricts trooped down to Delhi and sub­mit­ted a mem­o­ran­dum to Union agri­cul­ture min­is­ter Radha Mo­han Singh. They al­lege Reliance Gen­eral In­sur­ance

(rgi), which is the in­surer for the re­gion, in­ter­fered in cces to see to it that the yield is de­clared very high so that it pays less com­pen­sa­tion. The com­pany does not have an of­fice in the dis­trict and has not ap­pointed a no­ti­fied loss as­ses­sor at taluk level, as re­quired un­der pmfby. Though 11,000 farm­ers sub­mit­ted pre­mium un­der the scheme in kharif 2017, thou­sands of them did not fea­ture in the ben­e­fi­ciary list and did not get com­pen­sa­tion. De­spite this, rgi has not con­ducted a griev­ance re­dres­sal, manda­tory un­der

pmfby, they al­lege. rgi of­fi­cials did not re­spond to Down To Earth queries.

Ex­pen­sive for gov­ern­ment?

States also do not ap­pear to be as sup­port­ive of the scheme as they are ex­pected to be. To be­gin with, sev­eral states are not reg­u­lar in pay­ing their share of pre­mium cit­ing heavy fi­nan­cial load (see ‘States re­luc­tant...’). This means non-ini­ti­a­tion of the in­sur­ance process as the Cen­tre pays its share only af­ter the states have paid. Ac­cord­ing to the

icrier work­ing pa­per, high cost of ac­tu­ar­ial pre­mium could be a ma­jor hur­dle for pmfby. It ac­counts for nearly one-third of the bud­get of the Depart­ment of Agri­cul­ture Co­op­er­a­tion and Farm­ers Wel­fare un­der the Union gov­ern­ment. Many states say the pre­mium ac­counts up to 40 per cent of their an­nual agri­cul­ture bud­get. Though it was ex­pected that the in­crease in in­sured ar­eas would re­duce the pre­mium rate, the pre­mium rates have in­creased from 11.6 per cent of in kharif 2015 to 12.5 per cent in kharif 2016. Now, with less area un­der cov­er­age it might in­crease fur­ther.

The pre­mium rates are spi­ralling due to two rea­sons. First is un­timely no­ti­fi­ca­tion by states for bid­ding by in­sur­ance com­pa­nies. pmfby guide­lines say the no­ti­fi­ca­tion must be is­sued at least a month in ad­vance. But this has not been the case. For in­stance, only six states had is­sued bid­ding no­ti­fi­ca­tion till June 13 for this year’s kharif sea­son that starts in July. Ex­pe­ri­ence shows such de­lay means a higher ac­tu­ar­ial pre­mium rate.

This leads to the sec­ond rea­son. The in­sur­ance busi­ness has changed fun­da­men­tally. “Most com­pa­nies now trans­fer their risk to re-in­sur­ance firms. Un­timely no­ti­fi­ca­tion and de­layed sub­sidy pay­ments do not in­spire con­fi­dence in them, and they quote very high pre­mium rates,” says the se­nior aic of­fi­cial. He of­fers a so­lu­tion: In­stead of bid­ding ev­ery crop sea­son, it should be done once in three years so that in­sur­ance firms gain con­fi­dence to cre­ate in­fras­truc­ture down to the level of vil­lage.


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