Ramaswami,
a farmer of Burugupally village in Mahbubnagar district
of Andhra Pradesh, has been paying the premium for crop
insurance every year for ten years now. His crop has
failed completely twice in this period, and failed substantially
more than three times. This year as well, he can point
to the acres of dry and useless maize plants on his
fields, destroyed by the late rains and prolonged dry
spells of this monsoon. He estimates that he is unlikely
to receive even ten per cent of the output he had anticipated.
Yet
he has never received any insurance compensation at
all for the repeated crop failures, and even this year
he is unlikely to receive any benefit in return for
the hefty insurance premium that he has paid so regularly.
And what is the reason? The average crop output is his
mandal has not fallen below 60 per cent of the average
of the past four years, and so he is not deemed to be
eligible for compensation. This is so even though the
mandal and the district as a whole have been declared
as drought-affected areas.
Ramaswami is frustrated and cynical about crop insurance,
and given a choice he would certainly avoid paying the
premium again. But he has no choice. In order to get
a crop loan from a commercial bank, he must necessarily
take on the insurance as well. The premium can be high
- it ranges from 2 per cent to 7 per cent depending
upon the crop. The premium is typically taken by the
bank as an additional loan, on which interest is charged;
or in some cases the amount is even compulsorily ''pre-paid'',
that is deducted from the amount transferred as loan
to the farmer.
The entire system of crop insurance in rural India is
bizarre in the extreme. The farmer is not compensated
for individual crop loss, but has to be treated as one
of the entire group in the area, and the unit for calculation
is taken to be the mandal (or block in other states).
There is wide variation in soil types, cultivation conditions
and even rainfall within mandals, and so the average
disguises a large range of crop output. Some farmers
may lose their entire crop even when the average for
the mandal is normal.
In these circumstances, linking compensation payments
to the average crop performance of the mandal is extremely
unfair. It is akin to linking payments of life insurance
claims to the average death rate in a particular area,
rather than the death of the individual who has taken
out the policy.
What explains this extraordinary system, which adds
to the burden on farmers without providing any compensation
to so many genuine cases? The answer lies in the way
in which the system of crop insurance was introduced,
and the inflexible manner in which it is currently being
pursued.
Some well-meaning policy-makers at the Centre decided
some years ago that anyone taking a crop loan from an
institutional source should also take on crop insurance.
And so the public insurance companies were instructed
to provide crop insurance - which could be linked to
the loans - to farmers. This was an excellent idea,
except that the insurance companies were not provided
with the additional staff that is necessary to supervise
and implement the provision of crop loans. In fact,
they were encouraged instead to ''downsize'' and reduce
staff in order to cut costs, even when serving rural
areas.
As a consequence, because of shortage of staff, the
public insurance companies are simply not in a position
to undertake the examination of fields which would be
required to provide an individual insurance policy and
deal with individual claims along the lines of other
insurance products. So they have fallen back on a system
of averages, and that too, of a relatively large area,
and linked individual payments to the average performance
of the area.
Because of the requirements of assessing the potential
and the crop-cutting experiments required to assess
the actual yield in any given year, the insurance companies
are even reluctant to bring the assessment unit down
to the individual village, since that would increase
costs.
What makes matters worse in some areas is that in many
parts of rural India, rainfall conditions over the past
few years have been well below historical norms. In
western Rayalaseema region of Andhra Pradesh, for example,
as in northern Telengana, the past five years have received
rainfall which is around 15-20 per cent below the historical
(for the past fifty years) average. These regions are
already low rainfall areas, with only between 500-600
mm per year, and so even small reductions in the average
can have very damaging effects.
The past few years have been exceptionally poor in rain
in these areas, and therefore also have been associated
with much worse output. To take this low performance
as the reference period is to make the conditions for
compensation for farmers even more onerous.
The
crop insurance has therefore become no more than a loan
insurance, which insures the lenders at the cost of
the farmers who have to pay the premium. The unfair
system, which is in sharp contrast to the other schemes
of insurance available in other sectors and for individuals,
provides yet another example of how so many systems
in our economy are weighted against cultivators. |
