How Union budget can aim to double farm income by 2022

New Delhi: In one of its first decisions after taking office on 30 May, the National Democratic Alliance (NDA) government extended its income support scheme for all farmers, regardless of the size of their landholding. Fulfilling this election promise will cost an estimated ₹90,000 crore every year.

With the Union budget coming up on 5 July, attention has turned to another election promise: Short-term new agriculture loans of up to ₹1 lakh at 0% interest rate for one to five years. This is on the condition of prompt repayment of the principal amount.

The Pradhan Mantri Kisan Samman Nidhi income support scheme was first announced by the NDA government in the interim budget in February. It provisioned for the disbursement of ₹6,000 a year in three equal instalments to an estimated 125 million small and marginal farmers holding up to 2 hectares. The announcement came on the back of farmers’ protests in 2017 due to the collapse of wholesale crop prices. Rural distress was seen as the reason for a string of defeats faced by the Bharatiya Janata Party (BJP) in the November assembly elections. This is despite programmes like approval for 100% FDI in food processing, completion of pending irrigation projects, extension of a crop insurance scheme and the distribution of a soil health card in the NDA’s first term in office.

The income support scheme is seen as a major step to boost the agricultural sector, which has been stressed over the past many years. “This is a good beginning made to revive the rural economy. Recognizing that there is a problem is a start,” said Himanshu, associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi.

“The track record of this government on investment in the agriculture sector has not been good. Investment in real terms has declined. There has to be a commitment by the government to invest—either in research and development or in agricultural markets,” he said.

A boost to the agriculture sector is crucial to double farm incomes by 2022—a stated goal of the BJP—and catapult India into the $5 trillion economy bracket by 2024. “Only on the foundation of a strong rural economy, it is possible to build a strong national economy,” said President Ram Nath Kovind in his address to both Houses of Parliament on 20 June. “Our farmers are the pillars of the rural economy. All possible efforts are being made by the central government to provide adequate assistance to the states for agricultural development,” he said, adding the government plans to enhance agriculture productivity with an investment of ₹25 trillion in the coming years.

That many sections of the President’s speech were focused on the rural sector can be taken as a pointer that Union finance minister Nirmala Sitharaman’s budget would have a strong pro-rural accent.

New steps that have been planned include storage facilities to farmers near villages through the Gramin Bhandaran Yojana to ensure wastage is minimized. To conserve water and address irrigation-related problems—given that a majority of farmers in India are reliant on monsoon rains—the government has constituted a new Jal Shakti ministry. There are also plans to increase farmer incomes through marine and inland fisheries. A special fund has been created to develop a fishery industry-related infrastructure. To encourage self-employment in rural areas, opportunities are being made available to rural women with loans amounting to more than ₹2 trillion disbursed to 30 million women in rural areas.

“There has to be a holistic approach to stimulate the rural sector. Agriculture is not the primary driver of the economy in terms of GDP,” said Himanshu.

“The stimulus should contain elements that will stimulate the whole rural ecosystem—rural employment, rural construction of roads and houses. This is what will revive the rural economy and this is the direction the finance minister will hopefully take in the budget,” he said.

source: Livemint
Link:https://www.livemint.com/

Krishi Kiosk launched

Haryana Agriculture and Farmers’ Welfare Minister, Om Prakash Dhankar on Friday launched Krishi Kiosk at Panchkula near here to start Digital Kisan Suvidha for facilitating the farmers.

Through this Kiosk, the farmers will not only be able to get information about the schemes of the Department, but the formalities related to claims  to Pradhan Mantri Fasal Bima Yojana can also be completed, Dhankar said.

He said that this Kiosk has been connected with the Deputy Commissioners’ offices in all the 22 districts of the state and a telephone facility has also been made available in Kiosk so that the farmers could give information through telephone to the State Headquarters.The Agriculture Minister also flagged off the ‘Suchana Rath’ facility.

He said that through this Suchana Rath, farmers will be encouraged not to burn the crop residues rather sow it in the field through scientific method.

He called upon the farmers’ to clean the environment by not burning crop residue and adopt agricultural equipment being provided by the government at 50 per cent subsidy.

Dhankar said that the government has created the Kisan Haryana App to benefit the farmers under the Digital Plan. Farmers can get information of all schemes through this app. On this occasion, he also released book entitled Agri Scope.

He said that the students can play a role of the most effective messenger, so it has been decided to include students in this campaign. For this, painting competition will be organised for class level from class V to VIII and painting, slogan, poetry writing and speech competition for students from Class VIII to ten plus two. Students bagging first place will be given Rs 500 and Seed Pencil will be given to other children to encourage them in preserving the environment.

He said that the Department has put tulsi seed in this seed pencil.

The Minister further said that for publicity purposes, 22 vehicles will be run in all districts of the state from July onwards. Apart from this, one Suchana Rath each would be flagged off at the cluster level in Sirsa, Gurugram and Panchkula, through which farmers will be made aware about the schemes. These vehicles will move around the state throughout the year and will provide information about crop residual management along with information related to the Pradhan Mantri Fasal Bima Yojana, Bhawantar Bharpayee Yojana, Jal Jeevan Yojna and other schemes of the Department.

The Agriculture Minister also said that due to air pollution, we have to face double challenges. On one hand, most of the wild animals are dying with poisonous gas whereas on the other hand, farmers are also reducing the fertility of the land by burning crop residue in fields.

He added that at present, social media is also an effective medium of publicity and through Facebook and Instagram, the information of the schemes and the challenges of the agriculture sector will be available to the people of the region.

source: daily pioneer
Link:https://www.dailypioneer.com/2019/state-editions/krishi-kiosk-launched.html

Submit applications to get subsidy on farm machinery by June 30

Ludhiana: To ensure that farmers do not pollute the environment by burning the paddy straw, the agriculture and farmers’ welfare department, Punjab, has started a scheme where subsidy will be given to farmers on farm machinery used for managing paddy straw.
While providing information, Dr Baldev Singh, Chief Agriculture Officer (CAO), Ludhiana, said like last year, this year also, subsidy on farm machinery would be given to farmers of the Ludhiana district under the in-situ management of crop residue scheme.

He said: “The machinery will be used for managing the paddy straw so that farmers do not burn it, which leads to pollution.”
He said under the scheme, farmers would be given 50 per cent subsidy for purchasing happy seeder, paddy straw chopper, multure, hydraulic reversible MB Plant, zero till drill, super SMS rotary slasher or shrub cutter.
“Applications for subsidy on the machinery can be submitted at the block agriculture offices by June 30, 2019, and no application will be entertained after this date,” he said.
Dr Baldev Singh clarified that if the applications received were more than the target, then the farm machinery would be distributed to farmers through draw of lots.
He said subsidy would be given only on the machinery manufactured by the companies approved by the agriculture department of the Union government.
He said under this scheme, there was a provision of 80 per cent subsidy for the registered farmers’ groups for opening custom hiring centres so that machinery could be used on rent.
He said for more information on the scheme, people could visit the website www.agripb.gov.in or www.agrimachinery.nic.in or visit any agriculture offices in the block.

source: Timesofindia
Link:https://timesofindia.indiatimes.com/city/ludhiana/submit-applications-to-get-subsidy-on-farm-machinery-by-june-30/articleshow/69849562.cms

Submit applications to get subsidy on farm machinery by June 30

Ludhiana: To ensure that farmers do not pollute the environment by burning the paddy straw, the agriculture and farmers’ welfare department, Punjab, has started a scheme where subsidy will be given to farmers on farm machinery used for managing paddy straw.
While providing information, Dr Baldev Singh, Chief Agriculture Officer (CAO), Ludhiana, said like last year, this year also, subsidy on farm machinery would be given to farmers of the Ludhiana district under the in-situ management of crop residue scheme.

He said: “The machinery will be used for managing the paddy straw so that farmers do not burn it, which leads to pollution.”
He said under the scheme, farmers would be given 50 per cent subsidy for purchasing happy seeder, paddy straw chopper, multure, hydraulic reversible MB Plant, zero till drill, super SMS rotary slasher or shrub cutter.
“Applications for subsidy on the machinery can be submitted at the block agriculture offices by June 30, 2019, and no application will be entertained after this date,” he said.
Dr Baldev Singh clarified that if the applications received were more than the target, then the farm machinery would be distributed to farmers through draw of lots.
He said subsidy would be given only on the machinery manufactured by the companies approved by the agriculture department of the Union government.
He said under this scheme, there was a provision of 80 per cent subsidy for the registered farmers’ groups for opening custom hiring centres so that machinery could be used on rent.
He said for more information on the scheme, people could visit the website www.agripb.gov.in or www.agrimachinery.nic.in or visit any agriculture offices in the block.

source: timesofindia
Link: https://timesofindia.indiatimes.com/city/ludhiana/submit-applications-to-get-subsidy-on-farm-machinery-by-june-30/articleshow/69849562.cms

Odisha allocates additional Rs 3,234 crore for Kalia scheme

Odisha government has allocated an additional Rs 3,234 crore for covering more farmers under the Kalia scheme during 2019-20, officials said on Friday.

Under the Krushak Assistance for Livelihood and Income Augmentation (Kalia) scheme, farmers get Rs 5,000 financial assistance per crop. A farm household is entitled to get Rs 10,000 per year for two crops (Kharif and Rabi), they said.

According to a notification issued by the Agriculture and Farmers Empowerment department, in accordance with the state Cabinet’s decision on May 29 to include 32.34 lakh additional beneficiaries under the scheme, more funds is being made available to ensure that all eligible beneficiaries get benefit.

“It has been now been decided that a further additional 32.34 lakh small farmers/marginal farmers/actual cultivators (share croppers)/ landless agricultural households be included in the Kalia scheme during 2019-20, apart from the farm families already assisted in 2018-19, so that no one who is eligible will be left out,” the notification said.

Out of a total of 75 lakh farm families to be included in the Kalia scheme, 50 lakh will be small and marginal farmers and sharecroppers while the remaining 25 lakh will be landless agricultural households.

This can be modified between the categories by the state government subject to the overall target under these two components of 75 lakh farm families, it said adding that the funds required for 2019-20 is estimated to be Rs 3,234 crore excluding the administrative cost, for 32.34 lakh farmers/landless agricultural households.

Earlier, the state government has made provision of Rs 10,000 crore for implementation of the Kalia scheme. Now after inclusion of more farmers, the total funds requirement for the scheme would be around Rs 13,234 crore for the 2019-20 fiscal.

source: Business-standard
Link: https://www.business-standard.com/article/pti-stories/odisha-allocates-additional-rs-3-234-crore-for-kalia-scheme-119060701025_1.html

Double farm incomes by investments, not subsidies

WTO scrutiny will prevent a big hike in farm subsidies by govt, but fixing markets is a far more efficient solution anyway.

If anyone thought the government could double farmers’ income by 2022—a Narendra Modi promise—by a sharp hike in farm subsidies or in PM Kisan-type income transfer schemes, they just need to look at the global reaction to the government’s plan to spend Rs 25 lakh crore on agriculture and rural development to know this is impossible. As FE reported a few days ago, after the government announced its Rs 25-lakh-cr plan, a host of countries have begun asking whether or not this will affect India’s WTO commitments that put a cap on how much farm support the government can give. Since the WTO principle is that government policy shouldn’t distort export markets, the US has, for instance, asked what step India is taking to ensure its large wheat stocks won’t distort global markets. Thanks to the high MSPs fixed by the government, FCI accumulates stocks far in excess of what is needed and, in order to clear them, FCI usually sells them at a discount later; to the extent the stock is bought by traders who export it, this gets counted as distorting export markets through subsidies. Right now, India has breached WTO norms of 10% subsidy/support in crops like wheat and rice. It is true, as Icrier professors Anwarul Hoda and Ashok Gulati point out, that the WTO is not taking into account inflation since the agreement was signed—once this is done, India’s support levels fall dramatically, from 26%, in the case of rice, to 2.9% (bit.ly/2XiVNgL), but till the WTO accepts India’s interpretation, the argument is moot.

Fortunately, increasing subsidies—such as those on MSP-based procurement—is not the only way to boost farmer income, and that is why Modi’s Rs 25 lakh crore plan can coexist with India’s WTO commitments. Public capital formation in agriculture fell from 3.9% of agri-GDP in 1980-81 to 2.2% in 2014-15, before recovering a bit to 2.6% in 2015-16 while, at the same time, input subsidies rose from 2.8% to 8%. So, if Modi were to switch expenditure from subsidies towards investment, that would help raise farmer incomes while not affecting the WTO equation. According to Gulati, every rupee spent on agricultural R&D adds Rs 11.2 to agriculture GDP while the same amount spent on roads adds a much smaller Rs 1.1; and just 88 paise gets added if the money is spent on fertiliser subsidy. That means if the government spends on R&D and on roads instead of on various input subsidies, doubling farmers’ income while staying WTO-compliant will not prove difficult since such spending is in the ‘GreenBox’. And while India hardly has much of a government R&D budget, a friendly policy towards seedtech firms like Monsanto, as opposed to today’s outright hostility, would boost productivity without any extra government investment.RELATED NEWS

And, according to an ICRIER-OECD study on agricultural policies in India, by not allowing farmers to get global prices, India taxed its farmers by 14% (of gross farm receipts) for the years 2000-01 to 2016-17. For the entire period, that means farmers lost Rs 45 lakh crore (at 2017-18 prices), or around Rs 2.6 lakh crore per year. While this is why Modi has been trying to push the pan-India electronic or eNAM market, it has not been successful; but were a successful attempt to be made, farmers can get 10-14% more income right away. The other advantage of supporting farmers the smart way is that if, for instance, subsidies aren’t given on water and electricity—and MSP not used to dictate what farmers grow—this will also ensure farmers don’t grow the wrong crop; as a result, with less damage to the soil, overall productivity will rise. Agriculture reform is a big agenda item for the government, and, if is done right, the impact on farmers and the economy will be huge.

Centre plans to invest ₹25 lakh crore to boost agricultural productivity: Ram Nath Kovind

Full attendance: President Ram Nath Kovind, Prime Minister Narendra Modi, Vice-President Venkaiah Naidu, Lok Sabha Speaker Om Birla and others on their way to the central hall of Parliament for the joint sitting.

Full attendance: President Ram Nath Kovind, Prime Minister Narendra Modi, Vice-President Venkaiah Naidu, Lok Sabha Speaker Om Birla and others on their way to the central hall of Parliament for the joint sitting.   | Photo Credit: Sandeep Saxena

Addressing the joint sitting of both Houses of Parliament, the President said that a committee of Chief Ministers was being set up to look into structural reforms in the field of agriculture.

The Centre plans to invest ₹25 lakh crore in the farm sector in the coming years to boost agricultural productivity, President Ram Nath Kovind said on Thursday.

Addressing the joint sitting of both Houses of Parliament, the President said that a committee of Chief Ministers was being set up to look into structural reforms in the field of agriculture. With regards to drought-hit areas, Mr. Kovind said the government was aware of the crisis and was assisting farmers and tackling drinking water shortages with the support of State governments and village sarpanchs.ALSO READPresident Ram Nath Kovind terms simultaneous polls ‘development oriented’

Listing the BJP-led government’s decisions in its first 21 days, the President began by highlighting the expansion of the Pradhan Mantri Kisan Samman Nidhi, an income support scheme, to all landowning farm families. Earlier, the scheme was only open to small and marginal farm families owning less than two hectares of land. The expansion of the scheme in keeping with a BJP poll promise would increase its annual budget to ₹90,000 crore (from the previous ₹72,000 crore estimate), said Mr. Kovind, adding that ₹12,000 crore had already been disbursed in the past three months.

Other initiatives include the contributory pension scheme for farmers above the age of 60, a ₹13,000-crore scheme to fund treatment of common diseases in cattle, the Grameen Bhandaran Yojana to provide village-level storage facilities for farm produce and the plan to create 10,000 new farmer producer organisations. A new department for fisheries development is expected to usher in a new blue revolution, the President said.

With regard to higher education, the President said the government was “striving to increase the number of seats in the country’s Higher Education System by one-and-a-half times by 2024.” This would create two crore additional seats, he said.

source: Thehindu
Link:https://www.thehindu.com/news/national/kovind-delves-into-agri-schemes/article28089368.ece

Odisha allocates additional Rs 3,234 crore for Kalia scheme

Odisha government has allocated an additional Rs 3,234 crore for covering more farmers under the Kalia scheme during 2019-20, officials said on Friday.

Under the Krushak Assistance for Livelihood and Income Augmentation (Kalia) scheme, farmers get Rs 5,000 financial assistance per crop. A farm household is entitled to get Rs 10,000 per year for two crops (Kharif and Rabi), they said.

According to a notification issued by the Agriculture and Farmers Empowerment department, in accordance with the state Cabinet’s decision on May 29 to include 32.34 lakh additional beneficiaries under the scheme, more funds is being made available to ensure that all eligible beneficiaries get benefit.

“It has been now been decided that a further additional 32.34 lakh small farmers/marginal farmers/actual cultivators (share croppers)/ landless agricultural households be included in the Kalia scheme during 2019-20, apart from the farm families already assisted in 2018-19, so that no one who is eligible will be left out,” the notification said.

Out of a total of 75 lakh farm families to be included in the Kalia scheme, 50 lakh will be small and marginal farmers and sharecroppers while the remaining 25 lakh will be landless agricultural households.

This can be modified between the categories by the state government subject to the overall target under these two components of 75 lakh farm families, it said adding that the funds required for 2019-20 is estimated to be Rs 3,234 crore excluding the administrative cost, for 32.34 lakh farmers/landless agricultural households.

Earlier, the state government has made provision of Rs 10,000 crore for implementation of the Kalia scheme. Now after inclusion of more farmers, the total funds requirement for the scheme would be around Rs 13,234 crore for the 2019-20 fiscal.

source: business-standard
Link:https://www.business-standard.com/article/pti-stories/odisha-allocates-additional-rs-3-234-crore-for-kalia-scheme-119060701025_1.html

Farmer suicides decline by 45% in Karnataka

Image used for representational purpose

BENGALURU: In a major relief to the state government — which has spent most of its first year warding off daily political dangers — the number of farmer suicides in Karnataka has dipped by 45% for year ending March 31, even as one farmer killed himself every 12 hours on average.
In 2018-19, 572 farmer suicides have been accepted as those relating to agriculture, while another 128 are under review. In 2017-18, there were 1,050 accepted cases, which is 45.5% more than the 572. Now, if the 128 cases too are considered as farmer suicides taking the total number to 700, the decline would still be 33%.

Initially, all the reports of farmer suicides as claimed by families are counted. Then a committee examines whether they are farm-related or not. Only those deaths caused by agricultural issues are finally accepted.
“The decline shows farmers are gaining confidence… although we have several initiatives, I can’t claim sole credit; I’d be happy if there was no suicide. Government has taken farmers into confidence while forming programmes,” chief minister HD Kumaraswamy told TOI.
Promise and hope
Farmer leaders, however, say while there has been some revival of hope, there is a lot that’s desired on ground. “The waiver is yet to reach everybody, and there’s nothing done about the sugarcane issue. But there’s some hope after the CM himself took on the banks, we hope he fulfils the promises,” said KS Sudheer Kumar, Mandya district president, Karnataka Rajya Raitha Sangha.
Claiming the government sincerely tried to boost farmers’ morale, Kumaraswamy said the crop loan waiver — 15.5 lakh farmers have benefited so far — was only one such initiative.
Prof MG Chandrakanth, director, Institute for Social and Economic Change (Isec), said: “There are two issues: One, the government must have long-term strategies that include marketplace intervention. There must be a direct link between buyers and sellers. Two, farmers must not over-depend on field crops and must embrace integrated farming and even look at millets that are changing the game.”
Cauvery belt most hit
Overall, 3,737 farmers committed suicide in Karnataka in four years between 2015-16 and 2018-19, which means more than two farmers killed themselves every day.
A region-wise analysis of these deaths shows the five districts in the Cauvery belt — Mandya, Mysuru, Hassan, Chamarajanagar and Ramanagara — are the worst affected collectively. While they make up only 16% of the districts in the state, they account for 24% of the suicides.TOP COMMENTUNDOUBTEDLY, THE CREDIT MUST GO TO THE BRILLIANT CHIEF MINISTER OF KARNATAKA, WITHOUT ANY CORRUPTION ISSUES HE IS HANDLING THE ADMINISTRATION OF STATE SO EFFECTIVELY, HATS OFF KUMARASWAMY… GREAT AND BRILLIANT…William IndiaSEE ALL COMMENTSADD COMMENT
Comparatively, six districts in the Mumbai-Karnataka region — Belagavi, Vijayapura, Bagalkot, Haveri, Dharwad and Gadag — account for 28% of the suicides, while six other districts in Hyderabad-Karnataka —Bidar, Kalaburagi, Raichur, Ballari, Koppal and Yadgir — account for 23% of the suicides.
“We’re trying to bring in significant changes in farming methods and make agriculture profitable. We’ve allocated more than Rs 46,000 crore for agriculture and allied activities and irrigation, energy subsidy and marketing support. We’ve also announced programmes that support farmers at every stage — sowing to marketing his produces,” said Kumaraswamy.

Pradhan Mantri Fasal Bima Yojana: An assessment of India’s crop insurance scheme

Agriculture remains the primary sector of the Indian economy. While it accounts for merely 16 percent of the country’s GDP, approximately 43.9 percent of the population depends on it for their livelihood. In recent years, indebtedness, crop failures, non-remunerative prices and poor returns have led to agrarian distress in many parts of the country. The government has come up with various mechanisms to address these issues: insurance, direct transfers and loan waivers, among them. However, these mechanisms are ad hoc, poorly implemented and hobbled by political dissension. In February 2016 the government launched the crop insurance scheme, Pradhan Mantri Fasal Bima Yojana (PMFBY) to reverse the risk-averse nature of farmers. While the PMFBY has improved upon its predecessors, it faces structural, logistical and financial obstacles. This paper makes an assessment of the performance of the PMFBY in terms of adaptability and the achievement of the objective of “one nation, one scheme.”


Attribution: Ruchbah Rai, “Pradhan Mantri Fasal Bima Yojana: An Assessment of India’s Crop Insurance Scheme”, ORF Issue Brief No. 296, May 2019, Observer Research Foundation.


Introduction

India’s agricultural sector, which contributed 16 percent[1] of the country’s GDP in 2017, supports the livelihoods of 43.9 percent of the population.[2] Employment in this sector has decreased by 10 percentage points within a decade, from 53.1 percent in 2008 to 43.9 percent in 2018.[3]  The sector is facing manifold problems such as crop failures, non-remunerative prices for crops, and poor returns on yield. Agrarian distress is so severe, that it is pushing many farmers to despair; about 39 percent of the cases of farmer suicides in 2015 were attributed to bankruptcy and indebtedness.[4]

While the Government of India (GoI) has made various efforts to address farmers’ grievances, the policies are insufficient, weighed down by their being merely ad hoc and subject to political wrangling. There is an imperative for a financial safety net that does not consist only of direct transfers and loan waivers—short-term solutions that often prove to be counterproductive—but a framework that is timely, consistent and improves agricultural productivity and, in turn, farmers’ quality of life.

Farmers are vulnerable to agricultural risks and thus need an insurance system. While India has had one since 1972, the system is rife with problems, such as lack of transparency, high premiums, and non-payment or delayed payment of claims. India’s first crop insurance scheme was based on the “individual farm approach,” which was later dissolved for being unsustainable. The next insurance scheme was then based on the “homogeneous area approach.” In 1985, the Comprehensive Crop Insurance Scheme was implemented for 15 years; improvements were made based on the area approach linked with short-term crop credit. Its successor, the National Agricultural Insurance Scheme, was implemented to increase the coverage of farmers, both those with existing loans and those without. However, despite the modifications, the scheme failed to cover all farmers, and in Kharif season 2016, the GoI formulated the Pradhan Mantri Fasal Bima Yojana (PMFBY) to weed out the issues in the previous crop insurance schemes.

The PMFBY is a crop insurance scheme that improved upon its predecessors to provide national insurance and financial support to farmers in the event of crop failure: to stabilise income, ensure the flow of credit and encourage farmers to innovate and use modern agricultural practices. However, a close assessment of the scheme and its implementation shows that the PMFBY is afflicted by the same problems as the previous schemes. This brief attempts to assess the performance of the PMFBY. It offers recommendations to make the PMFBY a sustainable mechanism that will protect farmer incomes and reverse their risk-averse nature.

The Rationale for Crop Insurance

Indian agriculture has been progressively acquiring a ‘small farm’ character. The total number of operational holdings in the country increased from 138 million in 2010–11 to 146 million in 2015–16, i.e. an increase of 5.33 percent.[5] Small and marginal farmers with less than two hectares of land account for 86.2 percent of all farmers in India but own only 47.3 percent of the crop area.[6] Semi-medium and medium landholding farmers who own two to 10 hectares of land, account for 13.2 percent but own 43.6 percent of the crop area, which supports the claim that the average landholding size has declined from 1.15 hectares in 2010–11 to 1.08 hectares in 2015–16.[7] To be sure, a small landholding is not automatically a deterrent to productive farming. In China, for example, despite a small average land size of 0.6 hectare, farmers have achieved higher productivity due to efficient practices involving mechanisation and R&D, in turn leading to increased surpluses.[8] In India, such small average holdings do not allow for surpluses that can financially sustain families. India’s primary failure has been its inability to capitalise on technology and efficient agricultural practices, which can ensure surpluses despite small landholdings.

India’s farmers need insurance for another reason: the commercialisation of agriculture leads to an increase in credit needs, but most small and marginal farmers cannot avail credit from formal institutions due to the massive defaulting caused by repeated crop failure. Moneylenders, too, are apprehensive of loaning money, given the poor financial situation of most farmers.[9] According to the All India Debt and Investment Survey (AIDIS) 2013–14,[10] indebtedness is more widespread amongst cultivator households than their non-cultivator counterparts. In 2014, 46 percent of the cultivator households were indebted, with an average amount of INR 70,580 in debt.[11] Institutional agencies (commercial banks, regional rural banks or insurance companies) held 64 percent of agricultural debt in 2013, while non-institutional agencies (moneylenders, family or friends) held the remaining 36 percent.[12] Professional moneylenders held the maximum share of agricultural debt (29.6 percent),[13] indicating that rural households still depend on them for easy credit. The AIDIS[14] 2013-14, also stated that non-institutional agencies advanced credit to 19 percent of the rural households and institutional agencies to 17 percent. This creates indebtedness amongst the farmers, leaving them disadvantaged to avail credit for further production. Farmers prefer informal loans as they are easier to obtain; however, they come with exorbitant interest rates. The lack of sufficient access to institutional capital for non-farm expenditure further drives farmers to meet these expenditures using credit from non-institutional sources. Additionally, those who lease land face more risk than those who own land, because certain regulations categorise farmers who have land on lease as “landless.” Not owning land thus makes it difficult for farmers to get loans from banks, making informal credit institutions more lucrative.

A third reason is related to climate change: higher incidence of extreme weather events aggravates agrarian distress. Floods and droughts leave farmers in a period of flux. A lack of preparedness makes them vulnerable to harvest losses, especially given the money already paid for capital, e.g. seeds and fertilisers. This results in fluctuating incomes and unstable livelihoods. Around 52 percent of India’s total land under agriculture is still unirrigated, posing problems for farmers investing in production and cultivation.[15] According to the Economic Survey 2017–18,[16] extreme temperature shocks result in a four-percent decline in agricultural yields during the Kharif season and a 4.7-percent decline during the Rabi season. Similarly, extreme rainfall shocks—when the rain is below average—lead to a 12.8-percent decline in Kharif yields and a smaller but not insignificant decline of 6.7 percent in Rabi yields. The agricultural productivity patterns as a result of climate change can reduce annual agricultural incomes between 15 percent and 18 percent on average, and between 20 percent and 25 percent for unirrigated areas.[17]

The three factors discussed above, along with lackadaisical implementation of agricultural policies, render farmers highly vulnerable. Crop insurance schemes were formulated to tackle such issues that hinder the productivity of the agricultural sector and to reduce their negative financial impact on farmers. Such schemes attempt to not only stabilise farm income but also create investment, which can help initiate production after a bad agricultural year. The GoI has been updating its crop insurance schemes to keep up with the changing times. The most recent one was launched in 2016, a scheme that rectifies past errors and ensures increased farmer participation, which in turn promises increased agricultural productivity and a bigger share for agriculture in GDP.

Pradhan Mantri Fasal Bima Yojana (PMFBY): An Overview

The PMFBY has made several improvements compared to its predecessors, the National Agricultural Insurance Scheme and the Modified National Agricultural Insurance Scheme. One of the highlights of the PMFBY is the absence of any upper limit on government subsidy, even if the balance premium is 90 percent. The scheme was implemented in February 2016 and was allocated an initial central-government budget of INR 5,500 crore for 2016–17.[18] It has increased by 154 percent, as announced in the Interim Budget of 2019.[19] This massive increase in the outlay for the scheme shows that it is important for the government to insure all farmers and guarantee financial support and flow of credit to them in the event of crop-yield loss.

Features of the PMFBY[20]

  1. Coverage of Farmers: The scheme covers loanee farmers (those who have taken a loan), non-loanee farmers (on a voluntary basis), tenant farmers, and sharecroppers.
  2. Coverage of Crops: Every state has notified crops (major crops) for the Rabi and Kharif seasons. The premium rates differ across seasons.
  3. Premium Rates: The PMFBY fixes a uniform premium of two percent of the sum insured, to be paid by farmers for all Kharif crops, 1.5 percent of the sum insured for all Rabi crops, and five percent of sum insured for annual commercial and horticultural crops or actuarial rate, whichever is less, with no limit on government premium subsidy.
  4. Area-based Insurance Unit: The PMFBY operates on an area approach. Thus, all farmers in a particular area must pay the same premium and have the same claim payments. The area approach reduces the risk of moral hazard and adverse selection.
  5. Coverage of Risks: It aims to prevent sowing/planting risks, loss to standing crop, post-harvest losses and localised calamities. The sum insured is equal to the cost of cultivation per hectare, multiplied by the area of the notified crop proposed by the farmer for insurance.
  6. Innovative Technology Use: It recommends the use of technology in agriculture. For example, using drones to reduce the use of crop cutting experiments (CCEs), which are traditionally used to estimate crop loss; and using mobile phones to reduce delays in claim settlements by uploading crop-cutting data on apps/online.
  7. Cluster Approach for Insurance Companies: It encourages L1 bidding amongst insurance companies before being allocated to a district to ensure fair competition. A functional insurance office will be established at the local level for grievance redressal, in addition to a crop insurance portal for all online administration processes.

The PMFBY was implemented to ensure transparency, availability of real-time data and an accurate assessment of yield loss.

The state-run Agriculture Insurance Company of India (AIC), which has been allocated the largest number of districts under the scheme, handles insurances in other districts and states. The others are the United India Insurance, New India Assurance and Oriental Insurance, and private general insurers such as HDFC ERGO, ICICI Lombard, Reliance GI and Iffco-Tokio.

Table 1: Comparison of crop insurance schemes in India

FeatureNAIS (1999)MNAIS (2010)PMFBY (2016)
Premium rateLowHigh (9–15%)Low (Govt. to contribute five times that of farmer)
One season-one premiumYesNoYes
Insurance amount coveredFullCappedFull
On account paymentNoYesYes
Localised risk coverageNoHailstorm, landslideHailstorm, landslide, inundation
Post-harvest losses coverageNoCoastal areasAll India
Prevented sowing coverageNoYesYes
Use of technologyNoIntendedMandatory
AwarenessNoNoYes (target to double coverage to 50%)
Insurance companiesOnly governmentGovt and private companiesGovt and private companies

Source: PIB, Ministry of Agriculture and Farmers Welfare, January 2016.

The models prior to PMFBY were claim-based insurance schemes. The NAIS was backed by a government-funded insurance company called “Agriculture Insurance Company,” which collected premiums from farmers without any subsidy and then used that money to pay the claims at the end of the season. On the other hand, the PMFBY allows a subsidy in the premium-based system, which is implemented through a multiagency framework of select private insurance companies, the ministries of agriculture, GoI and state governments in coordination with commercial banks, cooperatives, regional rural banks and regulatory bodies, e.g. the Panchayati Raj.[21] Thus, the premium is subsidised by the centre and state governments to reduce the burden on farmers.

The PMFBY was created to target 50 percent of all farmers, with the promise of compensation in case of crop loss. The previous schemes saw low enrolment rates due to a lack of trust. Moreover, under those schemes, the dissemination of agricultural insurance was low and stagnant in terms of the area insured and the farmers covered in the previous schemes due to high premiums, the lack of land records, low awareness and the absence of coverage for localised crop damage.

Since its implementation, the PMFBY has achieved 41-percent coverage of farmers—this may be considered impressive, particularly when compared to the 28-percent coverage of farmers achieved under the three previous schemes combined (WBCIS + NAIS + MNAIS).[22] During its first year, 58 million farmers were enrolled in the PMFBY, a quantum jump from the 30 million insured in the previous year under the MNAIS. However, there has been a fall in the number of total farmer applicants from 58 million in 2016–17 to 47 million in 2017–18.[23]

One could argue that the previous schemes were based on a better model, wherein the government created a fund that would collect premiums and then use it to pay off the remaining overhead claim settlements. However, this trust model was not resilient. Competition is necessary to bring down premium rates, and the government must step back after it has corrected the market failures. The private sector is required to pool in larger amounts of money, and with the help of the government, they can reach the masses through agricultural subsidies. Under the PMFBY scheme, the government can correct market failures before pulling back. In India, a private-public partnership works best in the agricultural sector, since the government is crucial in data collection and financial premium support in the form of subsidies, while the private sector enables the availability and mobility of credit.

Table 2 shows the percentage change of certain indicators to ascertain and compare the impact of the PMFBY on Kharif 2016 and Kharif 2017. Due to a lack of data on Rabi 2017–18 on the PMFBY website, the table does not show the percentage change during this season. However, there has been a significant increase in the number of claims paid and farmers benefitted: 64 percent and 29 percent, respectively.

While the positive effects are significant, it is important to also discuss the negative changes. As Table 2 shows, the number of insured farmers has declined by 14 percent from Kharif 2016 to Kharif 2017, and the total area insured has decreased by one percent over the span of one year. The PMFBY has therefore failed to achieve its main targets, i.e. increasing the area and the number of farmers insured.

Table 2: Percentage change in indicators for Kharif season under PMFBY

Kharif 2016Kharif 2017Percentage Change
Farmers insured40,258,73734,776,055–0.14
Claims paid (crore)10,496.317,209.90.64
Gross premium (crore)16,317.819,767.60.21
Area insured (ha)37,682,60834,053,449–0.10
Farmers benefitted10,725,51113,793,9750.29

Source: Author’s compilation using data from the PMFBY Website.

This failure is a result of some fundamental issues in the scheme, which must be discussed to create a more holistic crop-insurance scheme that mitigates risks for both farmers and food security.

An Assessment of PMFBY Performance

While the PMFBY aims to be a transformative scheme, its implementation has been poor, with various issues in its execution at the state/district level.

Structural Issues

  1. Since states choose to voluntarily implement the PMFBY, it is their responsibility to notify crops. However, it is unclear how states should choose the major crops during a season for different districts, which results in the exclusion from insurance coverage of farmers who grow non-notified crops. Further, state governments use their discretionary powers to decide how much land will be insured and the sum insured, to reduce their burden of subsidy premiums. Thus, farmers often find it pointless to buy the insurance if the sum insured is less than their cost of cultivation. During Kharif 2016, Rajasthan decided to minimise the landholding insured to save themselves INR 60 lakh.[24]
  2. An article in Down to Earth[25] noted that in a village in Sonipat, farmers were coerced to pay the premium amount with a condition that they would have to pay seven percent interest subsidy on a loan. This is unfair if the farmers have not received their claims, and it prevents small farmers from taking new loans. Vulnerable farmers under debt and in need of new loans are unable to avail this insurance unless all dues are paid, putting them in a vicious cycle of debt.
  3. Farmers are apprehensive about the scheme because of a trust deficit, which is a result of the mandatory credit-linked insurance. The premium is deducted from a farmer who has taken a loan from any banking institution without their consent and, sometimes, even without their knowledge. Loanee farmers do not have the choice to opt out of this scheme and find it unfair to pay the premium each season without being compensated for the losses in the previous year. Further, the insured farmers do not receive any policy documents or receipts of premium charges from the banks or insurance companies. Thus, there has been a 20-percent drop in loanee farmers in 2017 as compared to the first year (see Table 3). Few farmers now take loans or credit, harming future yield production.
  4. Sometimes, a farmer is insured for the wrong crop[26] or the bank may be late in paying premiums to the insurance companies, leaving the farmer in a lurch and unable to claim payments. In Rajasthan, when the SBI did not pay the premium on time, farmers had to cultivate the next season without receiving their claim payments.[27]
  5. Non-loanee farmer participation has been low because they might not own the required provision documents such as an Aadhaar card. While the overall non-loanee farmer enrolment rate has fallen by five percent in 2017, there has been a 3.6-times increase in the number of non-loanee farmers than loanee farmers in Maharashtra. This is because Maharashtra changed the rules of mandatory credit-linked insurance, giving one the choice to opt out of the PMFBY.[28]
  6. Leasing agricultural land is prohibited in Kerala and J&K, while states such as Bihar, MP, UP and Telangana have conditions on who can lease out land, which prevents many tenant farmers from buying insurance. In Haryana and Maharashtra, tenants acquire the right to purchase land after a period of time,[29] but without land-lease certificates, sharecroppers and tenant farmers cannot be part of the scheme.
  7. Being only a yield-protection insurance, this scheme is not holistic and fails to take into account revenue protection. Without revenue protection, farmers do not benefit from the insurance scheme since, irrespective of the harvest at the end of the season, a negative Wholesale Price Index (WPI) for primary food articles leaves farmers under-compensated. According to data from the Ministry of Commerce and Industry, the WPI for primary food articles has seen several fluctuations, with a 2.1-percent increase (144.7) in July 2018 to a 1.4-percent decline in December 2018 (144.0) to a further decline of 0.2 percent (143.8) in February 2019.[30] Lower wholesale prices of food articles render farmers unable to breakeven their investment for crop production, leaving them with little income security for the next season. For instance, even if a farmer were to reach the targeted harvest, low wholesale prices will prevent the compensation of their production costs. What is missing is a revenue-protection insurance to protect farmers from a “yield and price” risk.
  8. Concerns regarding the ability of the state to conduct reliable CCEs must be addressed by involving village and district-level institutions and/or farmers in different stages of PMFBY implementation. There is a lack of trained professionals to handle the CCEs, and the current technology is not reliable. This has led to delays in assessment and settlement of claims, further eroding trust in the scheme.
  9. Insurers still face problems in reaching farmers to convey to them the benefits of insurance, due to the lack of rural infrastructure. According to the Comptroller and Auditor General of India[31] in 2017, out of 5,993 farmers surveyed, only “37% were aware of the schemes and knew the rates of premium, risk covered, claims, loss suffered, etc., and the remaining 63 percent farmers had no knowledge of insurance schemes highlighting the fact that publicity of the schemes was not adequate or effective.” Without proper information regarding credit, insurance, premium deduction, yield-loss assessment and non-payment of claims, farmers are treated as outsiders in a scheme that is meant for their welfare.
  10. The PMFBY guidelines contain provisions on bidding/notification of the PMFBY by states for three years, to allow the concerned insurance companies to create infrastructure and manpower in the clusters allocated to them. Thus, every cluster or IU has a specific insurance company selling insurances, with no provision for competitive pricing that could benefit farmers. The lack of competition also serves as a disincentive for insurance companies to improve or upgrade their products and pricing, and creates a monopoly over a scheme that requires competitive pricing.

Table 3: State-wise number of farmers insured under PMFBY

Financial Issues

  1. Many state governments have failed to pay the subsidy premiums on time, as paying these premiums eat into their budgets for the sector. This leads to insurance companies delaying or not making claim payments. In 2016, the Bihar government had to pay INR 600 crore as premium subsidy, which was one-fourth its agricultural budget of INR 2,718 crore in 2016.[32] Since this would reduce the state government’s available fund, it chose instead to dole out direct transfers and loan waivers as cheaper alternatives to win vote banks.
  2. In 2016–17, private insurance companies paid a compensation of INR 17,902.47 crore, and the difference between the premiums received and compensation paid was INR 6,459.64 crore.[33] In 2017–18, they paid over INR 2,000 crore less in compensation. Thus, the outgo in compensation during 2017–18 stood at just INR 15,710.25 crore. Evidently, insurance companies are piggy-backing on the banking system, as the difference increases despite a fall in the number of farmers insured. Insurance companies continue to profit, despite a decline in the number of farmers being benefitted. Moreover, approximately 80–85 percent of the premium is paid by the government, which puts a huge burden on the exchequer, leading to delays in paying premiums and, in turn, delays in the claims-benefit process. Simply increasing the funds allocated to the scheme will not help the government achieve higher enrolments and lower premiums. What is needed is a robust system of trust and investment to provide credit and insurance. Table 4 shows that the difference between gross premium and compensation paid in the Kharif season has reduced, indicating a discrepancy in the data on the disbursement of claims and the profits made by private insurance companies.

Table 4

(In INR Crore)

SeasonFarmer PremiumGross PremiumClaims Paid
Kharif 20162,91916,31710,496
Rabi 2016–171,2966,0275,681
Kharif 20173,03919,76817,210

source: Orfonline
Link:https://www.orfonline.org/research/pradhan-mantri-fasal-bima-yojana-an-assessment-of-indias-crop-insurance-scheme-51370/