Panel set up to review crop insurance recommends agriculture insurance Act

Insurance companies should be allocated districts for minimum three years, instead of one season, to remove uncertainties, says panel headed by P K Mishra

 
By Jyotika Sood
Last Updated: Monday 17 August 2015

Farmers inspect crops damaged by hailstorm in Hoshangabad district of Madhya Pradesh after the freak hailstorms destroyed vast tracts of crops in north and central India in February and March this year (Photo: Lokesh Tiwari)

The committee set up by the Central government to review the implementation of crop insurance schemes in India has recommended introduction of an agriculture insurance Act to take care of specific requirements of the crop insurance and agriculture insurance in general.

The four-member committee, appointed in September 2013, was headed by former agriculture secretary, P K Mishra, and submitted its report in May this year.

General insurance v crop insurance

The report says crop insurance is different from general insurance in many ways and does not strictly follow rules and regulations of general insurance, such as receipt of insurance premiums and claim intimation by the insured. But the Insurance Regulatory and Development Authority (IRDA) has placed crop insurance under the miscellaneous category of the general insurance business. In the absence of appropriate law, various provisions such as compulsory coverage of loan availing farmers being challenged in courts. Therefore, it would be appropriate to have an agriculture insurance Act, says the committee.

The committee was formed to examine the loopholes, in any, in the implementation of existing crop insurance schemes—the National Agricultural Insurance Scheme (NAIS), Modified National Agricultural Insurance Scheme (MNAIS) and Weather-Based Crop Insurance Scheme (WBCIS)—and suggest measures for plugging them. The panel members comprised Raj Kumar and D B Gupta, principal secretaries for agriculture in Gujarat and Rajasthan respectively, and P J Joseph, chairperson-cum-managing director of Agriculture Insurance Company of India Limited. They were asked to submit their report within six months.

The committee has pointed out that under the present crop insurance system, districts are allocated through bids to insurance companies every season, creating uncertainty among insurers willing to invest in insurance education and awareness. Even those insurers who pay a large amount of claims in a particular season may not reap goodwill in the next season when they are allocated another district. The committee has, therefore, recommended that districts/crops be allocated to an insurer (the insurance company) for a minimum of three years.

Gujarat model

The report says that a web portal along the lines of the one in Gujarat should be developed by the National Informatics Centre (NIC) for other states so as to make data about land records available to financial institutions. The web portal would enable financial institutions to link each farmer’s existing loan account to the unique land account, making it possible to detect multiple loans taken against the same land.

The committee says that state governments should ensure the use of GPRS-enabled, camera-fitted mobile phones or hand-held machines while conducting crop cutting experiments (to determine average yield in a district), so as to transmit data on a real-time basis. The applications developed in Gujarat and also by the pilot studies under the World Bank technical assistance in Maharashtra and Rajasthan, can be utilised to put in place appropriate systems in other states, the report says.

The committee claims that implementation of recommendations in a time-bound manner, with some prioritisation, would help to plug the loopholes, thereby, effectively addressing the issues involved.
 

Other key recommendations
 
  • RBI and NABARD should monitor the compliance of their circulars regarding compulsory crop insurance for loan availing farmers with respect to notified crops in identified areas
  • Revisit the premium rates for Modified National Agricultural Insurance Scheme
  • New and innovative products of insurance may be introduced
  • An atlas of critical weather elements which trigger crop-yield losses in different crop growth periods should be developed for different agro-climatic regions
  • The Central government, through ministry of home and agriculture, should take measures to integrate crop insurance schemes with or link them to disaster mitigation activities.

Report: Report of the Committee to review the implementation of crop insurance schemes in India

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