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An Overview of Agriculture Insurance in India. Dr. Rajiv Mehta Adviser Department of Agriculture and Cooperation Ministry of Agriculture Govt. of India Expert Meeting on Requirements of Catastrophe Insurance and Weather Risk Management Markets World Meteorological Organisation Geneva

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an overview of agriculture insurance in india

An Overview of Agriculture Insurance in India

Dr. Rajiv Mehta

Adviser

Department of Agriculture and Cooperation

Ministry of Agriculture

Govt. of India

Expert Meeting on Requirements of Catastrophe Insurance and Weather Risk Management Markets

World Meteorological Organisation

Geneva

5th to 7th December 2007

vulnerability of agriculture
Vulnerability of Agriculture
  • Large population dependence
    • In India, 70% population rural
    • Two third livelihood depends on agriculture and allied activities
    • 120 Million farm holdings
    • 107 million agriculture labour
  • Weak asset base
    • Average size of operational holdings : 1.32 Hectares
    • 82% Holdings Small and marginal (2 or less than 2 hectares)
    • Human asset - Skill, education, health, information
  • Climate and Market aberrations
    • 60 percent agriculture rain dependent
    • Diversity of climatic conditions
    • Occurrence of floods, droughts, pests
    • Logistics and connectivity (600 thousand villages)
    • Market vulnerability – disadvantage in price realisation
annual rainfall distribution

Annual Rainfall Distribution

North East Monsoon

(Oct –Dec )

74%

13%

Winter

( Jan - Feb)

3%

10%

Pre Monsoon

( Mar –May )

South West Monsoon

(June -Sept)

spatial distribution of rainfall

Spatial Distribution of Rainfall

Very High Rainfall Zone

(Above 2000 mm)

High Rainfall Zone

(1125 – 2000 mm)

Low Rainfall Zone

(Less than 750 mm)

Medium Rainfall Zone

(750 to 1125 mm)

slide5

Diversity of

Cropping Pattern

Geographical Area: 328

Net Cropped Area : 141

Gross Cropped Area: 191

Gross irrigated Area : 78

(in Million HA)

slide6

Drought 2002

Monsoon Aberration 2002

July 2002 rainfall deficiency : - 49%

Monsoon 2002 rainfall deficiency : - 19%

21 out of 36 Met-Subdivisions received deficient/scanty rainfall

slide7

Drought 2002

Socio – Economic Impact

  • Spread – 1.8 million square kilometers
  • 300 million people affected
  • 700 million cattle Affected
  • Crop Area Affected - 62 million hectares
          • (30% of total crop area)
  • Food-grains Production fall - 24 million tonnes from normal (12%)
  • Drinking water shortage - 120,000 rural habitations and 500 Towns/ Cities
genesis of crop insurance in india
Genesis of Crop Insurance in India
  • Vital for stable agricultural growth and risk management
  • Modalities of crop insurance
    • Individual approach
      • Necessitates reliable and accurate data of crop yields of individual farmers for a sufficiently long period
      • Moral Hazards
    • Homogenous area approach
  • Comprehensive Crop Insurance Scheme (CCIS) 1986
  • National Agricultural Insurance Scheme (NAIS) 1999-2000
  • Agriculture Insurance Company of India Limited (AIC)
    • Incorporated in December 2002
    • Authorized Share Capital : Rs 15 Billions (USD 375 Millions)
    • Paid-up Capital Rs 2 Billions (USD 50 Millions)
    • Share holders Lead Public Insurance Companies and NABARD
  • Rainfall Insurance
national agricultural insurance scheme nais
National Agricultural Insurance Scheme (NAIS)
  • To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
  • To encourage the farmers to adopt progressive farming practices, high value inputs and higher technology in Agriculture.
  • To help stabilise farm incomes, particularly in disaster years.
nais eligibility and coverage
NAIS – Eligibility and Coverage
  • Food crops (Cereals, Millets & Pulses), Oilseeds, Sugarcane, Cotton & Potato (Annual Commercial / annual Horticultural crops)
    • Availability of past yield data based on Crop Cutting Experiments (CCEs)
    • Requisite number of CCEs are conducted for estimating the yield during the proposed season
  • All farmers including sharecroppers, tenant farmers growing the notified crops in the notified areas are eligible for coverage
    • Compulsory for Loanee farmers
    • Voluntary for others
nais risks covered exclusions
NAIS - RISKS COVERED & EXCLUSIONS
  • Comprehensive risk cover of yield losses due to non preventable risks,
    • Natural Fire and Lightning
    • Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
    • Flood, Inundation and Landslide
    • Drought, Dry spells
    • Pests/ Diseases etc.
  • Losses arising out of war & nuclear risks, malicious damage & other preventable risks excluded.
  • Sum Insured (SI)
    • extend to the value of the Threshold Yield (TY) of the insured crop at the option of the insured farmers
    • beyond value of Threshold Yield level upto 150% of Average Yield (AY) of notified area on payment of premium at commercial rates
    • Loanee farmers the Sum Insured would be at least equal to the amount of crop loan advanced
premium rates
Premium Rates
  • 1.5 % to 3.5 % of SI or Actuarial, which ever is less
  • 50% premium subsidy to small and marginal farmers
  • Seasonality discipline
  • Indemnity
    • Area Approach
    • Shortfall in Yield  X Sum Insured for the farmer Threshold yield
    • Specific localised risk (Hail, floods, cyclone)
nais business statistics 1999 2000 to kharif 2005
NAIS – Business Statistics 1999-2000 to Kharif 2005
  • FARMERS COVERED Millions 75.08
  • AREA Million HA 121.99
  • SUM INSURED Rs. Billion 706.91
  • PREMIUM Rs. Billion 22.25
  • SUBSIDY Rs. Billion 2.40
  • TOTAL CLAIMS Rs. Billion 64.71
  • CLAIMS PAID Rs. Billion 58.95
  • CLAIMS PAYABLE Rs. Billion 5.76
  • FARMERS BENEFITTED Millions 19.74
weather based crop insurance scheme pilot 2007
Weather Based Crop Insurance Scheme (Pilot 2007)
  • Trigger: moisture/water requirement of Crop to produce a standard yield ( Groundnut )

Trigger Stages for Rainfall deficiency

    • Sowing & Germination :
    • Vegetative phase:
    • Flowering & Pegging:
    • Pod formation & Maturity:

Trigger Stages for Excess Rainfall

    • Flowering and Pegging
    • Pod Formation and Maturity:
  • Total Sum Insured Rs 15,000 per hectare
  • Premium capped at Rs 525 per hectare
  • Commercial and capped premium difference subsidized
  • Automatic Weather Stations to measure rainfall
weather based crop insurance scheme pilot 20071
Weather Based Crop Insurance Scheme (Pilot 2007)

Trigger for Rainfall Deficiency

(Pilot Karnataka, District Haveri, Crop Ground Nut)