Prime Minister's Crop Insurance scheme: Many holes in the umbrella

Lucknow. Forty-five year-old Udan Singh lost a standing crop of sugarcane on two acres of his land in Dasapur village of Sitapur district in Uttar Pradesh. To protect the rest of his crops, he wanted to get them insured. He knew that on getting the Kisan Credit Card made, the crop of the farmer is automatically insured. However, despite making several rounds of the bank, he was unable to get the KCC made. By the time the last date for insuring your crop - 31 July - rolled by, Udan Singh and many other farmers like him found themselves bereft of the insurance cover for their kharif crop.

A lack of awareness about online methods of doing so among farmer and a lack of interest among insurance companies and the government machinery to implement the scheme have left the farmers bereft of any protection.

A lot of farmers have also lost interest in the scheme because of the long delays in getting their compensation after filing.

The report prepared by the Centre of Management in Agriculture at Indian Institute of Management, Ahmedabad, on the performance of the Prime Minister Crop Insurance Scheme for the year 2017-18, revealed that a total of 5.01 crore farmers registered for it. This is alarming because it indicates a 10 percent drop in the figures of the previous year. Even the area brought under insurance cover in 2017-18, showed a decline of 13.27 percent.

The rules state that the farmer must get his dues within two months of filing his claim. But the on ground reality is that farmers have to wait for anything from six months to a year for their compensation. This delay was accepted by the government in parliament.

Agriculture Minister pulls up insurance companies

In the monsoon session of parliament, Union Agriculture and Farmer Welfare Minister Radhamohan Singh gave an assurance that if insurance companies do not make the payouts to the farmers within two months of filing the claim, they will have to pay the farmer with a penalty of 12 percent on the compensation amount. He also owned up that there were some lacunae in the scheme that need to be addressed to improve it.

Gajendra Singh Shekhawat, the Union Minister of State for Agriculture, informed the house that so far 10 crore farmers have come within the ambit of the insurance scheme and five crore had taken benefit from it.

This scheme, touted as better than any other crop insurance scheme thus far, was implemented in 2016 and under it the farmers had to pay only two premiums for all kharif crops and 1.5 premiums for all rabi crops. The rest is paid by the centre and the state. For commercial farming and floriculture, the farmer has to pay five premiums.

The insurance covers the crop against floods, droughts, hail storms and other natural disasters that can damage the crops. But this is where the problem starts. The IIM-A report prepared after a survey of Gujarat, Himachal Pradesh, Karnataka and Uttar said that in 2017-18, the insurance companies collected premiums to the tune of Rs 23,206.18 crore. This was 16.6 percent more than the previous year. For the same period, the amount given out in compensation to farmers was Rs 13,858 crore. So in effect, the insurance companies profited to the tune of 40.24 percent.

According to data published in Business Standard, the insurance companies had collected Rs 1,940 crore in premiums. They have accepted claimed for Rs 1,660 crore. Claims for Rs 1,100 crore have either been settled or the process to settle them is on.

Most farmers, however, feel that the insurance companies are going to profit from the money paid by the governments and themselves and will not make the payouts. Neither do they make the payouts on time and neither do they encourage or incentivise the farmers to take the policies. This is precisely why farmers in Maharashtra, UP, Karnataka and Madhya Pradehs are not showing any keenness to take up the scheme.

Radha Mohan Singh, however, in his blog post on 4 August, stated, "According to data recently collected, more than 75 lakh debt-free farmers have applied for the insurance of their kharif crop through CSC till the last date on 31 July. This is a seven times increase in the number who had done the same in the previous year."

Bihar has decided not to implement this scheme. In fact, the state has also not paid its share of the premium for the 2012-13 scheme.

Senior scientist at Hyderabad situated research organisation ICRISAT, Dr Shiraz Husain, said, "To ensure that farmers get the maximum benefit from such schemes it is imperative tenders are called in before the monsoon predictions start coming in. Crop cutting systems need to be strengthened and data banks should be created. Reliance on banks should come down and state governments should pay their share of the premiums in a timely manner."

He also said that delays by the insurance companies in settling the claims filed by farmers need to be penalised. "But this depends on the terms of the tender," he said.

There are 18 insurance companies operating in India. Regional Manager of Agriculture Insurance Company India Limited, Tarun Kumar Singh points to several basic problems with the scheme. He feels that penalising the insurance companies will only create more problems. "This is a good scheme. Crop cutting experiment has reached the gram panchayat level. But a lot of things have not reached the ground level. State governments and insurance companies have to come together and work."

"The law states that if all the premiums are not paid, the settlement cannot be done. While farmers are paying their share of the premium, the state does not pay its share. This delays the centre's payments and the cycle of delays continues," says Tarun Kumar Singh. This is one of the reasons for the delay in final settlements.

IIM-A also found in its research that states give their share after they get records from the insurance companies. Insurance companies get their date from banks. Banks are already overworked. The centre gives its share only after getting the transfer of funds certificate from the state. Thus the cycle of delays goes on.

According to the IIM-A report, the scheme can be made profitable. They suggest that mechanising the process of manual crop cutting, drone and GP coding, digitisation of farmer records, linking with Aadhar will make the process smoother.