University of Horticultural Science, Bagalkot

College of Horticulture, Kolar

Horti-Farm and Financial Management

AEC-202 & 2(1+1)1
Assignment : WTO and it's functions,AoA
agreement on agriculture,Institutional sources of agri
finance, Pradhan mantri fasal bima yojana,Karnataka
APMC Act 2020

Submitted To,
Dr. V.A Rama chandra Sir
Dept. Of Agricultural Economics
College of Horticulture, Kolar

Submitted By;
Kalyan HS
UHS18UG4207
2nd B.Sc & 2nd Sem

1
 Topic:No-1
The World Trade Organisation (WTO):
Structure, Functions and Agreements
1.Structure of the World Trade Organisation:
The WTO secretariat (numbering 625 of many
nationalities) is headed by Director General. However,
the WTO is headed by the Ministerial Conference who
enjoys absolute authority over the institution. It not
only carries out functions of the WTO but also takes
appropriate measures to administer the new global
trade rules. In addition to these, the structure of the
WTO consists of a General Council to oversee the WTO
agreement and ministerial decisions on a regular basis.
The Council sits in its headquarters Geneva, Switzerland
usually once a month. Besides General Council, there is
the Council for Trade in Goods, the Council for Trade in
Services, the Council for Trade Related Intellectual
Property Rights (TRIPS). These Councils and their

2
respective subsidiary bodies perform their respective
functions.
Decision-making is made by consensus. If consensus is
not reached then majority voting plays the crucial rate.
The significant task facing the WTO is that of making the
new multilateral trading system truly global.
Implementation of WTO agreements and ministerial
decisions are crucial to credibility of the multilateral
trading system and indispensable for expanding global
trade, creating additional jobs and improving the
standard of living.

2.Functions of the World Trade Organisation:

i. It shall facilitate the implementation, administration
and operation of the WTO trade agreements, such as
multilateral trade agreements, plurilateral trade
agreements.
ii. It shall provide forum for negotiations among its
members concerning their multilateral trade relations.
iii. It shall administer the ‘Understanding on Rules and
Procedures’ so as to handle trade disputes.

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iv. It shall monitor national trade policies.
v. It shall provide technical assistance and training for
members of the developing countries.
vi. It shall cooperate with various international
organisations like the IMF and the WB with the aim of
achieving greater coherence in global economic policy-
making.
The WTO was founded on certain guiding principles—
non-discrimination, free trade, open, fair and
undistorted competition, etc. In addition, it has special
concern for developing countries.

3.WTO Agreements:
General Agreement on Tariffs and Trade was establishe
in 1947. In 1995, GATT was replaced by the World Trade
Organisation (WTO).
The three agreements establishing the WTO are:
(i) GATT,
(ii) GATS, and
(iii) TRIPS.

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i. GATT:
GATT is related to increasing market access by reducing
various trade barriers operating in different countries.
Dismantling of trade restrictions was to be achieved by
the reduction in tariff rates, reductions in non-tariff
support in agriculture, abolition of voluntary export
restraints or phasing out the Multi-fibre Arrangement
(MFA), cut in subsidies, etc.To improve market access,
industrialised countries will have to reduce tariffs by 36
p.c. over six years and 24 p.c. for developing nations
over 10 years. World trade in textiles and clothing’s is
governed by the MFA which requires to be phased out
within 10 years (1993-2002).

ii. GATS:
Multilaterally agreed and legally enforceable rules and
disciplines relating to trade in services are covered by
General Agreement on Trade in Services. It envisages
free trade in services, like banking, insurance, hotels,
construction, etc., so as to promote growth in the
developed countries by providing larger markets and in

5
the developing countries through transfer of
technologies from the developed countries.
As a result of this agreement, access of service
personnel into markets of member countries will
henceforth be possible on a non-discriminatory basis
under transparent and rule-based system. Under the
agreement, service sector would be placed under most
favoured nation (MFN) obligations that prevents
countries from discriminating among different nations
in respect of services.

iii. TRIPS:
The TRIPS Agreement covers seven specific areas, viz.
copyrights, trademarks, industrial designs, integrated
circuits, geographical indications, trade records and
patent. Of these seven areas, the most important as
well as debatable aspect is the patents right. The basic
principle of the patent system is that an inventor, who
makes a full disclosure of what he has invented, is
granted a statutory monopoly to exploit his invention.
In addition, WTO members have set procedures for
settling disputes arising out of the violation of trade

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rules. Thus, there exists a multilateral system of
settlement of disputes. The WTO agreement also allows
governments to take appropriate action against
dumping.

4.Criticisms of the World Trade Organisation:

Free trade policy pursued by the WTO over the years
has widened the income gap between rich and poor
nations, instead of minimising the gap. Secondly, WTO
functions in a discriminatory way as it is more biased to
the rich countries and MNCs. In fact, this strategy of the
WTO has not benefited the developing countries.One
can see that the market access of these countries in
industry has not improved, non- tariff barriers like anti-
dumping measures have increased and domestic
support and export subsidies for agricultural products in
the rich countries still remain high. Thirdly, it is
criticised that labour relations and environmental issues
have been side-lined or ignored by the WTO. Finally,
decision-making process in the WTO is rather non-
transparent, ineffective and non- inclusive since “the
vast majority of developing countries have very little
real say in the WTO system.”

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 Topic No-02

Agreement On Agriculture
The Agreement on Agriculture (AoA) is an international
treaty of the World Trade Organization. It was
negotiated during the Uruguay Round of the General
Agreement on Tariffs and Trade, and entered into force
with the establishment of the WTO on January 1, 1995.

Origins:-
The idea of replacing agricultural price support with
direct payments to farmers decoupled from production
dates back to the late 1950s, when the twelfth session
of the GATT Contracting Parties selected a Panel of
Experts chaired by Gottfried Haberler to examine the
effect of agricultural protectionism, fluctuating
commodity prices and the failure of export earnings to
keep pace with import demand in developing
countries.The 1958 Haberler Report stressed the
importance of minimising the effect of agriculture
subsidies on competitiveness and recommended
replacing price support with direct supplementary
payments not linked with production, anticipating

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discussion on green box subsidies. Only more recently,
though, has this shift become the core of the reform of
the global agricultural system.

Three pillars:-
The Agreement on Agriculture constitutes of three
pillars—domestic support, market access, and export
subsidies.

1.Domestic support :
The first pillar of the Agreement on Agriculture is
"domestic support". AoA divides domestic support into
two categories: trade-distorting and non-trade-
distorting (or minimally trade-distorting). The WTO
Agreement on Agriculture negotiated in the Uruguay
Round (1986–1994) includes the classification of
subsidies by "boxes" depending on consequences of
production and trade: amber (most directly linked to
production levels), blue (production-limiting
programmes that still distort trade), and green (minimal
distortion).While payments in the amber box had to be
reduced, those in the green box were exempt from
reduction commitments. Detailed rules for green box

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payments are set out in Annex 2 of the AoA. However,
all must comply with the "fundamental requirement" in
paragraph 1, to cause not more than minimal distortion
of trade or production, and must be provided through a
government-funded programme that does not involve
transfers from consumers or price support to producers.
The Agreement on Agriculture's domestic support
system currently allows Europe and the United States to
spend $380 billion a year on agricultural subsidies. The
World Bank dismissed the EU and the United States'
argument that small farmers needed protection, noting
that more than half of the EU's Common Agricultural
Policy subsidies go to 1% of producers while in the
United States 70% of subsidies go to 10% of its
producers, mainly agribusinesses.These subsidies end
up flooding global markets with below-cost
commodities, depressing prices, and undercutting
producers in poor countries, a practice known as
dumping.

2.Market access:

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Market access refers to the reduction of tariff (or non-
tariff) barriers to trade by WTO members. The 1995
Agreement on Agriculture consists of tariff reductions
of: 36% average reduction - developed countries - with
a minimum of 15% per-tariff line reduction in next six
years. 24% average reduction - developing countries -
with a minimum of 10% per-tariff line reduction in next
ten years.
Least developed countries (LDCs) were exempt from
tariff reductions, but they either had to convert non-
tariff barriers to tariffs—a process called tariffication—
or "bind" their tariffs, creating a ceiling that could not
be increased in future.

3.Export subsidies:
Export subsidies are the third pillar. The 1995
Agreement on Agriculture required developed countries
to reduce export subsidies by at least 36% (by value) or
by 21% (by volume) over six years. For developing
countries, the agreement required cuts were 14% (by
volume) and 24% (by value) over ten years.

Criticism:-
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The Agreement has been criticised by civil society
groups for reducing tariff protections for small farmers,
a key source of income in developing countries, while
simultaneously allowing rich countries to continue
subsidizing agriculture at home.
The Agreement was criticised by NGOs for categorizing
subsidies into trade-distorting domestic subsidies (the
"amber box"), which have to be reduced, and non-
trade-distorting subsidies (blue and green boxes), which
escape discipline and thus can be increased. As efficient
agricultural exporters press WTO members to reduce
their trade-distorting "amber box" and "blue box"
support, developed countries' green box spending has
increased.

A 2009 book by the International Centre for Trade and

Sustainable Development (ICTSD) showed how green
box subsidies distorted trade, affecting developing
country farmers and harming the environment. While
some green box payments only had a minor effect on
production and trade, others have a significant impact.
[6] According to countries' latest official reports to the

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WTO, the United States provided $76 billion (more than
90% of total spending) in green box payments in 2007,
while the European Union notified €48 billion ($91
billion) in 2005, around half of all support. The EU's
large and growing green box spending was decoupled
from income support, which could lead to a significant
impact on production and trade.
Third World Network stated, "This has allowed the rich
countries to maintain or raise their very high subsidies
by switching from one kind of subsidy to another...This
is why after the Uruguay Round the total amount of
subsidies in OECD countries have gone up instead of
going down, despite the apparent promise that
Northern subsidies will be reduced." Moreover, Martin
Khor argued that the green and blue box subsidies can
be just as trade-distorting—as "the protection is better
disguised, but the effect is the same".
At the 2005 WTO meeting in Hong Kong, countries
agreed to eliminate export subsidy and equivalent
payments by 2013. However, Oxfam argued that EU
export subsidies comprise for only 3.5% of its overall
agricultural support. United States, removed export

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subsidies for cotton which only covers 10% of overall
spending.
on 18 July 2017 India and China jointly submitted a
proposal to the World Trade Organization (WTO) calling
for the elimination – by developed countries – of the
most trade-distorting form of farm subsidies, known in
WTO parlance as Aggregate Measurement of Support
(AMS) or 'Amber Box' support as a prerequisite for
consideration of other reforms in domestic support
negotiations.

Mechanisms for developing countries:-

During the Doha negotiations, developing countries
have fought to protect their interest and population,
afraid of competing on the global market with strong
developed and exporting economies. In many countries
large populations living in rural areas, with limited
access to infrastructure, farming resources and few
employment alternatives. Thus, these countries are
concerned that domestic rural populations employed in
import-competing sectors might be negatively affected
by further trade liberalization, becoming increasingly

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vulnerable to market instability and import surges as
tariff barriers are removed. Several mechanisms have
been suggested in order to preserve those countries:
the Special Safeguard Mechanism (SSM) and treatment
of Special Products (SPs).

Special Safeguard Mechanism:-

A Special Safeguard Mechanism (SSM) would allow
developing countries to impose additional safety
measures in the event of an abnormal surge in imports
or the entry of unusually cheap imports.[10] Debates
have arisen around this question, some negotiating
parties claiming that SSM could be repeatedly and
excessively invoked, distorting trade. In turn, the G33
bloc of developing countries, a major SSM proponent,
has argued that breaches of bound tariffs should not be
ruled out if the SSM is to be an effective remedy. A 2010
study by the International Centre for Trade and
Sustainable Development simulated the consequences
of SSM on global trade for both developed and
developing countries.

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16
 Topic No-03
Institutional sources of Agricultural
finance
In India, agricultural credit are being advanced by
different sources. The short term and medium
term loan requirements of Indian farmers are
mostly met by moneylenders, co-operative credit
societies and Government. But the long-term loan
requirements of the Indian farmers are also met by
moneylenders, land development banks and the
Government.
Nowadays, the long term and short term credit
needs of these institutions are also being met by
National Bank for Agricultural and Rural
Development (NABARD).
Sources of agricultural credit can be broadly
classified into institutional and non-institutional
sources.Non-Institutional sources include

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moneylenders, traders and commission agents,
relatives and landlords, but institutional sources
include co-operatives, commercial banks including
the SBI Group, RBI and NABARD.
Below table shows the contribution of these
different sources to the total agricultural credit in
India since 1951- 52 to 1996.

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I. Non-Institutional Sources:-
(i) Moneylenders:
From the very beginning moneylenders have been
advancing a major share of farm credit.
Moneylenders are of two different types:
(a) Professional moneylenders
(b) Agriculturist moneylenders.
These moneylenders were supplying a major
portion of agricultural credit (69.7 per cent in
1951-52) and indulged into malpractice like
manipulation of accounts and charged exorbitant
rate of interest on their loan- often 24 per cent and
over.
Due to all these factors the share of moneylenders
in total farm credit has declined sharply from 69.7
per cent in 1951-52 to 36.1 per cent in 1971 and
then to only 16.1 per cent in 1981 and then to 7.0
per cent in 1995-96.

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(ii) Traders and Commission agents:
Traders and commission agents are also advancing
loan to the agriculturist for productive purposes
before the maturity of crops and then force the
farmers to sell their crops at very low prices and
charge heavy commission. This type of loans is
mostly advanced for cash crops.
The share of these traders in farm credit increased
gradually from 5.5 per cent in 1951-52 to 8.8 per
cent in 1961- 62 and then sharply declined to 5.0
per cent in 1996. Thus its importance has been
declining in recent years.
(iii) Relatives:
Cultivators are also normally borrowing fund from
their own relatives in times of their crisis both in
terms of cash or kind. These loans are a kind of
informal loans and carry no interest and are
normally returned after harvest.

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The importance of this source of farm credit is also
declining as its share of agricultural credit has
already declined from 14.2 per cent in 1951-52 to
8.7 per cent in 1981 and then to 3.0 per cent in
1995-96.
(iv) Landlords:
In India, small as well as marginal farmers and
tenants are also taking loan from the landlords for
meeting their financial requirements. This source
has been following all the ill-practices followed by
money-lenders, traders etc.
Sometimes landless workers are even forced to
work as a bonded labour. The share of this source
to rural credit has increased from 3.3 per cent in
1951-52 to 14.5 per cent in 1961-62 and then
sharply declined to 8.8 per cent in 1981 and then
to 10.0 per cent in 1995-96.

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Thus, the non-institutional sources of farm credit
have been facing serious loopholes like exorbitant
rate of interest, loan for unproductive purposes,
non-repayment of loan etc.

II. Institutional Sources:-

The main motive of institutional credit is to assist
the farmers in raising their agricultural
productivity and maximising their income.
Institutional credit is also not exploitative in
character. The following are some of the important
institutional sources of agricultural credit in India.
(i) Co-operative Credit Societies:
The cheapest and the best source of rural credit in
India is definitely the co-operative finance. In India
the active primary agricultural credit societies
(PACS) cover nearly 86 per cent of the Indian
villages and account for nearly 36 per cent of the
total rural population of the country. The share of
co-operatives in the total agricultural credit

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increased to nearly 40 per cent in 1996 as
compared with only 3 per cent in 1951-52.
In 1993-94 nearly 88,000 primary agricultural
credit societies (PACS) of India provided Rs 6461
crore as short term and medium term loans to the
farmers. In 2006-2007, the same loan has
increased to Rs 42,480 crore, which was financed
by co-operative banks.
But these co-operatives have a long way to go. In
some states like Bihar, West Bengal, Orissa and
Rajasthan the co-operative movement did not
spread much of its net world. Even in some places
the working of the co-operatives had been
wrecked hopelessly by unscrupulous and dishonest
members leading to large scale sufferings of huge
number of needy farmers.

(ii) Land Development Banks:

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Land development banks are advancing long term
co-operative credit for 15-20 years to the farmers
against the mortgage of their lands for its
permanent improvement, purchasing agricultural
implements and for repaying old debts. The
number of state land development banks (SLDBs)
increased from 5 in 1950-51 to 19 as on June 1986
which again consisted of 2447 Primary Land
Development Banks (PLDBs) branches.
The amount of loan sanctioned annually by these
PLDB branches has increased from Rs 3 crore in
1950-51 to Rs. 2039 crore in 1993-94. But benefits
from these land development banks could not
reach to small farmers and only the big landlords
have been taking all advantages out of it. At
present there are 19 central and 733 primary LDBs.
In 1997, these banks advanced loan worth Rs 1,744
crore.

(iii) Commercial Banks:

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In the initial period, the commercial banks of our
country have played a marginal role in advancing
rural credit. In 1950-51, only 1 per cent of the
agricultural credit was advanced by the
commercial banks. But after the nationalisation of
commercial banks in 1969, the commercial banks
started to extend financial support both directly
and indirectly and also for both short and medium
periods.
With the help of “village adoption scheme” and
service area approach the commercial banks
started to meet the credit and other requirements
of the farmers. They also sponsored various
regional rural banks for extending credit to small
and marginal farmers and rural artisans just to
save them from the clutches of village
moneylenders.

Till 1969, direct advances by the commercial banks

were restricted to only Rs 44 crore. But as on
25
March 2007 the amount of loan has increased to
Rs 1,40,382 crore. During 2006-2007 commercial
banks along with Regional Rural Banks extended
nearly 79.1 per cent of the total institutional farm
credit in our country.
Again in 1999-2000, disbursements of agricultural
advances by public sector banks under Special
Agricultural Credit Plan (SACP) were Rs 19,755
crore.
Commercial banks are finding difficulty in
advancing loans to the farmers particularly in
respect of lending techniques, security, recovery
etc. and are expected to overcome these
gradually. But the commercial banks are not very
much interested to advance loan to small and
marginal farmers and as on March 1997 their farm
credit was restricted to only 13.5 per cent of total
bank credit.

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The share of commercial banks in total
institutional credit to agriculture is almost 69.0 per
cent in 2006-2007.
(iv) Regional Rural Banks:
As per the recommendations of working Group on
Rural Banks the Regional Rural Banks (RRBs) were
established in 1975 for supplementing the
commercial banks and co-operatives in supplying
rural credit. Since 1975 these Regional Rural Banks
are advancing direct loans to small and marginal
farmers, agricultural labourers and rural artisans
etc. for productive purposes.
Till June 1996, in total 196 RRBs have been lending
annually nearly Rs 1500 crore to the rural people
and more than 90 per cent of these loans were
also advanced to the weaker section.

At the end of 1988 these RRBs jointly advanced

loan to the extent of Rs, 2,804 crore among 11

27
million persons lying below the poverty line. In
2006-2007, the RRBs have disbursed agricultural
credit amounting to Rs 20,435 crore which is just
10.05 per cent of total institutional credit to
agriculture.
(v) Government:
Another important source of agricultural credit is
the Government of our country. These loans are
known as taccavi loans and are lend by the
Government during emergency or distress like
famine, flood etc. The rate of interest charged
against such loan is as low as 6 per cent.
The share of the Government in the total
agricultural credit has increased from 3.1 per cent
in 1951-52 to 15.5 per cent in 1961-62 but then the
share declined to only 5.0 per cent in 1996. During
1990-91, the state Governments had advanced
nearly Rs 350 crore as short-term loan to
agriculture. But the taccavi loan failed to become

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very much popular due to official red tapism and
corruption.

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 Topic No-04
Karnataka APMC Act 2020

On 14 May 2020, the Government of Karnataka

amended the Agriculture Produce Market
Committee Act through the ordinance route.
This Amendment was in line with the wave of
other policy alterations that rode high on the
tide of liberalisation which includes but is not
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limited to Air India, BPCL, PSU Banks and
Defence production. The Agriculture sector that
had earned a leviathan like reputation for
indulging in the blood bath of farmers was
coupled with the economic downward spiral
which exacerbated the already despicable
situation. It caused the Government to arrive at
a conclusion that the future of the agriculture
sector was abysmal and the only panacea to
this was to open up the sector for private
players. In pursuance of the same, the Centre
issued strict instruction to the State
Governments to implement its Model
Agriculture Produce and Livestock Marketing
(Facilitation & Promotion) Act, 2017 and the
Karnataka Government heeded to it and paved
way for a liberalised and deregulated
agricultural sector.

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While the letter of the law-amending ordinance
is not yet out in the public domain, the Chief
Minister informed the media that the
amendment did not take away the powers of
the Agriculture Produce Market Committee
(Hereinafter referred to as APMC) in its entirety
but rather amended two sections of the APMC
Act so as to 1) Limit the powers of the APMCs
and 2) Enable the farmers to sell their produce
directly to the private players. These
amendments although without an iota of doubt
ends the APMC’s monopoly over the farmer’s
produce and reinforces the farmers’ ‘right to
choose’, what is also required to be
conclusively evinced is that the ‘laissez-faire
market’ and ‘freedom to contract’ are
beneficial to the farmers as well as the
economy in the long run. In other words, this
ordinance in order to achieve its objectives

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must secure a green-tick in the checkbox of it
having a rational nexus with the end goals
sought. Therefore, the questions that now
naturally arise are that – Can a farmer have an
equal bargaining power without the
intervention of the APMCs? What are the
potential pitfalls that need to be foreseen and
addressed? and Do these policy changes have
any implications on food security?
Cost-Benefit Analysis of the APMCs:
The role of the APMCs prior to the amendment
was that of being a sole ‘go-to medium’
between the farmers and the traders. The
reason why the concept of APMC was brought
into the picture in 1966 was to ease the burden
of the farmers who had to not just cultivate
crops and tend to it constantly but even paddle
one’s own canoe for selling the agricultural

33
produce. This additional burden was
exacerbated by the middlemen who paid the
farmers much below the market rate. The
APMCs constituted of democratically elected
farmers, traders, warehouse owners etc were
endowed with the duty to preserve the agricultural
produce in the cold storage and auction it the next
day at 2pm. Further, when the Government came
up with the MSP or Minimum Support Price, the
farmer was not in a position to demand it from the
procurer and APMCs played a key role in enforcing
the same. But like Lord Acton has rightly pointed
out that “power corrupts and absolute power
corrupts absolutely”, the APMCs’ too were not an
exception to this and over the years, several
allegations surfaced to the forefront regarding the
lack of its accountability and despite it being
allowed to take commissions only from the traders,
it overstepped and took commissions from the
farmers too. Further, it was also alleged that the

34
Committee indulged in the formation of cartels and
limited the scope of competition. It was drawbacks
as these that the amendments to the APMC Act
sought to avert. These amendments instead of
placing an oversight machinery to act as a watchdog
against the whims of the Committee decided to
make a complete overhaul by limiting APMCs’
jurisdiction to its yard and no further. This move has
effectively abandoned an age-old lesson, learnt
during the 1960s, that the farmers required
government intervention qua APMCs so as to
secure an equitable deal from the traders.

The Rider Attached to Laissez-Faire Agriculture

Sector:
The Chief Minister under the banner of “My Crop,
My Right” hailed the amendment and stated that it
would “double the income” and give effect the
vision of PM Modi’s “No injustice to farmers”.

35
However, the skyline that the Government missed
here was that in a ‘freedom to contract’ system, the
private players would always have an upper hand in
dictating the terms of the contract simply by virtue
of their expertise in commerce and ability to afford
expensive legal services. This disproportionate
influence over the contract can compromise the
welfare of the farmers because a farmer stands in
no position to secure an equitable deal on his own,
owing to his/her poor education and inability to
independently determine the price signals, let alone
his/her ability to understand the nitty-gritty of
contract deals. This calls in for Government
intervention through passing a Model Contract
Farming Bye-law that would require the contracts
between the farmer and private players to comply
with certain provisions such as that of fixed price
floors to safeguard the interests of farmers. The
Bye-laws must also include clauses levying an upper
limit on the quota of agricultural produce a private
player can procure from a single farmer so that it
36
would ensure multiple farmers being benefited
simultaneously.
Sword of Damocles hangs over food security:
Despite dating back to seventy-seven years, the
horrors of Bengal famine ‘engineered’ by a
company that ruthlessly enforced the policy of
making farmers grow commercially viable crops
such as indigo at the trade-off of crops essential for
human consumption runs fresh in the memory of
crores of Indians. Although the present-day
companies are not in a position to coerce the
farmers, they still can exercise a substantial soft-
power over the decision making of the farmers. This
kind of influence is more subtle and indirect
because the companies can incentivise the farmers
to cultivate those crops that would entail an
increased marginal profit for them. The companies
although are per se not coercing the farmers to
grow cash crops trading-off the cultivation of edible
crops, the lure of profit is extremely illustrious

37
especially when the farming community has a
history of being paid below the market rates. For
example, when a farmer selling edible crops will
gain an income much lesser than the profits that
can be gained through cash crops, then any
rationally thinking farmer would choose the latter
over the former. The larger picture here would be
that the food security will be adversely affected
when farmers have a diminished incentive to grow
edible crops. Further, it will lead to an increase in
the demand for edible crops and this, in turn, will
hike the price of consumables and effectively leave
out the majority of below poverty line citizens from
being able to afford basic essentials such as ‘roti
and subji’ for consumption. There is an
overwhelming need for the Government to include
in its Model Contract Farming Bye-law (as suggested
above) provisions that limit the quota of produce a
private player can procure from the farmers so that
no single crop is cultivated neglecting the other
essential crops that are necessary to ensure food
38
security. Without introducing the safeguards, the
Government, in the long run, will be left without
any option but to intervene and subsidise the food
prices to make it accessible; correct the distortion
of food security to restore its availability. But alas
the horse would have already left the barn by that
time and the whole idea of liberalising the
agriculture sector would be rendered as a self-
defeating exercise.
Conclusion:
While the Coronavirus pandemic has left the
Governments reeling about future, the Government
would have done well by taking a birds-eye view to
ascertaining the potential pitfalls that the
liberalisation of the agriculture sector in the present
form would entail. The need of the hour was not to
wash its hands and leave the farmer to fend for
himself but to untie the hands of the farmer and at
the same time instate certain legal safeguards in
order to ensure that the farmer would secure a fair

39
deal out the contract, the private players would not
exploit the laissez-faire market and the food
security would not be held to ransom by profit-
driven agendas.

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 Topic No-05
Pradhan Mantri Fasal Bima
Yojana
The Pradhan Mantri Fasal Bima Yojana (PMFBY)
launched on 18 February 2016 by Prime Minister
Narendra Modi is an insurance service for farmers
for their yields. It was formulated in line with One
Nation–One Scheme theme by replacing earlier
two schemes National Agricultural Insurance
Scheme (NAIS) and Modified National Agricultural
Insurance Scheme (MNAIS) by incorporating their
best features and removing their inherent
drawbacks (shortcomings). It aims to reduce the
premium burden on farmers and ensure early
settlement of crop assurance claim for the full
insured sum.
Objective of the Scheme:

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Pradhan Mantri Fasal Bima Yojana (PMFBY) aims
at supporting sustainable production in agriculture
sector by way of Providing financial support to
farmers suffering crop loss/damage arising out of
unforeseen events.
Stabilizing the income of farmers to ensure their
continuance in farming.
Encouraging farmers to adopt innovative and
modern agricultural practices.
Ensuring flow of credit to the agriculture sector
which will contribute to food security, crop
diversification and enhancing growth and
competitiveness of agriculture sector besides
protecting farmers from production risks.
Implementing Agency:
The Scheme shall be implemented through a multi-
agency framework by selected insurance
companies under the overall guidance & control of
the Department of Agriculture, Cooperation &

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Farmers Welfare (DAC&FW), Ministry of
Agriculture & Farmers Welfare (MoA&FW),
Government of India (GOI) and the concerned
State in co-ordination with various other agencies;
viz Financial Institutions like Commercial Banks,
Co-operative Banks, Regional Rural Banks and their
regulatory bodies, Government Departments viz.
Agriculture, Co-operation, Horticulture, Statistics,
Revenue, Information/Science & Technology,
Panchayati Raj etc.
Coverage of Farmers:
All the farmers growing notified crops in a notified
area during the season who have insurable
interest in the crop are eligible.
Compulsory coverage : The enrollment under the
scheme, subject to possession of insurable interest
on the cultivation of the notified crop in the
notified area, shall be compulsory for following
categories of farmers:

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Farmers in the notified area who possess a Crop
Loan account/KCC account (called as Loanee
Farmers) to whom credit limit is
sanctioned/renewed for the notified crop during
the crop season. and Such other farmers whom the
Government may decide to include from time to
time.
Voluntary coverage : Voluntary coverage may be
obtained by all farmers not covered above,
including Crop KCC/Crop Loan Account holders
whose credit limit is not renewed.
Coverage of Crops:
1.Oil seeds
2.Food crop
3.Annual Commercial / Annual Horticultural crops.
In addition for perennial crops, pilots for coverage
can be taken for those perennial horticultural

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crops for which standard methodology for yield
estimation is available.
Coverage of Risks and Exclusions:
1.Prevented Sowing/Planting/Germination Risk:
Insured area is prevented from
sowing/planting/germination due to deficit rainfall
or adverse seasonal/weather conditions.
2.Standing Crop (Sowing to Harvesting):
Comprehensive risk insurance is provided to cover
yield losses due to non-preventable risks, viz.
Drought, Dry spell, Flood, Inundation, widespread
Pests and Disease attack, Landslides, Fire due to
natural causes, Lightening, Storm, Hailstorm and
Cyclone.
3.Post-Harvest Losses: Coverage is available only
up to a maximum period of two weeks from
harvesting, for those crops which are required to
be dried in cut and spread / small bundled
condition in the field after harvesting against

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specific perils of Hailstorm, Cyclone, Cyclonic rains
and Unseasonal rains
4.Localized Calamities: Loss/damage to notified
insured crops resulting from occurrence of
identified localized risks of Hailstorm, Landslide,
Inundation, Cloud burst and Natural fire due to
lightening affecting isolated farms in the notified
area.
5.Add-on coverage for crop loss due to attack by
wild animals: The States may consider providing
add-on coverage for crop loss due to attack by wild
animals wherever the risk is perceived to be
substantial and is identifiable.
General Exclusions: Losses arising out of war and
nuclear risks, malicious damage and other
preventable risks shall be excluded.
List of insurance companies Edit:
Department of Agriculture Cooperation & Farmers
Welfare has designated/empanelled Agriculture

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Insurance Company of India(AIC) and some private
insurance companies presently to participate in
the Government sponsored agriculture /crop
insurance schemes based on their financial
strength, infrastructure, manpower and expertise
etc. The empaneled insurance companies at
present are:
1.Agriculture Insurance Company of India Ltd.
2.ICICI-Lombard General Insurance Company Ltd.
3.HDFC-ERGO General Insurance Company Ltd.
4.IFFCO-Tokio General Insurance Company Ltd.
5.Cholamandalam MS General Insurance Company
Ltd.
6.Bajaj Allianz General Insurance Company Ltd.
7.Reliance General Insurance Company Ltd.
8.Future Generali India Insurance Company Ltd.
9.Tata-AIG General Insurance Company Ltd.

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10.SBI General Insurance Company Ltd.
11.Universal Sompo General Insurance Company
Ltd.
The only government insurance company on this
list, the Agriculture Insurance Company of India,
exited the scheme after making large gains in the
first year.
Unit of Insurance:
The Scheme shall be implemented on an ‘Area
Approach basis’ i.e., Defined Areas for each
notified crop for widespread calamities with the
assumption that all the insured farmers, in a Unit
of Insurance, to be defined as "Notified Area‟ for a
crop, face similar risk exposures, incur to a large
extent, identical cost of production per hectare,
earn comparable farm income per hectare, and
experience similar extent of crop loss due to the
operation of an insured peril, in the notified area.

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Defined Area (i.e., unit area of insurance) is
Village/Village Panchayat level by whatsoever
name these areas may be called for major crops
and for other crops it may be a unit of size above
the level of Village/Village Panchayat. In due
course of time, the Unit of Insurance can be a Geo-
Fenced/Geo-mapped region having homogeneous
Risk Profile for the notified crop.
For Risks of Localised calamities and Post-Harvest
losses on account of defined peril, the Unit of
Insurance for loss assessment shall be the affected
insured field of the individual farmer.

*****END****

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