Crop Insurance in India

Agricultural production and income from farming is highly risky on account of natural
disasters like droughts, floods, cyclones, uncertain rainfall, temperature variations, attack of pests
and diseases, fire, sale of spurious seeds, fertilizers and pesticides, and market failures.
Agricultural risk is associated with the negative outcomes due to imperfectly predictable
biological, climatic and price variables. With the growing commercialization of agriculture, the
magnitude of risks and loss is increasing.

Advantages of Crop Insurance (i) It stabilizes farm income during period of crop failure
(ii) The farmers can act confidently since there is protection against hazards of farming (iii) It
will prevent the farmers from approaching non-institutional sources for credit during crop
failures (iv) It enhances use of modern inputs which will in turn help to improve productivity (v)
It will motivate farmers to cultivate in high risk areas.

A brief evolution and present status of Indian crop insurance is given below:

1. Program based on ‘individual’ approach (1972-1978): The first ever crop insurance
program started in 1972 on H-4 cotton in Gujarat, and was extended later, to a few other
crops and states. This scheme was based on the “individual approach” and a uniform
guaranteed yield was offered to selected farmers. The major difficulty with the
individual approach was the fixation of guaranteed yield and fair premium rate for each
farmer and each crop.
2. Pilot Crop Insurance Scheme – PCIS (1979-1984): PCIS was introduced on the basis
of report of Prof. V.M. Dandekar and was based on the ‘Homogeneous Area’ approach.
The scheme covered food crops (cereals, millets & pulses), oilseeds, cotton, & potato;
and was confined to borrowing farmers (ST crop loans) and participation was on a
voluntary basis.
3. Comprehensive Crop Insurance Scheme – CCIS (1985-1999): The scheme was an
expansion of PCIS, introduced in 1985 by the Government of India with the active
participation of the state Governments. This was made compulsory for all borrowing
farmers growing specified crops. Premium rates were 2 percent of the sum insured for
 cereals and millets and 1 percent for pulses & oilseeds, with premium and claims, shared
between the Centre and States, in 2:1 ratio. The CCIS suffered from various drawbacks.
4. Experimental Crop Insurance Scheme (ECIS): While in operation attempts were made
from time to time to modify the CCIS as demanded by the states. During 1997 a scheme
viz. Experimental Crop Insurance scheme was introduced from Rabi 1997-98 which was
implemented in 14 districts of five states. The scheme was similar to CCIS except that it
was meant for all small and marginal farmers with 100 per cent subsidy in premium. The
central and state governments shared the premium, subsidy and claims in 4:1 ratio.
5. Sookha Suraksha Kavack (Drought Risk Insurance): Sookha Suraksha Kavach was
specially designed for Rajasthan to cover 23 districts and popular and widely grown
crops like guar, bajra, maize, jowar, soybean and groundnut.
6. National Agricultural Insurance Scheme (NAIS) : This scheme was implemented in
the country since 1999-2000 season with the objective of providing financial support to
farmers in the event of failure of crops as a result of natural calamities, pests, and
diseases and is implemented by the Agricultural Insurance Company (AIC) of India Ltd.
This scheme provides for greater coverage as it is available to both loanees (borrowers)
and nonloanees (non-borrowers) and also extended to commercial and horticultural crops.
While it is compulsory for the borrower farmers it is optional for the non-borrower
farmers. The area approach is followed with individual assessment in the case of
localized calamities on experimentation basis.
7. Pilot Weather Based Crop Insurance Scheme (WBCIS): Efforts have been made to
bring more farmers under the fold of Crop Insurance by introducing a Weather-based
Crop Insurance Scheme (WBCIS) from the Kharif, 2007 season in selected areas on a
pilot basis. WBCIS is intended to provide insurance protection to the farmers against
adverse weather incidence, such as deficit and excess rainfall, high or low temperature,
humidity, etc. which are deemed to impact adversely the crop production.
8. Weather Based Crop Insurance Scheme (WBCIS): Weather Based Crop Insurance
Scheme (WBCIS) is a unique weather based insurance product designed to provide
insurance protection against losses in crop yield resulting from adverse weather
incidences. In provides pay-out against adverse rainfall incidence (both deficit and
excess) during Kharif and adverse incidence in weather parameters like frost, heat,
 relative humidity, un-seasonal rains etc. during rabi season. Reference Unit Area -
Weather Based Crop Insurance Scheme (WBCIS) operates on the concept of area
approach.
Advantages of WBCIS
a. Trigger events like adverse weather can be independently verified and measured.
b. It allows speedy settlement of claims
c. All farmers can buy WBCIS
d. Government provides subsidy in premium and hence premium payable is affordable
e. It provides transparent, fully objective, efficient and direct pay-outs for adverse
weather incidences
f. Insured is not required to submit claim form or other documents as proof for loss
g. Since the weather data decides the compensation the insured is willing to put extra
effort for getting better yield of crop.

Disadvantage: Lack of large number of automated weather stations is a hindrance to

speedy claim settlements and is a negative aspect of the WBCIS.

9. Modified National Agricultural Insurance Scheme (MNAIS)

❖ Implemented in 2010 in Rabi season

❖ features are same as that of NAIS with some Major improvements:

i. unit area of insurance reduced to village panchayat level for major crops

ii. 25 % advance of likely claims is paid as immediate relief

iii. More proficient basis for calculation of threshold yield,

iv. Allows private sector insurers to participate

10. PMFBY(Pradhan Mantri Fasal Bima Yojana)

❖ The scheme was introduced by the Ministry of Agriculture and Farmer’s Welfare,
Government of India on 18 February 2016.
Crops covered:
▪ Oilseeds
 ▪ Food crops (millets, cereals and pulses)
▪ Annual horticultural crops
Farmers covered:
▪ Compulsory inclusion of all farmers who are growing crops in the notified areas and
whose crops are eligible for insurance.
▪ These farmers should also have a crop loan account whose credit limit is renewed from
season to season.
▪ There is also voluntary coverage of those farmers without crop loan account or whose
credit is not renewed.
Basis for implementation:
▪ The scheme has been implemented on the basis of “Area Approach”