Agri Insurance Schemes In India – A Full Guide

Introduction: Hello farmers, today we are here with the details of  agri insurance or crop insurance schemes in India. Agriculture remains the main sector of the Indian economy. Agricultural insurance is also called Crop insurance. Crop insurance is the main component of the agriculture sector, especially in a country such as India, where the majority of farmers are small and marginal with low savings that reduce their capability to weather agricultural risks.

The agriculture sector is demographically the most important and broadest economic sector in India. Even a marginal dip in the agricultural production has trickled down the result on the whole economy. The variation in production is directly affected by several unfavorable conditions such as pest attacks, variations in weather conditions such as rainfall, temperature, humidity, etc. Therefore, the need of the hour is to secure the yield and yield-based losses.

A step by step guide to Agri insurance in India

Crop Insurance Schemes.
Crop Insurance Schemes.

Agricultural insurance in India is by which farmers can stabilize farm income and investment against the disastrous result of losses due to natural hazards or low market prices. Crop insurance not only stabilizes the farm income but also helps the farmers to start production after a bad agricultural year. It cushions the shock of crop losses by providing farmers with the least amount of protection. It spreads the crop losses over space and time and helps farmers create more investments in agriculture.

Agricultural insurance, in general, has not been so successful across the globe in different countries. Policymakers have unrolled various avatars of agricultural insurance at different times. Considering the unique nature of Indian agriculture and the inequitable socio-economic status of Indian farmers, crop insurance has remained a failed attempt in general.

Objectives of Agricultural insurance scheme

The objectives of Agricultural insurance are given below;

  • To give financial support to the farmers in the event of failure of any of the notified crops as an effect of natural calamities, pests, and diseases.
  • To restore the creditworthiness of farmers arising out of crop losses leading to nonpayment of crop loans.
  • To encourage the farmers to adopt progressive practices, high-value inputs in Agriculture crops.
  • To help stabilize farm incomes, mainly in disaster years.

The need for Crop insurance

Every year, in one part of India or the other food crops, are mainly affected by natural calamities. Crop yield instability is the normal form and agriculture continues still to be which the farmer’s fortunes are exposed, is practically the same as before. Good and bad years, wet weather and drought or floods and frost, low yields and bumper crops are to be expected in mixed succession.

The advantages of crop insurance are given below;

  • Agriculture insurance protects farmers against losses caused by crop failure. This insurance acts like a tool that allows farmers to manage their yield and price risks.
  • Farmers can repay their loans even during the crop failure time with the support of the right insurance partner.
  • Crop insurance or Agriculture insurance protects farmers against a production loss for crops. It offers preventive planting and replants security.
  • Insurance companies give awareness campaigns to help farmers understand the effect of natural calamities and also protect their farms.
  • Crop insurance also strengthens the position of co-operatives and other institutions that finance, agriculture to the extent it enables the farmer members to repay their loans in years of crop failure.
  • By protecting the economic interest of the farmers against possible risks, it accelerates the adoption of new agricultural practices.
  • Crop insurance encourages farmers to adopt modern and innovative agriculture practices that further increase their income.

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Various crops covered under the Agriculture insurance schemes

National Agricultural Insurance Scheme (NAIS) and the Modified National Agriculture Insurance Scheme (MNAIS) cover cereals, millets, pulses, oilseeds, Annual Commercial or Annual Horticultural crops. The crops are selected for Agriculture insurance if the past yield data for ten years are obtainable, and the State government agrees to conduct a requisite number of yield estimation surveys to estimate the yields for the proposed season. However, almost any crop can be covered under Weather Based Crop Insurance Scheme (WBCIS) for which a broad correlation can be established between weather parameters and anticipated loss in crop yield.

The major categories of Agricultural insurance

There are two major categories of Agricultural insurance;

  • Single and
  • Multi-peril coverage

Single peril coverage offers protection from single hazards and multiple-peril protects from several hazards.

Types of Crop insurance will be given below;

Multiple Peril Crop Insurance – Provides financial coverage to manage risks arising from weather-related losses, such as a flood, and drought, etc.

Actual Production History – Covers losses due to wind, hail, insects and also includes coverage for lower yield and compensates for the difference between the estimate and the real

Crop Revenue Coverage – This is based not only on the crop yield but on the total revenue produced from this yield. In case of a drop in crop price, the difference is covered by this kind of crop insurance.

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Agri insurance/Crop insurance functions

  • Policy seeker can get food crops, oilseeds, annual commercial crops insured under crop insurance by submitting the necessary documents and paying the premium accordingly,
  • But one must select a policy after evaluating the risks and comparing the different policies and companies,
  • Sum insured will be decided on several factors, such as the type of crop, location, and calamity years in that area and historical yield data,
  • In the case of crop loss, the insured wants to intimate the insurance company or local agriculture department within 72 hours of calamity,
  • Claims under Agriculture insurance are done based on localized losses, post-harvest loss, mid-season calamity, and widespread calamities. Therefore, the pay-out will be calculated by taking factors like weather and yield per hectare.

Following are the stages of the crop loss are covered under crop insurance;

Localized calamities – It covers localized calamities and risks such as hailstorm, landslide affecting isolated farms in the notified area.

Sowing, Planting, and Germination risk – Any problem in planting and sowing because of deficit rainfall or adverse seasonal conditions.

Standing crop loss – Comprehensive risk insurance to cover yield losses because of non-preventable risks, for example, dry spells, flood, hailstorm, cyclone, typhoon.

Post-harvest losses – It covers losses for up to a maximum period of 2 weeks from harvesting.

Various risks covered under the Agri insurance or Crop insurance scheme

The Crop insurance scheme provides comprehensive risk insurance for yield losses due to;

Natural Fire and Lightening, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood, Inundation and Landslide, Drought, Dry spells, Pests, and Diseases, etc. in Area-Yield Index insurance Schemes and Weather indices under Weather Index-based crop insurance Scheme.

The different schemes under Agri insurance

National Agricultural Insurance Scheme (NAIS)

The Scheme was introduced during Rabi 1999-2000 season replacing Comprehensive Crop Insurance Scheme or CCIS. The Scheme was to protect the farmers against the losses suffered by them due to crop failure on account of natural calamities such as drought, flood, hailstorm, cyclone, fire, pest, and diseases, etc., to indemnify the losses and restore their creditworthiness for the ensuing season.

Modified National Agri Insurance Scheme (MNAIS)

The objectives of the MNAIS scheme are as under;

  • To provide insurance coverage and financial support to the farmers in the event of prevented sowing and failure of any of the notified crop as an effect of natural calamities, pests & diseases.
  • To support the farmers to adopt progressive farming practices, high-value inputs and better technology in Agriculture.
  • To help stabilize farm incomes, mainly in disaster years.
Weather Based Crop Insurance Scheme (WBCIS)

WBCIS aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from the incidence of adverse conditions of weather parameters like rainfall, temperature, frost, humidity, etc.

Weather-based Crop Insurance Scheme (WBCIS) is a unique Weather-based Insurance Product designed to give insurance protection against losses in crop yield resulting from adverse weather incidences. It provides payout against adverse rainfall during Kharif and adverse incidence in weather parameters such as frost, heat, relative humidity, and un-seasonal rainfall, etc.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

Indian agriculture is extremely vulnerable to climate change and largely dependent on the monsoon. Drought, unseasonal rains, cyclones, hailstorms, floods, and climate extremes have brought huge losses to the farmers. Crop insurance is a reasonable result in the losses arising out of these events. The Pradhan Mantri Fasal Bima Yojana provides monetary compensation to losses arising out of climate risks and due to pests and diseases.

Features of the PMFBY

Coverage of Farmers – The PMFBY scheme covers loanee farmers (those who have taken a loan), non-loanee farmers (voluntarily), tenant farmers, and sharecroppers.

Coverage of Crops – Every state has major crops for the Rabi and Kharif seasons. The premium rates differ across seasons.

Area-based Insurance Unit – This unit operates on an area approach. Thus, all farmers in a particular area should pay the same premium and have the same claim payments. The area unit approach reduces the risk of moral hazard and adverse selection.

Coverage of Risks – It aims to prevent sowing or planting risks, loss to standing crop, post-harvest losses and localized calamities. The sum insured is approximately equal to the cost of cultivation per hectare, multiplied by the area of the notified crop proposed by the farmer for insurance.

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