Working Paper No. 352 - ICRIER

1 Working Paper No. 352 Crop insurance in india : Key Issues and Way Forward Ashok Gulati Prerna Terway Siraj Hussain February 2018 INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS Table of Contents List of Abbreviations .. i Acknowledgement .. iii Abstract .. iv Executive Summary .. v 1. Introduction .. 1 2. Evolution of Crop insurance Schemes in india .. 4 Crop insurance in india The beginning .. 4 Pradhan Mantri Fasal Bima Yojana (PMFBY) - Kharif 2016 onwards .. 4 3. Evaluation of the Performance of crop insurance schemes .. 5 Rolling out PMFBY: Experience of Kharif 2016 and Rabi 2016-17.

2 7 Challenges in the Implementation of PMFBY .. 13 4. Learning from International Best Practices .. 20 Crop insurance in USA .. 20 Farm bill 2014 .. 21 Crop insurance in China .. 22 Government Support in Agriculture insurance .. 24 Agriculture Reinsurance .. 24 AIR Worldwide .. 24 Crop insurance in Kenya- Kilimo Salama .. 25 Progress of the scheme .. 26 Lessons for india .. 26 5. Role of Technology in Crop insurance .. 27 Application of Satellites in 27 Application of Drones in Agriculture .. 28 Low Earth Orbits (LEO) .. 29 Planet Labs.

3 30 Government of india s Programmes of use of Satellite Data for Agriculture .. 30 Remote sensing-based Information and insurance for Crops in Emerging Economies (RIICE) .. 30 6. Conclusions and Policy Recommendations .. 31 References .. 39 Annexures .. 41 List of Tables Table 1a: Farmers Covered (million) under NAIS, WBCIS, MNAIS and PMFBY (Kharif 2013 to Kharif 2016) .. 8 Table 1b: Farmers Covered (million) under NAIS, WBCIS, MNAIS and PMFBY (Rabi 2012-13 to Rabi 2016-17) .. 8 Table 2a: Area Insured (million ha.) under NAIS, WBCIS, MNAIS and PMFBY (Kharif 2012 to Kharif 2016).

4 9 Table 2b: Area Insured (million ha.) under NAIS, WBCIS, MNAIS and PMFBY (Rabi 2012-13 to Rabi 2016-17) .. 10 Table 3a: Gross Premium (Rs crore) under NAIS, WBCIS, MNAIS and PMFBY (Kharif 2012 to Kharif 2016) .. 11 Table 3b: Gross Premium (Rs crore) under NAIS, WBCIS, MNAIS and PMFBY (Rabi 2012-13 to Rabi 2016-17) .. 11 Table 4a: Sum Insured (Rs crore) under NAIS, WBCIS, MNAIS and PMFBY (Kharif 2013 to Kharif 2016) .. 12 Table 4b: Sum Insured (Rs crore) under NAIS, WBCIS, MNAIS and PMFBY (Rabi 2012-13 to Rabi 2016-17) .. 12 Table 5a: Sum Insured (Rs) per hectare under NAIS, MNAIS and PMFBY (Kharif 2012 to Kharif 2016).

5 12 Table 5b: Sum Insured (Rs) per hectare under NAIS, MNAIS and PMFBY (Rabi 2012-13 to Rabi 2016-17) .. 13 Table 6a: Gross Premium as a Percentage of Sum Insured (Kharif 2012 to Kharif 2016) .. 13 Table 6b: Gross Premium as a percentage of Sum insured (Rabi 2012-13 to Rabi 2016-17) .. 13 Table 7: Comparison between NAIS, MNAIS and PMFBYs .. 18 Table 8: Area Insured and Premiums paid by the Government (USA) .. 21 Table 9: Premium Subsidy given by the Central and Provincial Government .. 24 List of Figures Figure 1: Average Annual Growth Rate (%) and Coefficient of Variation of GSDP Agriculture (2005-06 to 2014-15).

6 2 Figure 2: Total Premium Paid and Claims Received from Agriculture insurance (2001-2013) .. 23 Figure 3: Representation of Replanting Guarantee .. 26 Figure 4: Area under Crop insurance in india , China and USA .. 32 Figure 5: Gross Premium and Sum Insured (all schemes combined) under Crop insurance .. 34 i List of Abbreviations ADWDRS agricultural Debt Waiver and Debt Relief Scheme AIC Agriculture insurance Company of india Limited ARC Agriculture Risk Coverage AWS Automatic Weather Stations CCIS Comprehensive Crop insurance Scheme CCE Crop Cutting Experiment CHAMAN Coordinated Horticulture Assessment and Management using geo informatics CPIS Coconut Palm insurance Scheme DACFW Department of Agriculture, Cooperation and Farmers Welfare.

7 GoI DLTC District Level Technical Committee ESA European Space Agency FAA Federal Aviation Administration FCIC Federal Crop insurance Corporation FCIP Federal Crop insurance Program FCOS Food Crops and Oilseeds FIIS Farm Income insurance Scheme F&V Fruits and Vegetables GPS Global Positioning System GoI Government of india IA Implementing Agency IASRI Indian agricultural Statistical Research Institute ISRO Indian Space Research Organisation IRDA insurance Regulatory and Development Authority ii LEO Low Earth Orbits MNAIS Modified National Agriculture insurance Scheme MSP Minimum Support Price MPCI Multiple Peril Crop insurance NAIS National Agriculture insurance Scheme NCIP Nation Crop insurance Programme NADAMS National agricultural Drought Assessment and Monitoring System NSSO National Sample Survey Organisation PCICC Peoples Crop insurance Company of China PLC Price Loss Coverage PMFBY Pradhan Mantri Fasal Bima Yojana RIICE Remote sensing-based Information and insurance for Crops in Emerging economies RMA Risk Management

8 Agency RST Remote Sensing Technology RUA Reference Unit Area RWBCIS Restructured Weather Based Crop insurance Scheme RWS Reference Weather Station SLCCCI State Level Co-ordination Committee on Crop insurance SFSA Syngenta Foundation for Sustainable Agriculture SoF Scale of Finance STAX Stacked Income Protection Plan UAV Unmanned Aerial Vehicle WBCIS Weather Based Crop insurance Scheme iii Acknowledgement The research leading to this Paper was undertaken at ICRIER as a part of the project Supporting Indian Farms the Smart Way: Rationalising Subsidies and Investments for Faster, Inclusive and Sustainable Growth".

9 The project is supported by Syngenta Foundation to which we are grateful. We would like to thank Dr. Marco Ferroni, Dr. Yuan Zhou, and Baskar Reddy, of Syngenta Foundation for Sustainable Agriculture for their detailed and very useful comments. The authors would like to acknowledge the invaluable comments from officers of various insurance companies, Dr. Ashish Kumar Bhutani, Joint Secretary (Credit and Cooperation), Government of india , Dr. Shibendu S. Ray, Director of Mahalanobis National Crop Forecast Centre, Scott Sindelar, former Minister Counselor, Department of Agriculture, Embassy in india , Rajeev Chawla, Additional Chief Secretary, Karnataka and Vinod Kumar Singh, Directorate of Economics and Statistics, Uttar Pradesh.

10 Our special thanks are due to Prof. Anwarul Hoda, Chair Professor of ICRIER s Trade Policy and WTO Research Programme and Mr Umesh Mongia, Associate Vice President at ICICI Lombard General insurance Company Limited for their helpful comments and suggestions to improve the Paper . Needless to say, the authors are fully responsible for the analysis carried out and views expressed in the Paper . iv Abstract Farmers in india are exposed to large agriculture risks due to vagaries of nature. One of the most effective mechanisms to mitigate agricultural risks is to have a robust insurance system.