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Updated: September 8, 2010 11:02 IST

A risky business called farming

A. Narayanamoorthy
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Thanks to the green revolution of the mid-Sixties, Indian agriculture has made rapid progress in raising the production and productivity of different crops. Foodgrain production has increased from around 60 million tonnes in early 1960s to over 210 million tonnes today. But studies show that over the years farmers have not been able even to recover the cost because of the higher risk in cultivation and the uncertainty in price.

The risks the farming community faces are many; they relate to natural calamities such as drought and floods, high fluctuation in the prices of output, domination by middlemen, spurious inputs, and so on. Of late, there have been many cases of desperate farmers ending their lives in different parts of the country.

Recognising the risk faced by farmers, the Government of India has been making efforts to reduce the income-related risk through direct and indirect interventions. Agricultural insurance is one among them. This book, using both primary and secondary data, aims at identifying the problems and discusses the prospects of agricultural insurance in India. It also suggests ways of improving the coverage and effectiveness of the scheme.

Fluctuations in prices

After making out a case for insuring agriculture in the introductory chapter, the authors proceed to chart the fluctuations in the prices and yields of different crops both at the national and State levels. The data show that yield-related risk increased in respect of all the crops, except wheat where it declined over a period of time. A reliable irrigation facility appears to have mitigated the risk in some States. But the question is whether the extent of risk farmers face can be determined solely on the basis of area or yield? For instance, there is the income-linked risk — due to the vagaries of the market — to reckon with, an area of no less concern. The authors should have looked at this aspect and come up with an assessment of the situation using the data made available by the Commission for Agricultural Costs and Prices.

Not viable

On a critical study of the various schemes tried out in the past, the authors affirm that agricultural insurance has not made much headway. The coverage in terms of farmers, area, and value of output has been very limited. Most of the schemes have not been viable.

zThey seem to believe that the remedy lies in bringing more private operators into the field. Will the private sector be ready to get into agricultural insurance where the rate of premium (in the case of most crops) is low? If there are natural calamities like droughts and floods, will they be able to compensate the farmers adequately? In any case, it is essential to study these issues in the Indian context, before calling for greater private involvement.

A noteworthy chapter is the one on farmers' perceptions of agricultural insurance. During field studies in two districts of Andhra Pradesh, some 150 farmers were asked the question, to what extent they would like the insurance agency to bear the crop loss.

The data reveal that they wanted the loss to be shared in the ratio of 82:18 between the insurer and the farmer. Given this, one wonders how many private companies will be inclined to enter agricultural insurance.

The stark reality is that the marginal and small farmers, who constitute over 70 per cent of the total agricultural community in India, desperately need protection from both the market and non-market shocks and fluctuations. For them, insurance will mean better livelihood security and production activity, which in turn will lead to a better recovery of institutional credit and more investment in agriculture.

The imperative therefore is greater attention on reducing the income-related risk of the farmers through an insurance scheme that does not demand much from them by way premium. In this book, many of the issues related to the problem are discussed in a manner that may be useful to policymakers and researchers.

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