Crop loss is a common characteristic of agricultural households in rural India. Various factors cause crop losses such as the abnormal behaviour of monsoon, i.e. excessive rainfall or drought, cyclones, lightning, storm, diseases, insects, animals, and so on. Crop insurance acts as mechanism to cope with the problem of crop loss, specifically to reduce the impact of income loss for the agricultural households.

Image Credits: FAS PARI Archives (Amarsinghi, West Bengal)

This blog will draw a general picture of crop loss incurred and crop insurance availed by agricultural households in India using the Situation Assessment Surveys (SAS) and the village studies conducted by the Foundation for Agrarian Studies. For SAS, we focus on the latest two rounds of surveys (2012-13 and 2018-19) and on two crops – paddy and wheat, the two major crops cultivated by agriculture households in kharif and rabi seasons respectively (53 per cent of agricultural households cultivated paddy in July-December, 2018 and 41 per cent cultivated wheat in January-June, 2019).

Crop loss

According to Situation Assessment Survey (SAS), crop loss is defined as the damage in crop output of the major crops harvested by them due to natural calamities like inadequate rainfall/ drought, disease /insect/ animal, flood, and other natural causes. The Situation Assessment Survey (SAS), which were previously conducted for the years 2002-03 and 2012-13, has given the estimate of the crop loss faced by agricultural households for different crops for the first time in its 2018-19 report. The share of agricultural households reporting crop loss ranged from 22 per cent of households cultivating sugarcane to 70 per cent of households cultivating moong in July to December, 2018 (kharif season). For the rabi season (January to June, 2019), crop losses experienced by agricultural households ranged from 25 per cent in paddy to 64 per cent in moong.

More than one-third of the households reported crop loss in the case of paddy during kharif season and wheat during rabi season. The main reasons for crop loss were reported to be natural calamities and diseases. For kharif paddy, almost 60 per cent of crop loss was due to inadequate rainfall or drought and for rabi wheat more than half of the crop loss was due to disease, insect, or animal.

Primary data collected by Foundation for Agrarian Studies (FAS) under the Project on Agrarian Relations in India (PARI) also showed that a significant proportion of households in villages across agro-ecological zones in India incurred crop losses. The effect of crop loss is more severe among poor peasants, tenants, and sharecroppers than among rich peasants, landlords, and capitalist farmers. For example, in Zhapur, a rainfed village in north Karnataka, half of the small farmers incurred crop losses in the survey year as compared to 29 per cent of large farmers. Survey data also show that the common reasons for crop losses in the study villages has been unpredictable natural calamities like drought and flood.

Crop insurance

Crop insurance schemes have been in existence since the mid-1970s in different parts of India. Various national-level schemes have been introduced from the late-1970s, including the Pilot Crop Insurance Scheme (PCIS) (1979-84), Comprehensive Crop Insurance Scheme (CCIS) (1985-1999), and National Agricultural Insurance Scheme (NAIS) and Weather Based Crop Insurance Scheme (WBCIS) introduced in the 2000s. The most recent and ongoing schemes are the Pradhan Mantri Fasal Bima Yojna (PMFBY) and Restructured Weather Based Crop Insurance Scheme (RWBCIS), which were launched by the Government of India in 2016.

The main objective of the PMFBY and RWBCIS is to provide comprehensive insurance cover against failure of the crop, thus helping in stabilising the income of farmer households and encouraging them to adopt innovative practices. These two schemes provide insurance coverage for farmers cultivating specific crops in particular areas and the crops and areas eligible for insurance are notified by States. The mechanism of providing insurance relies on historical data on crop yields and weather parameters. Crop insurance was usually tied to farmers availing credit under Kisan Credit Card or through other methods. But farmers not availing loans may voluntarily opt for coverage at present.

But even after the launching of several new schemes and their existence for more than four decades, the percentage of agricultural households insuring has not increased significantly (Table 1). Less than 5 per cent of agricultural households cultivating paddy and wheat availed crop insurance in 2012-13. In 2018-19, this marginally increased to 8 per cent for paddy and 7 percent for wheat. As seen in Table 1, the proportion of agricultural households opting for crop insurance is much lower than the share of agricultural households reporting crop losses.

The insurance for kharif paddy is the highest in Haryana with 41 per cent. It is followed by Chhattisgarh, Kerala, Tamil Nadu, and Telangana with 34, 26, 26, and 25 per cent of cultivators respectively.  According to SAS 2019, crop loss of kharif paddy was highest in Jharkhand (75 per cent) followed by Himachal Pradesh (67 per cent) but insurance cover for these states are 6.5 and 1.4 per cent respectively. Of those who insured paddy, only 10 per cent received insurance claims in Jharkhand and none received any insurance amount in Himachal Pradesh. These states have reported the highest crop loss even for wheat: 79 per cent in Himachal Pradesh and 51 per cent in Jharkhand. But less than 2 per cent of cultivators were covered by insurance for these crops. Of those who insured wheat, 52 per cent of households received insurance claims in Himachal Pradesh and none received insurance in Jharkhand.

While private companies have pushed crop insurance among farmers in recent years, several issues with settlement of insurance claims have been reported. The recent SAS report, however, does not provide any information about crop insurance provided by the private companies.

Primary data collected by FAS under PARI also showed a very low coverage of crop insurance. Out of 17 villages for which we have data, nine villages did not have any household that availed crop insurance. In the seven out of the other eight villages, less than five per cent of the households had taken crop insurance.

There are several factors behind low coverage of crop insurance. According to SAS 2019, lack of awareness about the crop insurance and its availability are the main reasons for agricultural households not insuring crops. More than 60 per cent of the households cultivating paddy and wheat were not aware of crop insurance or availability of the facility that provided crop insurance in 2018-19.

Keeping in mind the volatility of crop income, the National Commission on Farmers (NCF) suggested that there is a need for cheap crop insurance covering all crops and all agricultural households. The current status of crop insurance shows that only a fraction of households have availed crop insurance and disparities across different regions of India. There is a greater need for improving awareness about crop insurance among agricultural households. Agricultural extension services can play a critical role in providing information about the crop insurance. In an article in the Review of Agrarian Studies, Subhankar Mukherjee and Parthapratim Pal showed that farmers who have attended training or received advice for agriculture from various agricultural extension services are more likely to be aware of the crop insurance than those who did not. But as the SAS itself shows, there has been a decline in farmers accessing public agriculture extension services from 2012-13 to 2018-19. Addressing the concern of low coverage under crop insurance also implies, among other factors, that public investment in extension services are also increased by the state.