CROP INSURANCE
PROGRAMME OF GOI
Perspective of
MNAIS
- RAJENDRA KUMAR TIWARI
Joint Secretary, Department of Agri. & Coop.
Ministry of Agriculture, GOI
Risks affecting Agriculture production– A
Major Challenge
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Vagaries of weather
- rainfall
- temperature
- humidity
- wind
- cyclone
- hailstorm
Pest & diseases
Fire
Quality of inputs
Soil
Market prices
Objectives of Crop Insurance
• To provide insurance coverage and financial support to
the farmers in the event of prevented sowing & failure
of any of the notified crop as a result of natural
calamities, pests & diseases.
• To encourage the farmers to adopt progressive farming
practices, high value in-puts and higher technology in
Agriculture.
• To help stabilize farm incomes, particularly in disaster
years.
HISTORICAL BACKGROUND OF CROP
INSURANCE IN INDIA
• LIC introduced first scheme based on individual approach
in 1972 for cotton in Gujarat,
 Continued up to 1978-79 and covered 3110 farmers
 premium of Rs. 4.54 lakhs and paid claims of Rs. 37.88 lakhs.
• In 1979 Pilot Crop Insurance Scheme (PCIS) was
introduced.
 homogenous area approach limited to loanee farmers.
 13 States implemented till 1984-85,covering 6.27 lakh farmers
 Premium of Rs. 196.95 lakhs and claims of Rs. 157.05 lakhs.
• From Kharif 1985,
Comprehensive Crop Insurance
Scheme (CCIS) was introduced which continued till Kharif
1999.
 The claims ratio was 1 : 5.72.
 CCIS was criticized for limited coverage of farmers, crops and
risks.
• For covering farmer’s, yield and price, Farm Income
Insurance Scheme (FIIS) was also Piloted during Rabi
2003-04 and Kharif 2004 seasons in selected districts
Existing Crop Insurance Schemes
I.
NAIS: yield based; non-actuarial premium
except horticultural crops / annual
commercial crops; underwriting of losses by
Central & State Govt. on 50:50 ratio
II. WBCIS: weather based ; actuarial premium
with premium subsidy shared equally by
Central & State Govt.
III. CPIS: plant based; actuarial premium
IV. MNAIS: yield based; actuarial premium with
premium subsidy shared equally by Central
& State Govt.
NATIONAL AGRICULTURAL
INSURANCE SCHEME (NAIS)
• For improving the scope and content of CCIS a broad
based NAIS was introduced from Rabi 1999-2000.
• NAIS provides for greater coverage of farmers, crops and
risk commitment.
• Premia-structure has been rationalized and the scheme is
required to operate at smaller unit area of insurance.
• Subsidy to Small and Marginal farmers.
• It is presently being implemented by 25 States & 2 Union
Territories
• In last 22 Crop Season:
 Farmers Covered : 17.01 crore ( Av. not more than 15% farmers)
 Premium Collected: Rs. 6213.41 crore
 Claims Paid
: Rs. 20437.21 crore
 Claim ratio
: 3.29
 Loss cost
: 9.86%
State-wise farmers benefited under NAIS
(in lakhs)
90
80
70
60
50
40
30
20
10
0
rs
Othe
r
TN
rh
isga
Cha t
sa
Oris
'nd
Jhar
Biha
WB
Guj
MP
UP
Karn
ra
Andh
Raj
Ma h
Performance of NAIS during XIth Plan
Particulars
2007-08
2008-09
2009-10
2010-11
(Kharif only)
Claims
(Rs.in crore)
1724
3880
4936
Under
process
Farmers
Covered
(in Lakh
184
192
239
114
Farmers
Benefited
(in Lakh)
32
62
88
Under
process
Limitations of NAIS
• Large insurance unit area
• Delay in payment of claims due to late submission of
yield data & availability of Govt. funds
• Pre-sowing/ planting Risk is not covered
• Unattractive basis of calculation of threshold yield,
• Low indemnity level,
• Localised calamities are not covered
• Post Harvest Losses are not covered
• Different seasonality discipline for loanee & nonloanee farmers
• Lack of competition
Main Recommendations of JG Report
• Actuarial premium regime with suitable subsidy
• Reduction in insurance unit area to Gram Panchayat
• Basis of calculation of threshold yield –best 5 of 7
years’ yield
• Higher indemnity levels of 80% & 90%
• Coverage of:
 Pre-sowing & post-harvest losses
 Perennial crops
 Personal accident
 Package insurance policies covering other assets of
farmers, including Animal Husbandry
• Private insurers to be encouraged,
• Exemption from Income Tax & Service Tax so that an
adequate Catastrophic Reserve Fund can be built
Recommendations of other Committees
• National Mission on Sustainable Agriculture (NMSA)
recommended for the following in respect to crop insurance
program:
 Improvements in the existing NAIS w.r.t. calculation of threshold
yield, reduction of insurance unit, on account payment of claims,
etc.
 Promotion of blended/mixed insurance scheme.
 Comprehensive insurance products to address all the needs of
different farming systems.
 Design of Insurance products using weather index.
 Weather Insurance products based on climate change.
• Prime Minister’s Council on Trade & Industry- Sub-Committee
on enhancing Agri Production & food Security has
recommended to Link Agriculture credit with crop insurance to
manage default risks
Major Modifications in NAIS
Sl.
No.
Parameters
NAIS
Modified NAIS
1
Insurance Unit
The defined area may be a
Gram Panchayat, Mandal,
Hobli, Circle, Phirka, Block,
Taluka etc declared by GOS
Village Panchayat for
major crops
2
Threshold yield
Moving average yield of
preceding 3 years for Rice &
wheat and 5 years for other
crops
Average yield of last 7
years excluding upto 2
years of declared natural
calamities
3
Indemnity levels
60%, 80% & 90%
70, 80% and 90%
4
Pre- sowing/
Planting Risk
Presently not covered
Prevented/Failed Sowing
Risk to be covered upto
25% of SI
Major Modifications in NAIS …Cont.
Sl. No.
Parameters
NAIS
Modified NAIS
5
Post Harvest
Losses
Presently not covered
Post harvest losses on account
of cyclones in coastal areas to be
covered
6
Early
Settlement
The claims are settled
based on the final yield
estimates submitted by
GOS
On account settlement of claims
upto 25% of likely total claims
7
Localized
calamities
Presently not covered
Individual assessment of claims
in case of hailstorm and landslide
8
Seasonality
Discipline
Different for loanee and
non-loanee farmers
Uniform seasonality discipline for
loanee and non-loanee farmers
9
Implementing
Agency
AIC
Private insurance companies
with adequate infrastructure and
experience are also allowed
alongwith AIC
Subsidy & Net Premium for Farmers under MNAIS
Sl.N Actuarial
o
Premium
(% of SI)
Subsidy to Farmers
(equally shared by
Central and State
Govt.)
NIL
Premium
payable by
farmers
1
Upto 2%
Upto 2%
2
>2-5%
40% subject to minimum
net premium of 2% of SI
2-3%
3
>5-10%
50% subject to minimum
net premium of 3% of SI
3-5%
4
>10-15%
60% subject to net
premium of 5% of SI
5-6%
5
>15%
75% subject to minimum
net premium of 6% of SI
=>6
MNAIS- Present Status
• Implemented in 34 districts covering 22 States during
Rabi 2010-11 season
• The scheme would be on actuarial regime in which
insurance company will receive premium on
commercial basis and will be responsible for all claims
• GOI & State Govts. will provide premium subsidy upto
a max. of 75% at different slabs of actuarial premium to
make the scheme affordable for farmers
• The coverage in Pilot MNAIS is expected to 25% of
total farmers of 50 districts.
Area Yield Index and Weather
Index: Advantage and Challenges
Area Yield Index
Weather Based Index
All peril covers
(drought, excess rainfall, flood,
pest & diseases)- resulted
yield
Single or sometimes multiple
perils coverrainfall – (excess & deficit),
temperature, relative humidity
Easy to design
Technical challenges in index
design (peril, crop, farming
practices, agro-meteorological
zone etc.)
Low start-up costs
High start-up costs
High loss assessment costs
(CCEs)
Lower loss assessment costs
Slow claims settlement
Faster claims settlement
Major Challenges in implementation of MNAIS

Assessment of crop yield at Gram Panchayat level –

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Strengthening of Crop Cutting Experiments (CCEs) to increase their accuracy,
reliability and timeliness;
Standardization of procedures and manuals (sample size, numbers, process
etc.),
proper manpower allocation/outsourcing, capacity building/ training of field
staffs,
supervision and monitoring of process,
real time reporting of CCEs -through SMS, internet etc.,
computerization of yield data/reporting of CCEs result etc.

Alternative method for yield/loss assessment –
 Use of remote sensing technology
 Normalized Differential Vegetative Index
 MoU was signed between DST and AIC for launching a Pilot project
on Remote sensing technology in Bihar, Karnataka, Rajsthan & UP
 No progress could be achieved due to transfer of concerned experts of
DST

Methodology for yield assessment of multi-picking crops (horticultural &
Commercial)
Major Challenges in implementation of
MNAIS
...cont
 Adequate Automatic Weather Stations (AWSs) – for onaccount payment
 Existing -2000 AWSs (based on uniform distribution),
 Required- 8000 AWSs
• Fiscal Management- shifting of liability from financing post
losses to pre-loses financing i.e. advance subsidy in premium
• Product Designing risk classification (basis risk, Threshold Yield, Indemnity level),
 appropriate weighting/calculation of basis risk (risk rating),
 multi-optional products for the farmers based on their need/choice
(pre-sowing, planting, post-harvest losses)
• Benchmarking/registration before providing government
support
• Rationalization & Standardization of premium rates
• Development of new products – for uncovered crops/areas
Major Challenges in implementation of
MNAIS
…cont
• Evaluation & Monitoring for proper
implementation and further planning &
Policy decision Grievance redressal
mechanism
• Publicity & awareness,
• Coordination amongst all stakeholders
• Clerical mistake
THANKS