An Overview of Agriculture Insurance in India

Dr. Rajiv Mehta

Adviser
Department of Agriculture and Cooperation
Ministry of Agriculture
Govt. of India
Expert Meeting on Requirements of Catastrophe Insurance and Weather Risk
Management Markets
World Meteorological Organisation
Geneva
5th to 7th December 2007

Vulnerability of Agriculture
Large population dependence
o
o
o
o

In India, 70% population rural

Two third livelihood depends on agriculture and allied activities
120 Million farm holdings
107 million agriculture labour

Weak asset base

o Average size of operational holdings : 1.32 Hectares
o 82% Holdings Small and marginal (2 or less than 2 hectares)
o Human asset - Skill, education, health, information

Climate and Market aberrations

o
o
o
o
o

60 percent agriculture rain dependent

Diversity of climatic conditions
Occurrence of floods, droughts, pests
Logistics and connectivity (600 thousand villages)
Market vulnerability disadvantage in price realisation

Annual Rainfall Distribution

North East Monsoon

74%

(Oct Dec )
13%

3%

Winter
( Jan - Feb)

10%
Pre Monsoon
South West Monsoon
(June -Sept)

( Mar May )

Spatial Distribution of Rainfall

Very High Rainfall Zone
8%

(Above 2000 mm)

High Rainfall Zone

(1125 2000 mm)

33%
24%

Medium Rainfall Zone

(750 to 1125 mm)

Low Rainfall Zone

(Less than 750 mm)

35%

Diversity of
Cropping Pattern
Geographical Area:
Net Cropped Area :
Gross Cropped Area:
Gross irrigated Area :

328
141
191
78

(in Million HA)

Drought 2002

Monsoon Aberration 2002

July 2002 rainfall deficiency :

- 49%

Monsoon 2002 rainfall deficiency :

- 19%

21 out of 36 Met-Subdivisions received deficient/scanty rainfall

Drought 2002

Socio Economic Impact

Spread 1.8 million square kilometers

300 million people affected
700 million cattle Affected
Crop Area Affected - 62 million hectares
(30% of total crop area)

Food-grains Production fall - 24 million tonnes

from normal (12%)

Drinking water shortage - 120,000 rural habitations

and 500 Towns/ Cities
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Genesis of Crop Insurance in India

Vital for stable agricultural growth and risk management
Modalities of crop insurance
Individual approach
Necessitates reliable and accurate data of crop yields of individual farmers for
a sufficiently long period
Moral Hazards

Homogenous area approach

Comprehensive Crop Insurance Scheme (CCIS) 1986

National Agricultural Insurance Scheme (NAIS) 1999-2000
Agriculture Insurance Company of India Limited (AIC)

Incorporated in
December 2002
Authorized Share Capital :
Rs 15 Billions (USD 375 Millions)
Paid-up Capital
Rs 2 Billions (USD 50 Millions)
Share holders Lead Public Insurance Companies and NABARD

Rainfall Insurance

National Agricultural Insurance Scheme (NAIS)

To provide insurance coverage and financial support to

the farmers in the event of 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 inputs and higher technology in
Agriculture.

To help stabilise farm incomes, particularly in disaster

years.
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NAIS Eligibility and Coverage

Food crops (Cereals, Millets & Pulses), Oilseeds, Sugarcane,
Cotton & Potato (Annual Commercial / annual Horticultural
crops)
Availability of past yield data based on Crop Cutting Experiments (CCEs)
Requisite number of CCEs are conducted for estimating the yield during
the proposed season

All farmers including sharecroppers, tenant farmers growing the

notified crops in the notified areas are eligible for coverage
Compulsory for Loanee farmers
Voluntary for others
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NAIS - RISKS COVERED & EXCLUSIONS

Comprehensive risk cover of yield losses due to non preventable
risks,

Natural Fire and Lightning

Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
Flood, Inundation and Landslide
Drought, Dry spells
Pests/ Diseases etc.

Losses arising out of war & nuclear risks, malicious damage &
other preventable risks excluded.
Sum Insured (SI)
extend to the value of the Threshold Yield (TY) of the insured crop at the
option of the insured farmers
beyond value of Threshold Yield level upto 150% of Average Yield (AY) of
notified area on payment of premium at commercial rates
Loanee farmers the Sum Insured would be at least equal to the amount of
crop loan advanced
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Premium Rates
1.5 % to 3.5 % of SI or Actuarial, which ever is less
50% premium subsidy to small and marginal farmers
Seasonality discipline
Indemnity
Area Approach
Shortfall in Yield X Sum Insured for the farmer Threshold
yield
Specific localised risk (Hail, floods, cyclone)
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NAIS
Business Statistics 1999-2000 to Kharif 2005

FARMERS COVERED
AREA
SUM INSURED
PREMIUM
SUBSIDY
TOTAL CLAIMS
CLAIMS PAID
CLAIMS PAYABLE
FARMERS BENEFITTED

Millions
Million HA
Rs. Billion
Rs. Billion
Rs. Billion
Rs. Billion
Rs. Billion
Rs. Billion
Millions

75.08
121.99
706.91
22.25
2.40
64.71
58.95
5.76
19.74
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Weather Based Crop Insurance Scheme (Pilot 2007)

Trigger: moisture/water requirement of Crop to produce

a standard yield ( Groundnut )
Trigger Stages for Rainfall deficiency
1. Sowing & Germination :
2.
Vegetative phase:
3.
Flowering & Pegging:
4.
Pod formation & Maturity:
Trigger Stages for Excess Rainfall
1. Flowering and Pegging
2. Pod Formation and Maturity:

Total Sum Insured Rs 15,000 per hectare

Premium capped at Rs 525 per hectare
Commercial and capped premium difference subsidized
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Automatic Weather Stations to measure rainfall

Weather Based Crop Insurance Scheme

(Pilot 2007)
Trigger for Rainfall Deficiency
(Pilot Karnataka, District Haveri, Crop Ground Nut)
SL

CROP STAGE

CALENDAR
PERIOD

TRIGGER
(mm)

EXIT
(mm)

Sowing &
Germination
(21 days)

10th 30th
June

Vegetative phase
(31 days)
Flowering &
Pegging
(31 days)
Pod Formation &
Maturity
(45 days)

1st 15th July

16th 31st July
1st 15th Aug
16th 31st Aug

30 mm
over any 3
consecutive
days
25
25
40
40
80

3
4

1st Sept 15th

Oct

10
mm

PAYOUT
(Rs./mm)
Rs. 100
per mm

MAX.
PAY
OUT
Rs. 2000

5
5
10
15

Rs. 125
Rs. 125
Rs. 100
Rs. 120

Rs. 2500

30

Rs.70

Rs. 3500

Rs. 3000

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THANKS
Contact email: rajivmehta2003@rediffmail.com

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