Gaurang Karmakar


This paper provides a comprehensive survey of the baby steps taken in India since 1947 to help smallholder farmers with a safety net to absorb crop losses. With reducing farm sizes (average size is 1.28 acres), 82% of farmers have farm sizes less than 2 hectares and their income levels are sub-optimal. 65% of farmers depend on rainfed irrigation and derisking smallholder farmers is of paramount interest, especially when 51% of farmers have no bank account and are financially excluded. Our food security is an issue in the face of rising input costs (seeds, fertilizers, diesel oil, electricity etc.) and with farmers committing suicide, there is a need to redesign our agricultural insurance schemes with quicker payouts and which are farmer friendly.

The pioneering efforts of Mr. J.S. Chakravarti in designing a weather-based cropinsurance scheme in 1920 and the dogged persistence of Prof. V.M. Dandekar in finalizing a homogenous area yield approach for crop insurance, deserves unstinted praise from all. The GIC Experimental Crop Insurance Scheme (1979-85), followed by the Comprehensive Crop Insurance Scheme (1985-98) and the ongoing National Agricultural Insurance Scheme or NAIS (since1999) have helped in derisking the small holder farmer to some extent. The Weather-Based Crop Insurance Scheme (WBCIS), pioneered by private insurers in a few districts of the country (since 2003) and AIC of India‘s Varsha Beema Scheme (2007 onwards) in 100 districts have been very helpful to the small holder farmer with quicker payouts in times of financial stress due to monsoon failure.

As high basis-risk is one of the greatest drawbacks of the NAIS, with states notifying larger insurance units, the WBCIS depends upon the availability of standardised rain gauge stations at the village/ taluka (block)/ district levels. The paper then analyses the various requirements of a well-designed crop insurance scheme from a theoretical viewpoint and discusses steps taken by various other countries to meet the safety net requirements of their farmers. A conceptual framework for insurance stabilisation has also been attempted in the Indian context. The inevitable conclusion is that redesign of the existing crop insurance schemes (NAIS, WBCIS etc.) is long overdue and the Government of India needs to take immediate steps to revamp the scheme with the help of AICI/ GIC.


smallholder farmer, crop-insurance, NAIS, WBCIS, actuarial evaluation, risk mitigation

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