Whycropinsuranceschemesfailpoorfarmerswhenthey

areneededthemost
Posta
Comment

ByKP Narayana
Kumar,
ET
Bureau|
26Apr,
2

IftheimageofafarmerhanginghimselffromatreeatJantarMantarintheCapitalhaunts
India,itisbecauseperhapsforthefirsttimeurbanIndiacamefacetofacewithself
destructionthatsofarappearedtobehappeningthousandsofmilesawayinaBharat
cityslickersfounddifficulttoputafingeron.
Andifthousandsoffarmersarekillingthemselvesontheirravagedfields,it'snotjust
becausetheweathergodshavebeenbrutalit'salsobecausetheprotectionfromsuch
climaticflippancy,intermsofcropinsurance,hasfailedthefarmerwhenheneededitthe
most.
Thesuicidesthatarebeingreportedfromfarmsacrossthecountryclearlyindicatethat
theseschemeshavenotfoundenoughtakers.Worse,evenincaseswherethefarmerhas
signedupforapolicy,hemaynotbeeligibletomakeaclaimwhenheisbadlyhiton
accountofloandefaults.

CropinsuranceinIndiaisacontrastingtaleoffraudinregions
wherepenetrationishigh,andofdefaultwhereawarenessand
coveragearelow.

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ResearchdonebyETMagazinesuggeststwomajorflawsapartfromseverallesserevils.
Thetwobiggestproblemswiththedesignoftheseschemesisthat,first,evenextremely
poorfarmersareexpectedtopaythepremium.Second,ifthefarmergetstrappedinacycleofdebtanddefaultsonhisagriculturalloan

towhichhiscropinsuranceschemeislinkedhispolicybecomesinoperative.
ThousandsoffarmerswhohaveopenedinsuranceplansthroughtheKisanCreditCard(KCC)schemeforinstancefindtheycannot
claiminsurancebecauseofunpaidduesontheirbankloan.
Earlierintheweek,ETreportedthathomeministerRajnathSinghiskeentofasttrackthemuchproposedNationalCropIncome
Insurancescheme,whichwillmergeallfarmrelatedinsuranceschemesandprovidecoverforproductionrelatedrisksandprice
volatility.
AsIndiaappearsheadedforyetanotherbelowparmonsoon,thehomeminister'sinitiativeisdoubtlesswelcome,butifthenewschemes
havetobeeffective,thegovernmentmayneedtoplugsomebasicflaws,suggestexpertsETMagazinespoketo.

StateswithLowInsuranceCover(Source:CropInsuranceofficials)
Punjab,Haryana,MadhyaPradesh,WesternUttarPradesh

Farmersheredon'thaveanyknowledgeaboutinsuranceandremainwithoutcover
Smallfarmershavenoincentiveastheyhavetopaythepremium
Inmanycasesfarmershavewrittentobankssayingtheydonotwantinsurance
Thebankshavecompliedwithsuchrequeststomeettargetsalthoughinsuranceisacompulsoryfeatureofagriculturalloanschemes
WhattheExpertsSay:
Thegovernmentneedstolegislateonthesubject,makinginsurancecovercompulsoryThegovernmentshouldpaythepremiumfor
smallfarmers
Holdingagriculturalaswellasbankofficialsaccountableforprocesspertainingtocropinsuranceshouldalsobeapartofthelegislation

StateswithHighLevelsofInsuranceFraud(Source:CropInsuranceofficials)
Maharashtra(AurangabadandJalgaon),Gujarat(Saurashtra),AndhraPradesh(Rayalaseema),Karnataka(DharwadandHaveri),
TamilNadu(NagapattinamandSivaganga)andTelangana(Mahbubnagar)
Coverageintheseregionsishighandsoisfraudulence
Insomedistrictshundredsoffarmersareliterallylivingofffraudulentclaims
TheModusOperandi:

Networksoffarmers,bankofficialsandagriculturedepartmentofficialsruntheserackets
Governmentofficialsshowahigherlosswhilebankofficialshelpfarmersinsurethesamelandrepeatedly

FoodForThought
Thatfarmershavetopaythepremiumhasmetwithabacklashinmultiplestateswithseveralfarmerassociationsevenwritingto
insurancecompaniestonotdebittheinsurancepremium.GiventhatthebanksareunderpressuretomeettargetsfortheKCC,they
decidetowaiveoffthepremiumcomponent.
Accordingtoaseniorofficialwithapublicsectorinsurancecompany,cropinsuranceschemeswerelinkedtofarmloanstoprovide
comprehensivecoverage.Butsincethepremiumhastobepaidbythefarmers,theyprefertodoawaywiththeinsurancecomponent.
"Ifyoutellthefarmerthatthecropinsurancewillstopifyoudefaultonloanrepayments,howisthishelpinghimduringacrisis?Thisis
important,giventhatthestatedecidedtosetupcropinsuranceschemesnotonlytohelpthefarmerbutalsofromafoodsecurity
perspective.Givingaidtosmallfarmersintermsoffinancialstabilityisonewayofensuringfoodsecurity,"saystheofficer.
TheBigDivide
TheseschemeshavealsobroadlycleavedIndiaintotwopartswithonesetofstates,whichareunderpenetrated,reportinglackof
awarenessamongfarmersaboutinsuranceevenasmultiplefraudsarebeingreportedfromthesecondsetofstatesthathavebetter
coverage.
Talkingtovariousexpertswhohaveimplementedtheseschemesontheground,ETMagazinegotasenseofthehugedivide.
AnofficialwhohasworkedonthefieldinseveralnorthIndianstatesforovertwodecadessaidsomestatesthathadanearlyleadin
settingupcooperativebanksandotherinstitutionswereabletoimplementcropinsuranceschemesfaster.Thesestatesalsohavehad
torepeatedlydealwithdrought,cyclonesandothercalamities.
However,strong"localnetworks"offarmers,bankofficialsandagriculturedepartmentofficialshavecorneredalltheseschemesby
perpetratingvariousfrauds.

ThestateswherecropinsurancefraudsarebeingreportedcontinuouslyincludeGujarat,Maharashtra,AndhraPradesh,Karnatakaand
TamilNadu.Accordingtothisofficial,farmersinsomedistrictsinthesestatespayoffofficialshandlingtheyieldassessment.
"InMehsanainGujarat,therewasacasewherethefarmershadcollectedclaimswhichsuggestedthegroundnutyieldwas32quintals
peracre.Butwhenthestategovernmentdidarecheck,theyfoundtheactualyieldwasaround450quintals,"saidthisofficial.
"Therearedistrictsinthecountrywherethefarmersonlyharvestinsuranceclaims."Thedistrictsthatreportcropinsurancefrauds
regularlyincludeDharwadandHaveriinKarnataka,SivagangaandNagapattinaminTamilNadu,AurangabadandJalgaonin
Maharashtra,theSaurashtraregionofGujaratandtheRayalaseemaregionofAndhraPradesh.
Politicalinfluencehasalsoplayedaroleintheacceptanceofmultipleclaimsoverthesameplotofland,whichisthemostcommonform
offraud."Ifyouhaveinfluence,youcangetthebankmanagertosanctionmultipleloansandcropinsurancepoliciesoverthesameplot
underthenamesofvariousmembersofthefamily.Thisisalmostthenorminthesedistricts,"saystheofficial.
InMaharashtra,officialssay,farmerstakeupinsuranceonlyforseasonswhentheyknowtheywouldsufferbiggerlosses.Theyareable
todosobecauseahighcourtorderhasmadecropinsuranceastrictlyvoluntarycomponentoffarmloans.Thereisalsoanampletime
lagbetweenthelastdateforacceptanceofinsurancepolicyapplicationsandthetimeforassessingthemonsoonpattern.
Officialssaythisaffectstheirbusinesscasebecausethepremiumcollectedinthestateisextremelylowwhencomparedtotheclaims.
LackofAwareness
Evenastheinsurancecompanystrugglestodealwithfraudulentclaimsinthesestates,thereexistsanothersetofstateswherethe
coverageispoorandthefarmershavelittleawareness.ThesestatesareledbyPunjabwhichisyettosignupforanycropinsurance
policy.Haryana,westernUttarPradeshandMadhyaPradesharesomeoftheotherstatesthathaveapoorrecordofgettingcrop
insuranceschemesimplemented.

WhenETMagazinevisitedBundelkhandtotakestockoftheconditionoffarmersafterunseasonalrainandhailstormdestroyedcrops
acrossIndia,morethan20farmerssaidthatalthoughtheydidpaypremiumforacoupleofyears,theyhaveneverbeenabletoclaim
insurancemoneydespitesufferinglossesyearafteryear.
AnofficerwithalocalbankthatimplementstheKCCschemesaidthefarmerswerenotawareofhowtheinsuranceschemesworked.
Mostofthem,forinstance,didnotknowthatthepolicybecomesinoperativeiftheydefaultonpayments."Thefarmersdonotknow
anythingabouttheguidelines.Thegovernmenthasalsonotmadeanyefforttomakethemaware.Thisiswhytheseschemesarenot
tooeffective,"thebankmanagersaid.
AnofficialwiththegovernmentinsurancecompanysaidtheaveragesmallfarmerinthecountryisestimatedtoearnaroundRs1,700
permonthanda10%insurancepremiumRs170perbiannualseasonisasubstantialamountforhim.
ExpertsETMagazinespoketosaidIndianeedstolegislateoncropinsurance.Acropinsuranceexpertsuggestedfivebroadpointsfor
aneffectivelegislation.Firstly,banksshouldnotbealloweddiscretionarypowersofdoingawaywithcropinsuranceasacomponentof
farmloans.Secondly,thepremiumcomponentforsmallfarmersshouldbepaidforbythestate.
Also,welltodofarmersshouldnotgetanysubsidyforpremiumsasthiswillalsohelpcurtailfraudspertainingtorepeatclaimsonthe
sameplotofland."Butmostimportantlycropinsurancepoliciesshouldnotcometoahaltwhenafarmerdefaultsonaccountofthe
stressonhim.Whenhegetscontinuousprotectionfromagriculturaldistress,hewillbemotivatedtocontinuewithfarming,"saidthe
expert.

HowLoansGoingBadAlsoResultinUnpaidInsurancePremiums
Farmertakesaloantomeetcostofcultivationandforworkingcapitalinsurancepremiumisdeducted
Drought,floodor,aswasseenrecently,unseasonalrainsdamagethecrop

Thefarmerisunabletorepayloanasaresulttheinsurancepremiumscan'tbepaidinsurancegoestowaste
Farmertakesaloanfromamoneylendertopayoffpreviousloans
Themoneylendergetsaggressiveincaseofdefaultandthreatenshim.Manyatime,thehumiliationcausesthefarmertocommit
suicide