All farmers taking agricultural loans to be offered insurance

The new crop insurance scheme (INCS), expected to get the Cabinet’s nod on Wednesday, would make it mandatory for the banks to offer insurance to those farmers who have taken agricultural loans.

Sources told FE that at present, all the eligible crops loans are not insured by the banks, thus leading to poor coverage of the existing crop insurance schemes. Under the new policy, the banks or insurance companies would be asked to provide crop insurance to those farmers who have not availed agricultural credit.

According to an RBI study, only 12.1% of total crop loan disbursed during 2013–14 had crop insurance cover. “Low awareness about the crop insurance amongst the banks and insurance companies have been a major concern for low coverage,” an agriculture ministry assessment of the existing crop insurances schemes — Modified National Agricultural Insurance Scheme (MNAIS) and Weather Based Crop Insurance Scheme (WBCIS) —  has stated.

“Claims disbursed by crop insurance companies are often not credited to the farmers’ accounts by the banks,” the agriculture ministry note has stated. Under the new policy, banks have to credit the claim received by insurance companies into farmers’ bank accounts within 14 days.

Even the state governments are issuing notifications at the end of the cropping season and requisite communications are not reaching the branches of the concerned banks in the rural areas, thus depriving the farmers from taking crop insurance, the note has said.

“There should be linkage between banks’ agricultural and crop loans database and a centralised database for all banks, and also with insurance companies, so that premium is deducted as soon as loan for eligible crops is disbursed,” an official said.

The NCIS, or Bharatiya Krishi Bima Yojana, would also be aimed at providing crop insurance to at least 50% of the farmers over the next couple of years.

Only 2 crore of an estimated 12 crore farmers in the country had crop insurance cover in 2014-15, even as the facility was just against the cost of cultivation and barely provided any income protection. A major chunk of farmers who took crop insurance were in Rajasthan, Bihar, Uttar Pradesh, Maharashtra, Karnataka and Andhra Pradesh. Around 23% of total cropped area of 194 million hectares is under insurance.

Crop insurance — under the MNAIS and WBCIS — is virtually a non-starter in states like Punjab, Haryana and Odisha that contribute significantly to the central pool stocks of rice and wheat. Only a tiny segment of the farmer community availed of the facility last fiscal in Jharkhand, Tamil Nadu, Telangana, Himachal Pradesh and Kerala.