Hedging against the risk of an uncertain loss is called insurance, in layman’s language, it is protecting you from potential damage. Many of us are aware of the subtleties of these arrangements and have learned to appreciate its significance.
A similar approach has been taken towards the protection of crops from climatic changes, natural disasters, pest attacks etc. Given the fact that harvest is vulnerable to a multitude of uncertainties, crop insurance is considered critical to safeguarding the farmer’s interest.
If it has been around for that long, why is everyone talking about it now?
The answer to that question is two- folds. First and foremost, the last decade has shown that the Mother Nature has its own plans. Erratic rain patterns, floods, earthquakes, droughts and other glitches have led to several crop failures. Farmers are suffering from a major liquidity crunch and many have come under the bus of insolvency too. We need to ensure that our farmers are shielded against such difficulties, now more than ever.
Secondly, the union budget announced an allocation of 5, 500 crore rupees towards crop insurance through Pradhan Mantri Fasal Bima Yojana (Prime Minister Crop Insurance Scheme). A basic structure of the same is presented below: –
- Crops for which past yield data is available.
- All farmers growing such crops in notified areas.
- Mandatory for farmers with Crop Loan Account/ Kisan Credit Card.
The Chain Reaction
The scheme promises the farmers a good deal, where a uniform premium of only 2 per cent has to be paid for Kharif crops, 1.5 per cent for Rabi crops and 5 per cent for horticultural crops. This will provide them with a much-needed support system, in case things go south. Making it mandatory for the farmers who have outstanding loan accounts is a security measure to help lift a load of repayment off their shoulders. This also promotes a flow of agricultural credit and stability of income while ensuring liquidity. Like any other insurance, this creates a pool of resources, funds that need curating by professionals. These generate investment and banking opportunities in this sector. The government has also impaneled Agriculture Insurance Company of India (AIC) and some private insurance companies to implement the scheme. This generates employment opportunities in the service sector.However, let us remind you again why convincing farmers for insurance is different than convincing urban dwellers.
Explaining the role of insurance to farmers who are uneducated and uninformed can be quite a task. Accepting change can be difficult for anyone, especially farmers who are already undergoing a financial crisis. Even though this is a government scheme, crop insurance can be categorized as a product and these agencies would require help selling it. Assistance from someone who the natives trust and relate to. Of course, this someone should be able to plan ahead of time and design an overall marketing strategy. Fortunately, agencies with extensive experience in rural areas exist and are available to help to formulate the strategy in addressing issues with marketers in areas of awareness, penetration, and mobilization for maximum utilization of govt’s highly ambitious crop insurance scheme to benefit farmers.ld.