Managing agricultural risk through Crop Insurance in Maharashtra- Institutional framework and its acceptance amongst farmers in the Ahmednagar district.

Bidisha Sinha

Agriculture, in India, is highly dependent on climatic conditions and has suffered in recent times due to erratic, frequent and severe climate change, bringing the sector to a precipice of heightened risk. Agriculture, being the mainstay of close to 60% of the Indian population, is of utmost requirement that a financial resilience be built, in order to cope with these risks. Crop Insurance is a risk management tool that agricultural producers can use to this end. Such insurances are commonly government supported programs, often with heavy subsidization of the premium amounts with the involvement of private insurance agencies in the distribution process. Since this is a growing sector with multiple stakeholders, it is required that early observations be made and implemented to create efficient working of this extremely important climate financing method.
The Objective of the study is to identify the factors that affect the behavior of farmers in Maharashtra towards opting for Crop insurance. This brings us closer to having a clearer understanding of the various Institutional Enablers and Barriers towards a fully functional insurance system in Maharashtra. Also it is important to understand how can the farmer's and institutional status be combined and modified for a functional system towards reduction of farmer vulnerability from climatic risks. However, in the Indian context, this tool is still developing and is sub-optimal in addressing farmer grievances. This study, therefore, aims to supplement the present understanding of this sector to identify the crevices of implementation, design and reception by the intended beneficiaries.
The methodology involved the detailed study of government and non-government documents to understand the evolution of the crop insurance sector in India with gradual changes that accommodated the changing nature of risk. Followed by this were FGDs with various sections of farmers to gauge their understanding about the insurance system and the processes they follow while also speaking to key officials regarding the institutional hitches. The last leg of the work involves the analysis of the barriers and enablers, which were investigated upon and conclusions drawn on the subject.
The major findings in this study are ----
1) A presence of information asymmetry between the large landholders and small landholders has been observed. The larger farmers, having the ability and the inclination of taking risks have also adopted the risk averting mechanisms. The smaller farmers, however have not been open to these.
2) The Private sector operates with a general profit maximising motive which are pushing insurance prices higher, making it a non-lucrative option for the farmers whose finance are marginal by nature.
3) The procedural lags, high premium to benefit ratio and non-clarity of the processes often make the farmers mistrust the institution and this is resulting in a gradual withdrawal from the system.
4) Presence of other financial options like "Loan" disclines them from paying premium, which is like a out-of-pocket expense.
In general agreement from both the policy makers’ perspective and that of the farmer, insurance cannot work in isolation and steps must be taken to create climate smart agriculture. Nonetheless, insurances are a better financial option than Ad Hoc responses to disasters. The importance of this study is to evaluate the workings of the machinery and to eventually feed back in the learning and reviewing process which even the government is going through.