Agricultural insurance as a risk management tool in Gujarat, India

Agriculture in India is subject to numerous risks such as drought, flood, cyclone, pests and diseases. Repeated droughts and dry spells continue to affect farming significantly in a large patch of unirrigated belts of the country. There is need to provide these farmers with some safety nets against these natural hazards. It is reported that just 20% of farmers in India are covered under the Centre's crop insurance schemes that basically provide a safety net for farm loan dues in case of crop damage. The aim of this paper is to analyze the status and prospects of various crop insurance schemes, particularly, previous crop insurance scheme (i.e., NAIS) and present crop insurance scheme (i.e., PMFBY). The study has been undertaken with a special focus on their comparative performance in Gujarat. The purpose of this paper is to analyze the performance of PMFBY (introduced in year 2016–17) in terms of farmers’ coverage, premium, sum insured and claim payout efficacy and analyse how it was different from earlier scheme. The paper has made an attempt to analyses the growth and performance of National Agricultural Insurance Scheme of 19 seasons from Rabi 1999–2000 to 2013–14 and PMFBY of 2016–17 and 2017–18. The study is mainly based on secondary sources of data. The study finds that the crop insurance coverage under the new scheme has increased significantly. However, there are a number of areas where the present scheme can be further improved. There is a need to address issues such as delay in claim settlements; generating sufficient awareness in farmers about formulation and implementation of risk reduction strategies, developing suitable crop insurance product and effective implementation strategies and infrastructure, investing in R&D on insurance product design in collaboration with private insurance service providers, substituting relief payments with crop insurance system, covering the price risk along with weather risk and substituting relief payments with crop insurance system.