Post on 17-May-2023
EVALUATION OF WEATHER BASED CROP INSURANCE SCHEME OF PADDY
Dr. R Sendil Kumar 1 & George James2
1. Associate Professor, Dept. of Co-operative Management, Kerala Agricultural University,
Thrissur, 2. MBA-Agribusiness Management, Kerala Agricultural University, Thrissur
Abstract
Crop insurance is one protective instrument for farmers to tackle their risks associated with
farming. India have been witnessed several experiments on various crop insurance schemes.
Weather based crop insurance scheme is the latest among them, getting popularity in India.
Weather index insurance has similar advantages to those of area yield insurance. It provides timely
compensation made on the basis of weather index. This insurance covers a wide section of people
and a variety of crops; its operational costs are also low. Recently this insurance scheme has been
introduced in Paddy and several other crops in Kerala. An evaluation study was conducted in
Palakkad district of Kerala. Both loanee and non-loanne farmers were interviewed to know their
response towards the scheme. Also focus group discussion of other stakeholders like Insurance
agents, Bank officials, Agricultural officer, Padashekara Samidi heads were done. The study
highlighted the need for improvement in this scheme to make this scheme transparent. Also
objective calculation of weather index and quick settlement of claims are essential for making it
attractive to farmers.
Key words: Crop Insurance, Weather Insurance, Paddy Insurance
Introduction
Agriculture is inevitable for a country like India to achieve its economical and
developmental goals. This major sector is facing challenges from different perspectives. Weather
fluctuation is one such challenge on which farmer have least control. The atmospheric variables
like temperature, humidity, precipitation etc. have shown a high degree of variability in the recent
times. Reports says that the annual mean temperature in India had increased by 0.49% in the last
century at the same time the increase in temperature had reduced global farm output by roughly
1.5% in the last decade. These variations have great significance as far as farming is concerned.
Especially for a country like India where farming is entirely depended on monsoon, weather
fluctuation and its impact are always a concern.
In the face of uncertainty and risk faced by the farming community, various schemes have
been evolved over time in India to protect farmers against risks. Crop insurance is one such
protective instrument for farmers to tackle the risks. India have been witnessed several experiments
on various crop insurance schemes. From 1985 onwards Comprehensive Crop Insurance Scheme
(CCIS) was implemented in India which then replaced with National Agricultural Insurance
Scheme (NAIS) in 1999. In crop insurance uncertainty faced by individual farmers is transferred to
the insurer through their participation in large numbers, and the farmers pay a risk premium in
return for the benefit. At present four crop Insurance schemes namely National Agricultural
Insurance Scheme (NAIS), Pilot Modified National Agricultural Insurance Scheme (MNAIS), Pilot
Weather Based Crop Insurance Scheme (WBCIS) and Pilot Coconut Palm Insurance Scheme
(CPIS) is being implemented in the country.
Crop Insurance Approaches
In the beginning, crop insurance was based on either Area approach or Individual approach. Area
approach is based on defined areas, which could be a district, a taluk, a block/a mandal or any other
smaller contiguous area. The actual average yield / hectare for the defined area is determined on the
basis of Crop Cutting Experiments (CCEs). These CCEs are the same conducted as part of General
Crop Estimation Survey (GCES) in various states. If the actual yield in CCEs of an insured crop for
the defined area falls short of the specified guaranteed yield or threshold yield, all the insured
farmers growing that crop in the area are entitled for claims.
The claims are paid to the credit institutions in the case of loanee farmers and to the individuals
who insured their crops in the other cases. The credit institution would adjust the amount against
the crop loan and pay the residual amount, if any, to the farmer. Area yield insurance is practically
an all-risk insurance. This is very important for developing countries with a large number of small
farms. However, there are delays in compensation payments
In the case of individual approach, assessment of loss is made separately for each insured farmer.
It could be for each plot or for the farm as a whole (consisting of more than one plot at different
locations). Individual farm-based insurance is suitable for high-value crops grown under standard
practices. Liability is limited to cost of cultivation. This type of insurance provides for accurate and
timely compensation. However, it involves high administrative costs.
Weather Based Crop Insurance Scheme
Weather Based Crop Insurance Scheme (WBCIS) is a new crop insurance product which aims to
mitigate the hardship of the insured farmers against the likelihood of loss on account of anticipated
crop loss resulting from incidence of adverse conditions of weather parameters like rainfall,
temperature, frost, humidity etc. Early literatures date backs to 1920 by Chakravarti indicates that
India was the birthplace of the idea of weather indexed insurance. Chakravarti outlined a detailed
proposal for rainfall indexed insurance to be sold across India as early as 1920. Weather index
insurance has similar advantages to those of area yield insurance. This programme provides timely
compensation made on the basis of weather index, which is usually accurate. All communities
whose incomes are dependent on the weather can buy this insurance. A basic disadvantage could
arise due to changing weather patterns and poor density of weather stations.
Agricultural Insurance Company India Limited (AICIL) implemented a pilot scheme called
Weather Based Crop Insurance Scheme (WBCIS) during 2007-08 in 5 States spread over 190
Tehsils / blocks of 30 districts and covered about 6.71 lakh farmers growing in about 10.35 lakh
hectares of crops.
The following table shows the performance of WBCIS in South India for a five year period
(during 2007 to 2011).
Table 1.0 State-wise Number of Farmers Benefited & Area Insured under WBCIS in South India
States 2007-08 2008-09 2009-10 2010-11
Farmers
Benefitted
Area
Insured
(In
Hectare)
Farmers
Benefitte
d
Area
Insured
(In
Hectare)
Farmers
Benefitted
Area
Insured (In
Hectare)
Farmers
Benefitted
Area Insured
(In Hectare)
Andhra
Pradesh
- - - - 16879 11954 74890 1707193.27
Kerala - - 885 1155 5200 6929 15329 20209.88
Karnataka 35275 50075 21719 35307 70660 134044 154679 460285.87
Tamil
Nadu
- - 10894 21634 7240 40104 20961 102761.8
Southern
India
35275 50075 33498 58096 99979 193031 265859 2290450.82
India 228002 1068329 229752 487336 1134549 3472629 6159739 27867544.65
Source: Compiled by Datanet India from Ministry of Agriculture, Govt. of India.
Fig. 1.0 State-wise number of farmers benefited under WBCIS in South India
Source: Compiled from secondary data
WBCIS of Paddy in Kerala
In Kerala WBCIS is implemented in different crops like paddy, banana, coconut, turmeric,
pepper, cardamom etc. Paddy crop in 11 districts has been brought under weather-based crop
insurance scheme launched by the Agriculture Insurance Company of India. In Kerala problems of
water logging, lodging of paddy and shedding of grains due to heavy wind and rain is common in
paddy crop which leads to problems in harvest. And in this situation the newly launched WBCIS
have great importance as a risk management mechanism for farmers in the case of adverse weather
conditions. Agricultural department, Central and State government, banks, insurance agencies are
also involved in the implementation of this scheme. During 2013 about 18,000 farmers in Palakkad
had got enrolled in the scheme out of which 15,000 received insurance claims arising out of bad
weather which affected their crop. WBCIS in paddy was extended to Thiruvananthapuram, Kollam,
Idukki, Ernakulam, Thrissur, Malappuram, Kozhikode, Kannur, Wayanad and Kasaragod districts
from 2014 onwards. As the scheme is new in paddy it is important to study its design, effectiveness,
and also the response of farmers towards the scheme. Hence a study was conducted to evaluate the
Weather Based Crop Insurance Scheme of paddy in Palakkad district of Kerala.
Andhra PradeshKerala
Karnataka
Tamil Nadu
Southern India
0
100000
200000
300000
400000
500000
600000
2007-08 2008-09 2009-10 2010-11No
. of
Farm
ers
Ben
efit
ed
State-wise Number of Farmers Benefited under WBCIS in Southern India
Methodology of Study
Both primary and secondary data were used for the study. Primary data were collected from
randomly selected paddy farmers using a structured interview schedule and focus group discussion
with Agricultural Officers, Insurance agents, and Padashekara Samidhi heads. And secondary data
was collected from various publications, earlier studies, research articles, and records and
notifications of Agricultural Insurance Company. The study was focused on paddy farmers of
Alathur block of Palakkad district. The population list was obtained from the authorized insurance
agent of AIC and from that a sample of 60 paddy farmers which consists of 45 loanee farmers and
15 non-loanee farmers were selected. Data were analyzed with the help of appropriate tools such as
percentage and index. For measuring the attitude level of paddy farmers about WBCIS, Satisfaction
Index were developed. For the construction of indices the respondents were asked to rate the
statements regarding features of WBCIS of paddy. The opinion of respondents were assigned to
marks of 7,5,3 and 1 representing the most positive degree of opinion to most negative degree of
opinion.
The scores of all respondents for each variable were summed up to arrive at the total score. The
total score thus obtained by each variable was then divided by the maximum possible score obtained
for that variable to obtain the index of that variable. Index for a statement is calculated using the
formula.
M= Maximum score
N= Number of respondents
S= Number of statements
The indices were then classified into three zones as follows for interpreting the results.
Table 1.3 Satisfaction Index
Results and findings of the study
The major results and finding of the study are discussed in different headings.
A) Seasonal demand for WBCIS of paddy.
Table 1.1 Seasonal demand for WBCIS of paddy n=60
Season
Frequency Percentage
Loanne
farmer
Non-loanne
farmer
Loanne
farmer
Non-loanne
farmer
Virippu 8 2 17.78 13.33
Mundakan 13 5 28.89 33.33
Both Virippu and
Mundakan 24 8 53.33 53.33
Total 45 15 100 100
Source: Compiled from primary data
The table 1.1 shows that half of the loanne and non loanne farmers (53.33 %) cultivate paddy in
Virippu as well as Mundakan seasons. This shows that there is a high demand for the WBCIS in
both Virippu & Mundakan season (May to December). And no farmers cultivate paddy in Punja
or summer season and there is zero demand for the scheme during the period of January to March.
B) Impact of yield in adoption of WBCIS of paddy
Table 1.2 Impact of yield in adoption of WBCIS of paddy n=60
Yield Virippu Mundakan
Loanne Non-loanne Loanne Non-loanne
Average Yield 17.60 18.40 22.47 23.47
Maximum 22.00 20.00 25.00 26.00
Minimum 14.00 16.00 20.00 20.00 Source: Compiled from primary data
From the table 1.2 it is clear that yield of paddy is more in Mundakan season than Virippu. Earlier
interpretation (Table 1.1) explains that the demand for WBCIS in paddy is more in Mundakan
season and hence it could be concluded that as yield increases the risk also increase and more
farmers adopt WBCIS. This shows that the farmers in the study area have adopted ex-ante strategy
to combat the climate risk, because of their rich experience.
C) Factors causing yield reduction in paddy
Table 1.6 Factors causing yield reduction in paddy n=60
Res
po
nd
en
ts
Drought Heavy Rain Unseasonal
Rain Heavy Wind Pest & Diseases
Freque
ncy
% Freque
ncy
% Frequ
ency
% Frequ
ency
% Frequen
cy
%
Loanne 25 55.56 3 6.67 11 24.44 3 6.67 3 6.67
Non-
loanne
13 86.67 0 0 0 0 0 0 2 13.3
3
Total 38 63.33 3 5 11 18.33 3 5 5 8.33
Source: Compiled from primary data
According to the study two third of the respondents (63.33%), said drought was considered as the
major weather factor, which reduce yield in paddy. Other factors causing yield reduction are
unseasonal rain fall (18.33%), pest and disease (8.33%) and heavy rain and heavy wind
contributing to 5% yield loss. Palakkad experienced an intermittent drought and this conditioned
to high acceptance of weather based crop insurances, especially for paddy. In WBCIS weather
fluctuations like reduction in rainfall (drought), unseasonal rain, heavy rain, and heavy wind are
covered. This feature of WBCIS make it more preferable to farmers than other crop insurance
schemes, were the claim is based on yield attributes.
D) Source of information about WBCIS
The information dissemination of WBCIS is diffused through various agencies like Padashekara
Samidi, Insurance agents, Banks and Krishibhavan. However ATMA and Media were not a
preferred channel for information dissemination for WBCIS in the study area.
Source: Compiled from primary data
E) Reasons for choosing WBCIS of paddy
According to this study, two-third of the respondents (61.67%) adopted WBCIS of paddy due to
the compulsion from bank authority while taking crop loan. Around one-fifth of the insurers
(21.67%) used this scheme as they realized that there could be a high yield reduction in paddy due
to weather fluctuations like poor rain, unseasonal rain, heavy wind etc. Only 11.67% of farmers
said that the WBCIS offered them short claim settlement period than NAIS which heavily
influenced them in choosing WBCIS of paddy.
F) Satisfaction of farmers towards WBCIS in Paddy n=60
Statement
No. of respondents Max.
obtainable
score
Score
obtained
Index
SA
(7)
A
(5)
D
(3)
SD
(1)
Information about WBCIS is
sufficiently available
9 37 14 0 420 290 69.05
Krishibhavan23%
Padashekara Samidi27%
ATMA0%
Insurance Agents25%
Bank25%
Media0%
Source of Information about WBCIS
Krishibhavan Padashekara Samidi ATMA Insurance Agents Bank Media
Procedure for enrolment is not
convenient
2 21 35 2 420 254 60.48
Actual risk is covered 5 14 26 15 420 198 47.14
Sum insured fixed is not adequate 24 21 14 1 420 164 39.05
Premium rate is affordable 8 40 9 3 420 286 68.1
Method of calculating crop loss is not
proper
17 26 14 3 420 186 44.29
AWS is fixed in a representative area 3 26 28 3 420 238 56.67
Settlement of claim is done in shorter
period
3 29 19 9 420 232 55.24
Response of intermediaries is not
proper
5 25 28 2 420 234 55.71
There is a good grievance redresses
mechanism
3 18 28 11 420 206 49.05
Total 79 257 215 49 4200 2288 544.76
Source: Compiled from primary data
Note: “SA” indicates Strongly Agree, “A” indicates Agree, “D” indicates Disagree and “SD”
indicates Strongly Disagree
Overall index = 54.48%
Regarding information availability of the scheme there is a high level of satisfaction among
farmers (69.05%). This can be inferred by the fact that there are several channels for passing
information about the scheme like Padashekara Samidi, Banks, Insurance agents, Krishi Bhavan
etc. Customers showed a medium (60.48%) level of satisfaction towards convenience in enrolment
into the scheme. As the scheme is now implemented through private agencies like United India
Insurance Company (in the survey area) the reach is more compared to other schemes. The
insurance agents are initiating the enrollment process and farmers only need to give the necessary
details like ID proof, Possession certificate/ Land tax receipt, and bank account details. Regarding
coverage of actual risk the farmers expressed a medium level (47.14%) of satisfaction.
According to the paddy farmers the average cost of cultivation of paddy is around Rs. 25,000/acre,
but the maximum sum insured is Rs. 14,000/acre. Farmers expressed a low level (39.05%) of
satisfaction towards sum insured and they want an increase in the sum insured amount. Farmers
are satisfied with the premium rate of WBCIS fixed by government which is now at Rs. 350/acre
after central government subsidy (75%) and state government subsidy (50 %). Around two third
(68.01%) of the respondents said the premium is affordable to them. At present the premium rate
for paddy under WBCIS is 10 % and the farmer need to pay only 2.5% of premium (as per Kharif
2014 season). There is a low level of satisfaction (44.29%) regarding the method of calculating
crop loss in WBCIS. Now WBCIS adopts ‘area approach’ for the calculation of crop loss. Loss in
each notified Reference Unit Area (RUA) is calculated based on the weather data during the
insurance period as received from the respective notified Reference Weather Station (RWS).
Farmers express a deep concern about the chance of missing their farm and corresponding weather
details while calculating crop loss. Beneficiaries showed a medium (56.67) satisfaction about the
location of Automatic Weather Station (AWS) installed for collecting weather parameters. Many
of the farmers are not confident about the working efficiency and accuracy of AWS installed in a
distant place. Farmers are moderately satisfied with the claim settlement period under WBCIS.
The satisfaction level is medium (55.24%) and farmers said that they receive the claim on an
average of six months duration which is comparatively better. The satisfaction level of farmers
towards the responsiveness of intermediaries and availability of redressal mechanism are medium
(55.71 %, 49.05% respectively). Farmers are moderately satisfied with the performance of various
intermediaries involved in WBCIS such as Insurance agents, Banks, Krishibhavan etc.
Suggestions for Improvement of WBCIS
Target small farmers: The study reveals that the scheme is more popular among small
farmers who are having less land and financial resources. They are highly exposed to
climate risks and hence they have to be given more importance.
Address seasonal demand: Give more publicity and reach to this insurance product during
Mundakan season compared to Virippu season.
Improve awareness about the scheme.
o Many farmers chose this scheme due to compulsion from bank. By educating about
the functioning of WBCIS more farmers can be added to this scheme voluntarily.
o Farmers should be educated about the crop loss estimation method in this scheme.
Many farmers have doubt and apprehension about this.
o As it is implemented through a private insurance agency the faith of farmers on this
scheme is comparatively less. So this problem should be addressed by using the
service of extension agents like AO, ATMA workers etc.
Advance AWS network: More AWS have to be installed to maximize accuracy of
measurement of weather parameters.
Conclusion:
To conclude the study, Weather Based Crop Insurance Scheme of Paddy is designed well to
compensate the climate risks associated with paddy cultivation. As different players are involved
in the implementation of this scheme the level of awareness is also more. Many farmers expect
frequent weather fluctuation and this is the scope for wider expansion of the scheme. Small farmers
utilize this scheme as an ex-ante strategy to combat climate risks. By improving awareness and
infrastructural facilities like AWS, accuracy in measurement of weather parameters can be
achieved.
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