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Insurance Article

How Crop Insurance Will Benefit the Farmers?

February 23 2017
how crop insurance will benefit the farmers

With natural calamities on a rise, crop insurance offers the best relief

India ranks second worldwide when it comes to farm output. India exports its agricultural produce to more than 100 countries across the globe. Agriculture contributes to only 16% of the country’s GDP, yet it is the backbone of the economy. It employs over 60% of the working population in the country. However, the sector is highly volatile and vulnerable to external risks like droughts and floods.

Pradhan Mantri Fasal Bima Yojna

Most crop insurance schemes in the past were limited to few states that were severely affected by weather and natural calamities. Moreover, there were caps on the sum assured, the claim processes were slow and riddled with inconsistencies and frauds. To overcome these challenges, the Pradhan Mantri Fasal Bima Yojna (PMFBY) was launched on 13th January 2016 and rolled out in June 2016, which allows farmers to pay minimal premium to insure their crops.

The scheme envisages a uniform premium of only 2%, which is paid by farmers for Kharif crops, and 1.5% for Rabi crops. The premium for annual commercial and horticultural crops will be 5%. The remaining insurance premium will be given by the government to reduce the burden on farmers. The government also announced an increase in coverage under the PMFBY to ₹13,240 crore in the next fiscal from the present ₹5,500 crore.

Benefits to Small Farmers

There are about 40% of small and marginal farmers, who avail credit from the cooperative structure. To ensure flow of credit, the Government plans to support the National Bank for Agricultural and Rural Development (NABARD) for computerisation and integration of all 63,000 functional Primary Agriculture Credit Societies (PACS) with core banking system of district central cooperative banks. This will be done in 3 years at an estimated cost of ₹ 1,900 crore.

Extensive Coverage to Farmers

Under crop insurance, farmers will benefit by becoming self-sufficient and they will be able to raise their investment in crops to get better quality produce. This will also help to keep the crop prices in the marketplace under control and allow the population to buy food and groceries at affordable rates. It is estimated that less than 20% of farmers in India have opted for crop insurance and the government aims at including more farmers under its ambit.

Farmer suicide is another major issue, which the government is trying to eradicate through the crop insurance scheme. The numbers of farmer suicides in recent times are shocking. In 2015 alone, more than 8,000 farmers committed suicide due to increased financial pressure arising from loss of crops due to natural calamities. The crop insurance will cover the losses of farmers in case of any crop loss arising from natural calamities.

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