That’s what it will cost to set up the infrastructure for weather-based crop insurance, with timely payments
By Sunil Jain
Chittorgarh in Rajasthan, more known for its fort and brave warriors, is an unlikely place for an agricultural revolution, but if the Syngenta Foundation has its way, it may well be. Syngenta Foundation is trying out a tiny experiment which, if successful, could pave the way for replicating its Kenyan insurance success, where 1.9 lakh farmers have got crop insurance and are able to get their claims settled in, hold your breath, 2-4 days! With a possible back-to-back drought, and farmers desperate for crop-damage compensation, that’s what India urgently needs—Syngenta was part of a team headed by ICRIER professor Ashok Gulati that made a presentation to finance minister Arun Jaitley on this last week.
The Rajasthan experiment is a small one, involving just 6,000 farmers across 150-odd villages, but it has all the ingredients of the eventual plan. Farmers buying hybrid maize seeds—this costs Rs 1,400 per acre as compared to Rs 300-400 for traditional seed—have a scratch card inside the seed bag (this can be done for fertilisers or other inputs as well). Once they open the bag, they call a toll-free number or SMS the number on the card to Syngenta or the insurance company it is working with—ICICI Lombard, in this case. Normally, the card has a chip which helps satellites monitor the farm, but in this case, 7 weather stations are to be used to monitor the scheme.
The way the scheme works, by June 15 or thereabouts, the area is supposed to get around 22mm of rain—only when there is that much moisture will the farmer plant the seeds. If, within the next 15 days, the area does not get another 15mm of rain, the seed will not germinate. Syngenta’s plan is that, were this to happen, the farmers who are paying an 8% insurance premium will get a refund for their seeds by July 3 or 4. In other words, they can possibly replant and harvest in the same season.
Imagine the beauty of the scheme when it is fully rolled out, and its spread goes beyond just the cost of the seed or the fertiliser, and proud farmers no longer have to go to the government like beggars and get cheques for a few hundred rupees as compensation, and that too months after their crop has been destroyed—the central government has, for instance, not yet cleared the crop damage dues for Uttar Pradesh though it has for Rajasthan and Maharashtra. In other words, it is the ultimate expression of prime minister Narendra Modi’s cooperative federalism—farmers get their dues quickly and how much they get is no longer dependent upon the central government’s whims and fancies; in other words it is the end of the mai-baap sarkaar handing out dole, preferably to states run by its party.
Setting up the physical infrastructure is relatively easy and cheap. You can also use drones and low-orbit satellites (what’s the point of going to Mars if you can’t use the technology for specific purposes at home?) to monitor farms, and handheld-GPS devices that can be used to outline the boundaries of a farm—the farmer, or the patwari if you wish, needs to walk around his farm with the device. Each weather station costs R50,000—Syngenta is renting those owned by the National Collateral Management Services, and firms like Skymet also have such stations across the country—and you need around 5 per block. So, that’s around 33,000 weather stations across the country that are needed. Add in the costs of rainfall loggers which cost around R10,000 each, and you are talking of a cost of just around R350 crore to set up the physical infrastructure, all of which can be in place in 6 months. Now link this data to the Jan Dhan bank accounts and imagine the impact of the insurance scheme in terms of what it will do for farmers—the idea is to push the schemes in the manner that was done for Jan Dhan and the 3 social security schemes launched last month.
The larger costs of the scheme, obviously, are in running it, in paying for the insurance. Take a typical wheat farm which, in irrigated areas, can give around 3-3.5 tonnes per hectare, so that’s a potential earning for a farmer of Rs 51,000 per hectare. In the case of unirrigated land, the amount will be half or so, so take an average of Rs 39,000 or so; if you assume the insurance firm will insure 80% of the crop, that’s around Rs 30,000 per hectare. At a premium rate of 5%—which is reasonable if the government negotiates a bulk rate for, say, 100 million hectares—that’s a Rs 15,000 crore annual premium.
As this newspaper has pointed out before, if FCI was to stick to just keeping enough stocks as per the buffer norms instead of exceeding them by more than 100% on occasions, the savings in terms of just the carrying costs will pay for half the premium—based on the old buffer norms, before the Food Security Act was in place, the savings would add up to Rs 9,500 crore. While any insurance scheme has to have some payments by the state governments as well as farmers—70% by the Centre and 15% each by the states and the farmers?—as Gulati points out, the Centre has been spending between Rs 2,500 crore and Rs 5,000 crore anyway per annum on drought relief and premium subsidies on the limited crop insurance that we have even today; if you add in the loan waivers, the amounts will increase. In addition, if you put a cess on the export of water-guzzling crops like rice and sugar, that’s another tidy sum of money—with rice exports of Rs 47,000 crore last year, a 2% cess would yield Rs 940 crore. A cess on farm equipment sales could also be considered.
Given the government can well afford the scheme, and how easy it is to set it up, and what it will do for the dignity of the farmer, it is surprising the scheme has not been put in place so far. The number of meetings the government has held on this, including one chaired by the finance minister himself last week, though, suggests there may be some concrete action this time around.
