AN ECONOMIC ANALYSIS OF CROP INSURANCE FOR POTATO
INHASSAN DISTRICT IN KARNATAKA, INDIA
Dr.K.G.Suresh Kumar* and Dr. M.V. Srinivasa Gowda**
Dr.S A Sujatha***
Abstract: This paper attempts to: 1) analyse the extent of crop-wise coverage of insurance
scheme in Hassan district, 2) assess the season-wise premium collected and indemnity paid
under the crop insurance scheme, 3) identify and analyse the risks and uncertainties involved
in production and marketing of potatoes, and 4) assess changes in the acreage under potato
brought about by the scheme. The study was conducted in two taluks of Hassan district in
Karnataka state of India.
The data were collected from both primary and secondary sources. The primary data
were collected from 120 farmers (60 insured and 60 non-insured) from six villages which had
the highest number of insured farmers in the taluk. The sample insured farmers were those
who had cultivated potato during Kharif 2010 and had paid their premiums. The noninsured farmers were those who had grown potato during Kharif 2010, but had not enrolled
under crop insurance. Simple statistical techniques such as mean, standard deviation,
coefficient of variation, percentages and ratios were used to analyse and interpret data.
The important findings of the study are: both production and marketing risks are
associated with potato cultivation. Production risks are mostly in the form of plant diseases
and rainfall variations that often affected the crop yields. Potato crop is highly sensitive to
weather conditions, pest and diseases and it requires heavy expenditure during the
production period and the farmer is not assured of good quality and disease-free crop which
is essential for obtaining reasonable yields sufficient to recover expenses. Marketing risks
consisted of wide price fluctuations.
Majority (86.7%) of the sample insured farmers and of non-insured farmers (88.3%)
felt that crop insurance was a good measure against risk and uncertainty. But they want
simplified procedures involved in insuring the crops and avoidance of unnecessary delay in
payment of compensation. Training of farmers as well as staff involved in implementing
crop insurance scheme would help make the scheme more effective.
Key words: Risks and Uncertainties, Production and Marketing Risks, Crop Insurance,
Insurance Premium, Coefficientof Variation,Compensation Claims.
................................................
*Associate professor of Economics, A.V.K.College for Women, affiliated to University Of Mysore,
Hassan-573201, Karnataka, India; Email: [email protected]; Contact No: +91-09448957404,
+91-08172-267273.
**Professor, SBM Chair for Studies in Banking & Management, Visvesvaraya Technological University,
Regional Campus, Bangalore-560091, Email: [email protected]; [email protected];
Contact No: +91-9880729629; +91-9449069629.
*** Lecturer, Government Arts College, Hassan ,573201. [email protected];, contact no
+91-0948062779
1
Introduction
In spite of reaching a stage of self-sufficiencyIndian agriculture is still haunted by
instability which seriously threatens the Indian farmers’ ability to step up the agricultural
output and their viability. Fluctuations in crop yields have mainly been due to weather
uncertainties. The presence of ups and downs in dry land agricultural production over the
years bears ample testimony to the continuing instability in agriculture. Instability in the
agricultural sector cannot be completely eliminated, but its adverse effects can be
minimized through various measures. Different strategies have been evolved by the
government to combat these risks and uncertainties. Some of them include providing tax
remissions, waiving off loans and interest on loans, drought or flood relief measures, etc.
However, a major hurdle in such types of relief is that such measures depend
primarily on the policies as well as the resources of the government. Therefore, though
these measures guarantee some security in a situation at uncertainty, it in fact makes the
farmers to wait in anticipation for some relief when there is a loss.
Farmers on the other hand have sought to reduce these risks by utilizing modern
technology, diversifying agricultural operations, through intercropping or through the
flexible use of fertilizers, pesticides, etc. But again, one major impediment here is that by
and large financial facilities are utterly inadequate amongst the Indian farmers. Thus,
because of these drawbacks, the policy makers of the country have sought to insurance of
crops as a feasible measure to combat against the risks and hazards and provide protection
to the farmers. This will encourage them to carry on with their productive efforts, which not
only improve the well-being of the farmers but also ultimately help in stabilizing the
agricultural output.
Importance of Crop Insurance
Insurance of crops is regarded as an essential part of a well-rounded agricultural
programme designed to provide protection to farmers against physical failure of crops due
to weather and other unavoidable natural hazards. Crop insurance advances the process of
stabilizing the agricultural industry to a stage of production, making such a process more
comprehensive, effective and useful.The principal benefits derived from crop insurance are
as follows:
i) Crop insurance prevents farmers from financial disaster due to crop failurethrough its
indemnity function,
ii) It improves the position of farmers in relation to agricultural credit. As cropinsurance
guarantees protection against crop failure, the insured farmers have abetter credit rating,
when a loan is provided to them. It also considerablystrengthens the financial position of
the involved agricultural cooperative creditinstitutions,
iii) The crop insurance scheme, besides stabilizing farmers income by indemnifyingthem for
damage to their crops, plays a positive role of increasing productivitythrough prevention
and limitation of the operation of natural calamities especiallyplant pests and disease
infections and,
iv) Crop insurance contributes to greater stability of the economy by spreadingeconomic
damage resulting from crop losses over time and space.
2
Although being a relatively a new concept, crop insurance has been recognized in
developing as well as developed countries as one of the available mechanisms which
provides the farmers with some relief for the purpose of re-investment in the future. It not
only provides protection and also safeguards the interest of the farmers in general, but also
helps in ensuring the well-being of the small and marginal farmers in particular.
Development and Present Status of Crop Insurance in India:
Crop insurance has been an important policy measure which has gained the
attention of our policy makers ever since independence. Various studies regarding the
modalities of the crop insurance programme were carried out since 1947. Different
experiments on crop insurance on a limited, adhoc and scattered scale was started from
1972-73 when the General Insurance Department of the Life Insurance Corporation of India
introduced a crop insurance scheme on H-4 Maize. In 1972, General Insurance business was
nationalized and by an Act of parliament, the General Insurance Corporation of India was
setup. The General Insurance Corporation took over the experimental scheme in respect of
H-4 maize, groundnut, etc., grown by small and marginal farmers. The schemes which
operated between 1973 and 1976 resulted in heavy financial losses. In view of these
economic difficulties, the crop insurance scheme was discontinued. Prof. Dandekar (1976) a
leading agricultural economist, recommended a crop insurance scheme to be based on
homogeneous area approach and the linking of insurance with crop loans. Based on his
report, a pilot crop insurance scheme was introduced from 1979.
Objectives of the Study:
The specific objectives of the study were:
1) To analyse the extent of crop-wise coverage of insurance scheme in Hassan district
2) To assess the season-wise premium collected and indemnity paid under the crop
insurance scheme
3) To identify and analyse the risks and uncertainties involved in production and
marketing of potatoes.
4) To assess changes in the acreage under potato brought about by the scheme.
Methodology
Description of the area under study
Hassan district was selected as study area as it is one of the important potato
growing areas of the state. The study was conducted in two taluks of Hassan district namely
Hassan andHolenarsipura taluks. Hassan district has a total area of 6826.15 Sq. Kms. The
greatest length of the district, from south to north, is about 129 kilometres, and its greatest
breadth, from east to west, is about 116 kilometres. The district has 8 taluks, 38 Hoblies
and 2369 villages. The geographic area of Hassan district is 6826.15 Sq. Kms. The district is
situated in between 12º – 31º and 13º– 33º north latitude 75º_ 33º east longitudes in the
south-western part of the state. It is bounded on the north by Chikkamagalur district, on the
east by Tumkur and Mysore districts, on the south by Mysore and Kodagu districts, and on
the west by Dakshina Kannada district. Based on the incidence of rainfall, the district can be
divided broadly into Malnad, Semi-Malnad and Maidan regions.
3
Sources and Collection of Data
To meet the objectives of the study the data were collected from both primary
andsecondary sources. The primary data were collected from 120 farmers(60 insured and 60
non-insured) from those six villages, which were having the highestnumber of insured
farmers in the taluk. The sample insured farmers were those who had cultivatedpotato
duringKharif2010 and had paid their premiums. The non-insured farmers were those who
had grown potato during Kharif2010, but had not enrolled under crop insurance. The data
were collected from both the categories of farmers through personal interviews and by
using a structured questionnaire.
The primary data on various aspects was collectedwith the help of questionnaire
directly from farmers. In the same way secondary dataregarding various aspects relating to
crop insurance were collected from AgricultureInsurance Company of India, Regional Office,
Bangalore and the district level secondary dataon various aspects were collected from
District Statistical Office etc.The present study made use of different techniques such as
averages, standarddeviation, coefficient of variation, percentages, ratios, composite score
technique and normalcurve technique.
Crop-wise coverage of crop insuranceScheme in Hassan district
The potato followed by groundnut and paddy crops covered the maximum number
of farmers and the area under crop insurance scheme. Regarding the sum insured, premium
collected werehighest in potato followed by groundnut and sunflower but in claim payment
potato stood first, followed by groundnut and potato. Similarly, in the claim-premium ratio
potato crop had maximum claims over the premiums followed by groundnut and paddy. The
potato and sunflower have the major portion of area under insurance scheme against the
total area under these two crops.The Rabiseason was the major season in terms of number
of farmers and areacovered under the crop insurance scheme and the Kharifseason was the
major season interms of sum insured, premium collected and claims paid and claim
premium ratio in Hassandistrict.
Analytical techniques used
Tabular analysis provides the simplest and most intelligible tool to analyse the extent
of coverage of crop insurance scheme and to analyse the opinions of insured and noninsured farmers. The results were interpreted by working out averages, standard deviation,
coefficient of variation, percentages and ratios. In order to analyse the crop-wise, seasonwise premium collected and claims paid under the insurance scheme and to calculate
variations in rainfall and also yields and prices ofpotato crop in Hassan district. The
percentage method was employed to assess the changes in the acreage under potato. To
elicit the opinions of insured and non-insured farmers, percentage method was employed.
Magnitude of crop-wise coverage of insurancescheme in Hassan district
Table 1 shows the farmers covered under the crop insurance scheme. The average
number of farmers covered was maximum under the potato crop with 12,419 farmers
followed by groundnut crop about 8029 farmers, paddyby 2666 farmers and sunflower by
1822 farmers. Thecoefficient of variation was maximum in groundnut (114.99%) followed by
paddy (100.68%), potato (84.45%), sunflower (64.06%) and Maize (66.11%). Regarding area
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covered under the crop insurance scheme under potato crophad maximum area, i.e., 21,252
hectares followed by groundnut crop with 11,898 hectares, paddywith 4,350.15hectares,
and Maizewith about 2210 hectares. The coefficient of variation was maximum in paddy
crop (153.54%) followed by groundnut crop, (111.54%) potato crop (88.58%), Maize crop
(55.20%) and sunflower crop (51.53%).
The average sum insured was maximum forpotatocrop amounting to Rs. 2721.59
lakh, followed by groundnut crop with Rs. 1183.67 lakh, sunflower cropwith Rs. 1015.48
lakh, paddywith Rs. 169.48lakh and Maize crop with the lowest sum of Rs. 28.03 lakh.
Similarly the coefficientof variation was maximum in paddy crop, to the tune of 130.81 per
cent, followed by groundnut crop about with 126.22 per cent, potato cropwith 110.10 per
cent and sunflower with83.90 per cent and the lowest coefficient of variation was in
Maizecrop (62.15 per cent). The average premium collected was maximum in potato crop
(Rs.92.22 lakh), followed by groundnut (Rs.55.93 lakh), sunflower(Rs. 39.16 lakh) and Maize
(Rs. 16.60 lakh). The premium was minimum in paddy crop with Rs. 8.44 lakh while the
coefficient of variation was maximum under groundnut crop to the tune of 133.59 per cent
followed by paddycrop with 101.43 per cent, potatocrop with 88.22 per cent, Maize crop
with 73.06 per cent and lowest being in sunflowercrop (60.14%).
Regarding claims payments, theaverage claim paid was maximum in sunflower crop
(Rs.181.92 lakh) followed by groundnut, potato and paddy to the tune of Rs. 32.87 lakh, Rs.
20.98 lakh and Rs. 6.33 lakh respectively. Regarding coefficient of variation in claim
payments it was maximum in groundnut with 180.41 per cent followed bypaddywith 157.69
per cent. The claims payment in Potato crop had similar coefficient of variation to the tune
of 141.42 per cent.The average claim-premium ratio was maximum in sunflower crop to the
tune of Rs.8.08 followed by paddy crop with Rs. 3.48, groundnut with Rs. 2.36 and on Rs.
0.72 per rupee claimsin potato. There were no claim payments for Maize crop. The
coefficient of variation in the claim-premium ratio was maximum in groundnut with 165.21
per cent followed by potato with 141.42 per cent each and paddy crop was having 134.61
per cent of coefficient variation under the claim-premium ratio.
Area under insurance in different crops
The percentage of area under insurance against the total area under different crops
in Hassan district was obtained by averaging the total area under 5 crops of the last 3 years
andinsured area under 5 crops and percentage was obtained and presented in Table 2. The
potato crop occupied about 80.46 percentage of the total potato cropped area followed
bysunflower crop which occupied 66.05 per cent of the total area under andgroundnut crop
occupied 10.77 per cent of the total groundnut area under insurance scheme.The paddy
crop occupied only 6.84 per cent of the area under insurance out of the total paddy
grownarea. The Maize was having the least area under insurance to the tune of 2.30 per
cent of thetotal Maize area.
Season-wise premium collected and indemnity paid under insurance scheme
Table 3 depicts season-wise number of farmers, area covered, premium collectedand
claims paid under National Agricultural Insurance Scheme in Hassan district.The average
number of farmers covered under crop insurance scheme wasmaximum in Rabiseason of
about 40,039 farmers with coefficient of variation of 117.33 percent followed by
5
Kharifseason about 39,505 farmers with coefficient of variation of 89.83 percent and
summer season covers only 2.20 farmers with coefficient of variation of 223.61 percent.The
average area under insurance scheme in Rabiseason was maximum to the tuneof 63162
hectares followed by Kharifseason 62974.60 hectares with coefficient of variationwas
115.43 per cent and 84.12 per cent respectively the summer season having a negligiblearea
of about 4.80 hectares with coefficient of variation of 223.61 per cent.
Regarding the sum insured the average sum insured was maximum in
Kharifseasonabout Rs. 5878.94 lakh followed by Rabi seasonRs. 2275.48 lakh and summer
season had very low sum insured about Rs. 0.70 lakh whichhad highest coefficient of
variation of 223.61 per cent followed by Rabi 118.54 per cent, Kharif103.03 per cent.The
average premium collected in Hassan district was maximum in Kharifseason tothe tune of
Rs. 255.45 lakh followed by Rabiseason Rs. 65.01 lakh. The summer seasonwas having a
negligible amount of Rs. 0.01 lakh and the summer season having themaximum coefficient
of variation about 223.61 per cent followed by Rabiand Kharifseason,117.99 per cent and
106.62 per cent respectively.The average claims paid were maximum in Kharifseason to the
tune of Rs. 368.08lakh followed by Rabi season Rs. 8.68 lakh and no-claims were paid under
summer season.Similarly the coefficient of variation was maximum in Rabiseason 174.55
per cent followed byKharifseason 156.20 per cent.
The risks involved in production and Marketing
Yield variations in Hassan district
Table 4 depicts the crop yield variations in Hassan district. The coefficientof variation
in yield of was 30.84 per cent in last 3 years. It decreased to 24.38 percent, 18.08 per cent in
the last 5 years and 10 years respectively. Similarly, the coefficient ofvariation of yield was
almost similar in the last 15 years and last 20 years. The mean yieldwas maximum in the last
15 years to the tune of 3,666 kg per hectare and this was minimum in the last 20 years with
3,413.20 kg per hectare.
Rainfall variation
Rainfall variations in Hassan district is depicted in Table 5. The average rainfallwas
very lowestin the last 3 years i.e. 93.38 mm and the maximum during the last 20 years was
about114.21 mm in the growing period. The coefficient of variation in rainfall was 26.21
percent in last 3 years. It decreased to 25.42 per cent in the last 5 years, 19.3 per cent in the
last 10years. The coefficient of variation in rainfall again rose to 29.52 per cent in the last 15
years and this decreased slightly to 28.42 during the last 20 years.
Price variation
The mean,standard deviation and coefficient of variation in potato priceswere
calculated for the last 3, 5, 10,15 and 20 years respectively and the results are presented in
Table 6. The coefficient of variation in prices in the pre-harvest period was 12.85 per cent in
the last 3years which increased to 22.59 per cent, 52.87 per cent, 61.53 per cent and 71.27
percent in the last 5, 10, 15 and 20 years respectively.Similarly in the post-harvest period
the coefficient of variation inthe price was 24.41per cent in the last 3 years which increased
to 24.95 per cent, 76.15 per cent, 83.43 per centand 91.05 per cent in the last 5, 10, 15 and
20 years respectively.
6
Farmers’ opinions
Composite scores were given in order to identify and analyse the risks in production
and marketing by both the insured and non-insured farmers. As seen from Table 7, almost
all the insured farmers opined that the plant disease was a major risk in production with a
score of 4.97. Drought was the second risk with a score of 2.75 and the low quality of seed
or inputs also had a score of1.03 with a frequency of 20. In the case of excess rain the score
was 1.68and the frequency was 38. Insectsand lack of water in critical stages had almost the
same scores of 0.88 and 0.77 respectivelybut the frequency was 37 in insects as against 26
in case of lack of water in critical stages.Marketing risks in the case of insured farmers were
depicted in Table 7. Theprice variation had a highest score of 4.97 with highest frequency of
60. Storage had score of 1.12 with a frequency of 17 which occupied the second position.
Trader’s commission was alsoan important component in marketing cost with a frequency
of 24 resulting ina score of 1.03 andtransportation was the least factor affecting marketing
with a score of 0.73. So, the insured farmers were facing mainly the risk ofplant diseases
andprice variation which were causing the maximum losses inpotato production and
marketing respectively.
Table 8 shows the risks faced by non-insured farmers in potato production and
marketing. From the table it is clear that drought was a major risk factor causing heavy
losses in the yieldwhich was expressed by 51 farmers in the study area with a composite
score of 4.18 andplant diseases was the second risk factor with a score of 2.38 and insects,
excess rain andlack of water in critical stages were having almost similar effects with a
scores of 0.55, 0.51and 0.58, respectively and low quality of seed or inputs was not a major
risk for the non-insured farmers which attained a least score of 0.45. Similarly in marketing
risks, price variation was the major risk faced by the non-insuredfarmers with a score of 4.91
followed by storage with a score of 1.18 and commission with ascore of 1.08.
Opinions about crop insurance scheme
Maximum number of farmers, i.e., 95 per cent of insured and 90 per cent of noninsured farmers endorsed the need for crop insurance as it helps farmers to face losses.
About 95 per cent of the insured farmers were interested in continuing the programme
whereas 71.7 per cent of non-insured farmers also liked to be covered by the programme.
As high as 70 per cent of the insured and only 40 per cent of the non-insured farmers were
satisfied with the existing programme and all of them wanted one or the other modification.
Majority of the insured of the non-insured farmers (90% and 85%) felt that crop insurance
was the better way of reducing loses and remaining 10 per cent insured and 15 per cent
non-insured farmers felt that mixed and diversified farming was a better way of reducing
losses.
Majority(86.7%) of the sample insured farmers and of non-insured farmers (88.3%) felt
thatcrop insurance was a good measure against risk and uncertainty.
Suggestions by farmers
After implementation of National Agriculture Insurance Scheme there was more
delayin payment of compensation. Therefore 91.6 per cent of the insured and 96.6 per cent
of thenon-insured farmers suggested that compensation should be paid before starting of
7
nextseason (Table 9).Hardly five per cent of insured and 30 per cent of the non-insured
farmers suggestedthat irrigated crops also should be taken into consideration which was not
considered in thepresent scheme.Proper guidance to be given for bank officials and farmers
regarding its smoothoperation was suggested by 18.3 per cent of insured and 25 per cent of
the non-insuredfarmers.Only 8.3 per cent of the insured farmers suggested about
information regarding the amount of compensation and timeliness of payment
compensation amount,while 3.30 per cent of theinsured farmers suggested that village
should be considered as unit area instead of Hobli.About 16.67 per cent of insured and 3.30
per cent of non-insured farmers suggestedthat premium should be taken in instalments and
creation of separate insurance cell wassuggested by 5 insured (8.3%) and 2 non-insured
(3.3%) farmers. Nearly 15 insured (25%)and 2 non-insured (3.3%) farmers suggested for the
simplification of procedure for paymentof premium and the regular visits by insurance
officials to the plots of insured farmers wassuggested by 10 insured farmers (16.67%) and 1
non-insured farmer.
Crop-wise coverage of insurance scheme inHassan district
For analytical convenience, 5 major crops of the area under study were
considered.The number of farmers insured was highest in potato crop followed by
groundnut and paddy crop (Table 1). The coefficient of variation was highest in groundnut
crop followed by paddy and potato. This highest coefficient of variation in groundnut crop is
due to high fluctuations in the number of farmers insured under groundnut crop since the
implementation of crop insurance scheme. The area covered was maximum in potato crop
followed by groundnut and paddy crops and the coefficient of variation was maximum
under paddy crop followed by groundnut and sunflower. This high coefficient of variation
indicates there is high fluctuation in area under insurance scheme of these crops. The main
reason for fluctuation is due to drought situation prevailed in the year 2007 and 2008. As a
result the area covered was very less. Thearea under insurance during 2010also
decreaseddue to delay in payments in the previous season. Among the various crops
insured, the sum insured was maximum in potato followed bygroundnut and sunfloweras
these are the major high-value crops commercially grown in Hassan district.
The coefficient of variation was maximum under paddy crop followed by groundnut
and sunflower. The high coefficient of variation indicates there was very low amount of sum
insured during 2008 and 2010. In case of premium collected under insurance scheme potato
crop was having maximum premium collection followed by groundnut and sunflower
because the potato crop is the riskiest crop compared to groundnut and sunflower. The
coefficient of variation was very high in groundnut crop due to very low premium collection
during 2007 and 2008. In case of claims potato was having the first position followed by
groundnut and sunflower, though the potato crop was introduced in the crop insurance
scheme for only 2 years and after 2010 the potato crop was withdrawn from the crop
insurance scheme because the potato crop was not qualified for notification under
insurance scheme. In claim premium ratios the potato crop having maximum claim premium
ratio followed by paddy and groundnut because of heavy losses in potato yields during year
2008. In the percentage of area under insurance against total area under different crops,
the potato crop was having the maximum area under insurance, followed by sunflower crop
and groundnut crop. The main reason attributed was the potato, sunflower and groundnut
crops were riskier crops compared to Maize, paddy crops.
8
Risks in potato production and marketing
The coefficient of variation in the yield of potato was maximum in last 3 years
ascompared to the last 5, 10, 15 and 20 years having the similar coefficient ofvariation. This
indicates that there was high risk in potatoyield as depicted in Table 4. This high coefficient
of variation in potatoyield for the last 3 years was due toplant diseases in the
district.Looking to the rainfall variation in Hassan district there was a high coefficient
ofvariation in rainfall during the last 3 years as compared to the last 5 years and last 10
years and the meanrainfall over the years was decreasing for the last 20 years (Table
5).Regarding variation of potatoprice in Hassan district between pre-harvest andpostharvest period, the coefficient of variation was more during thepost-harvest period as
comparedto pre-harvesting period of potato (Table 6). The reason attributed was the
arrivals werestable in pre-harvest season and arrivals increased in the post-harvest season.
Thecoefficient of variation of prices in both pre-harvest and post-harvest period goes
onincreasing with the increase in the number of years. This indicates there is more risk in
price ofpotato.
The plant disease was having the maximum effect on production of potato with
thecomposite score of 4.97 for insured farmers. Drought was also a majorproblem in potato
cultivation which had a score of 2.75 for insured farmers as indicatedby Table 7. Excess rain
had some impact on the potato production because it was sensitiveto water logging
conditions. Low quality of seed and other inputs also had effect onproduction of potato,
while insects and lack of water during critical stages had negligibleeffect on potato
cultivation.In marketing of potato, price variation was the major risk factor causing heavy
lossesin the income of the farmers which was having a score of 4.97 followed by
storagecommission with some effect. But transportation was not a problem in marketing of
potato ofinsured farmers.The plant diseases was the major factor which caused heavy losses
in yields of the most ofthe non-insured farmers which was having a maximum composite
score of 4.18 as depicted inTable 4.9. This was followed by drought which was a major
problem of potato growerswith a score of 2.38 and insects, excess rain and lack water
during criticalstages were having almost similar adverse effects on production of potato but
the quality of seed/input hadlittle impact on potato production.Similarly in marketing of
potato, price variation was the major risk faced by the farmerwith a composite score of 4.91
followed by storage commission which was also had someeffect on marketing of potato but
transportation had negligible effect on marketing ofpotato.
Summary and policy implications
Farming involves numerous risks including natural and economic risks. But
theprincipal characteristics, which distinguish farming from most other businesses is its
heavy dependence on Nature. Agriculture is subject to heavy losses through natural
uncertainties and calamities, which are beyond farmer’s control.Uncertainty of crop yield is
one of the basic risks, which every farmer has to face. Yield uncertainty arises from the
excessive dependence on the vagaries of nature, whichprevents farmers from maximizing
production.Crop insurance is a means of counteracting the risks involved in cropproduction.
Crop insurance is a device through which the risks faced by an individual istransferred to an
agency or insurer through their participation in large number for which theypay a premium
i.e., the total risk is shared by all the participating farmers.Potato crop in particular is highly
9
sensitive to weather conditions, pest and diseasesand it requires heavy expenditure during
the production period and the farmer is not assuredof good quality and disease-free crop
which is essential for obtaining reasonable yieldssufficient to recover expenses.
Policy implications
1) The yield and price risks were more in the areaunder study. Therefore there is a
need toencourage the farmers to go in for crop insurance.
2) There is a need to take a strong step against unnecessary delay in payment of
compensation.
3) There is a need of training for staff involved in implementing crop insurance
scheme.Training programmes also need to be conducted for farmers regarding filling
up ofinsurance application.
4) The insurance agencies need to simplify the procedures involved in insuring the
crops, in order toeliminate unnecessarycomplications in the process of insuring the
crops by the farmers.
5) The cost of cultivation and prices of commoditiesshould be taken into
considerationduring calculation of coverage level as against the coefficient of
variation in the yieldsalone, which is beneficial to both Agriculture Insurance
Company and farmers.
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11
TABLES (1 - 10):
Table 1: Crop-wise Area Covered, Premium Collected and Claims Paid underNAIS in Hassan
District
Crops
Average
Standard
Coefficient
deviation
Variation (%)
Farmers (No.)
Paddy
2666.20
2684.40
100.68
Groundnut
8029.60
9232.91
114.99
Maize
2010.00
1328.81
66.11
Potato
12419.33
10488.47
84.45
Sunflower
1822
1167.43
64.06
Area covered (ha)
Paddy
4350.15
6679.17
153.54
Groundnut
11898.00
13270.75
111.54
Maize
2210.67
1220.34
55.20
Potato
21252.00
18824.09
88.58
Sunflower
2267.00
1168.14
51.53
Sum insured(Rs. lakh)
Paddy
Groundnut
Maize
Potato
Sunflower
169.48
1183.67
28.03
2721.59
1015.48
221.70
1494.00
17.42
2996.48
852.00
130.81
126.22
62.15
110.10
83.90
Premium collected (Rs. lakh)
Paddy
8.44
8.57
Groundnut
55.93
74.71
Maize
16.60
12.13
Potato
92.22
81.83
Sunflower
39.16
23.55
Claim-paid ratio
Paddy
6.33
9.98
Groundnut
32.87
59.31
Maize
0.00
0.00
Potato
20.98
29.68
Sunflower
181.92
257.28
Claim-premium ratio
Paddy
3.48
4.68
Groundnut
2.36
3.89
Maize
0.00
0.00
Potato
00.72
1.02
Sunflower
8.08
11.43
Note: Paddy and groundnut crops (2006 to 2010)
12
101.43
133.59
73.06
88.22
60.14
157.69
180.41
0.00
141.42
141.42
134.61
165.21
0.00
141.42
414.42
Potato (2007 to 2009)
Table 2: Crop-wise Area Insured in Hassan District
Crops
Total area under thecrop (ha) Insured area (ha)
Paddy
41548
2843.73
Groundnut
84582
9106.00
Maize
288162
663.00
Potato
5635
4534.00
Sunflower
96531
63756.00
Percentage
6.84
10.77
2.30
80.46
66.05
Table 3: Season-wise Number of Farmers, Area Covered, Premium Collected andClaims
Paid under NAIS in Hassan district
Particulars
Average
Standard
Coefficient of
deviation
Variation (%)
Farmers (No.)
Kharif
39505.20
35488.61
89.83
Rabi
40039.00
46979.23
117.33
Summer
2.20
4.92
223.61
Area covered (ha)
Kharif
62974.60
52976.02
84.12
Rabi
63162.00
72905.80
115.43
Summer
4.80
10.73
223.61
Sum insured (Rs. lakhs
Kharif
5878.94
6056.99
103.03
Rabi
2275.48
2697.47
118.54
Summer
0.70
1.56
223.61
Premium collected(Rs. lakhs)
Kharif
255.45
272.36
106.62
Rabi
65.01
76.71
117.99
Summer
0.01
0.03
223.61
Claims paid (Rs. lakhs)
Kharif
368.08
603.06
156.20
Rabi
8.68
15.16
174.55
Summer
0.00
0.00
0.00
Table 4:Yield VariationsinCrop in Hassan Districtfrom 1989-90 to 2009-10
Particulars
Last 3 years (2007-08 to 2009-10)
Last 5 years (2004-05 to 2009-10)
Last 10 years (1999-2000 to 2009-10)
Last 15 years (1994-95 to 2009-10
Last 20 years (1989-90 to 2009-10)
Mean
(kg/ha)
3617.00
3555.40
3425.20
3666.00
3413.20
13
Standarddeviation(kg/ha)
1115.44
864.76
619.27
1335.57
1237.31
Coefficient of
Variation (%)
30.84
24.32
18.08
36.43
36.25
Table 5:Rainfall variations in Hassan district during growing period
Particulars
Mean of three
Standard
Coefficient of
months* (mm)
deviation (mm)
Variation (%)
Last 3 years (2008 to 2010)
93.38
24.47
26.21
Last 5 years (2006 to 2010)
96.13
24.43
25.42
Last 10 years (2001 to 2010)
103.69
20.04
19.33
Last 15 years (1995 to 2010)
116.63
34.43
29.52
Last 20 years (1990 to 2010)
114.21
32.45
28.41
Note: * - June, July and August months
Table 6:Pre- and post-harvest Potato Price variations in Hassan district
Particulars
Pre-harvest
Post-harvest
Mean
Standard
Coefficient
Mean
Standard
Coefficient
(Rs./q)
Deviation
of
(Rs./q)
deviation of variation
(Rs./q)
variation
(Rs./q)
(%)
(%
Last 3 years 434.44
55.84
12.85
495.00
120.84
24.41
(2008 to 2010)
Last 5 years 406.00
91.73
22.59
478.33
119.35
24.95
(2006 to 2010)
Last 10 years 458.00
242.12
52.87
586.17
446.38
76.15
(2001 to 2010)
Last 15 years 374.11
230.19
61.53
473.96
395.41
83.43
(1995 to 2010)
Last 20 years 316.00
225.22
71.27
400.18
364.38
91.05
(1990 to 2010)
Note: Pre-harvest period – June to August
Post-harvest period – September to November
Table 7:Risk in production and marketing of insured farmers
Factors
Frequency
Composite Score
A. Production risks
Plant diseases
60
4.97
Insects
37
0.88
Excess rain
38
1.68
Drought
41
2.75
Lack of water in critical
26
0.77
stages
Low quality of
20
1.03
seed/input
B. Marketing risks
Price variation
60
4.97
Transportation
28
0.73
Storage
17
1.12
14
Commission
24
1.03
Table 8: Risksfaced by non-insured farmer in potato production and marketing
Factors
Frequency
Composite Score
A. Production risks:
Plant diseases
35
2.38
Insects
11
0.55
Excess rain
8
0.51
Drought
51
4.18
Lack of water in critical stages
7
0.58
Low quality of seed/input
9
0.45
B. Marketing risks:
Price variation
60
4.91
Transportation
10
0.63
Storage
19
1.18
Commission
18
1.08
15
Table 9: Opinions of insured and non-insured farmers about Crop Insurance Scheme (No.of farmers opining)
Sl.
Particulars
Insured Farmers
Non-Insured Farmers
No
Frequency
Percentage
Frequency
Percentage
1
2
3
4
5
6
7
Sl.
No.
1
2
3
4
5
6
7
8
9
10
11
12
Sl.No.
1
2
3
4
5
6
A. Opinions regarding crop insurance scheme:
Awareness about the crop insurance
60
100
programme
Farmers being insured since the inception of
60
100
the Programme
Crop insurance programme is necessary
57
95
Farmers interested in continuing the
57
95
insurance programme
Farmers who are satisfied with the existing
42
70
programme
Crop insurance is the better way of reducing
54
90
losses
Mixed and Diversified farming is a better
6
10
way of reducing losses
Particulars
Insured Farmers
Frequency
Percentage
B. Awareness regarding premium and indemnity:
Awareness of the premium rate for potato
58
96.7
Awareness about the way of collection of
59
98.3
premium
The premium rate charged is reasonable
51
85.0
Financial help is necessary through
59
98.3
compensation especially during crop losses
Farmers willing to pay premium to insure their
56
93.3
crops
Farmers who have received compensation
56
93.3
Farmers who have received compensation at the
00
00
right time
Farmers who received compensation after one
33
55
year
The compensation paid was adequate
43
71.7
Awareness about the way of payment of
53
88.3
compensation
Framers awareness about the basis for fixing the
7
11.7
compensation amount
Opinion on the compensation amount paid be
32
53.3
decided on Individual basis
Particulars
Insured Farmers
Frequency
Percentage
C. Awareness regarding yield calculations:
Awareness of premium rate for potato
16
26.7
Method of calculating threshold yield is
14
23.3
appropriate
Threshold yield should be considered
52
86.7
Threshold Returns should be considered
8
13.3
Awareness about the method used in conducting
16
26.7
crop cutting experiments
Present method of conducting crop cutting
14
23.3
16
57
95
00
00
54
00
90
00
00
00
51
85.0
9
15.00
Non-Insured Farmers
Frequency
Percentage
31
13
51.7
21.7
33
56
55.0
93.3
55
91.7
00
00
00
00
00
00
00
6.10
00
00
5
8.3
31
51.7
Non-Insured Farmers
Frequency
Percentage
5
2
8.3
3.3
14
46
6
23.3
76.7
10.00
4
6.7
experiment is ideal
Table 10: Suggestions byFarmers
Sl. Suggestions
No.
Insured Farmers
Non-Insured Farmers
Frequency
Percentage
Frequency
Percentage
1
60
100.00
58
96.6
3
5.00
10
30.00
11
18.30
15
25.00
5
8.30
5
8.30
2
3.30
00
00
5
10
8.30
16.67
2
1
3.30
1.70
15
25.00
2
3.30
14
23.33
3
5.00
10
16.67
1
1.70
2
3
4
5
6
7
8
9
10
Compensation should be paid before
starting of next season
Irrigated land also taken into
consideration
Proper guidance to be given for the
staff and farmers for its smooth
operation.
They should give information regarding
payment of compensation
5 Village should be considered as unit
area instead of Hobli
Creation of separate insurance cell
Premium should be taken in
instalments
Simplification of procedure payment of
premium
Training regarding filling up of
insurance application
Regular visits by insurance officials to
the plots of insured farmers
17