Agriculture Insurance Reforms | Drones, Doves, GPS Devices, FIIS

How can we insure our farmers from extreme weather risks?

• Long run: invest more in irrigation and better water management. 
• Short term: crop insurance system needs an overhaul. 
• Two issues have to be sorted out: 
1. the appropriate level of coverage in terms of area, insurance per hectare (ha), and subsidy on premiums; 
2. how new technologies like drones, doves and low earth orbiters (LEOs) -->  used to monitor crops and assess damage.

Need for Agriculture Insurance:

• ~ 60% of rural households are dependent on agriculture for their livelihood.
• 85% small and marginal farmers
• Monsoon- uncertainty  -->  in production and in price of agricultural produce.
• >50% of farmers/households are at risk of defaulting on their debts (banks or informal moneylenders) ---> vulnerability at the household level -->  primary factor for farmer suicides
• Low prices of produce because of 
• increased global production and 
• lower demand for various commodities.
• Increasing input costs in agriculture and the alarming increase in consumption expenditure vis- à-vis income.
• Many measures (MSP, subsidies, insurance, schemes) BUT issues of:
• Exclusion
• Benefit of MSP is mainly appropriated by big farmers.
• Subsidies have to leakage and corruption.
• Climate change 
• WTO’s anti-MSP stress 

Let's understand the crop insurance in more detail:

Currently, there are basically three schemes in this field: 

• the National Agriculture Insurance Scheme (NAIS) [Rashtriya Krishi Bima Yojana] - for all crops and all farmers
• covers of all food crops (cereals and pulses), oilseeds, horticultural and commercial crops. 
• covers all farmers, both loanees and non-loanees
• Area approach- defined areas for each notified crop for widespread calamities.
• Individual basis- for localized calamities such as hailstorms, landslides, cyclones and floods.
• Weather Based Crop Insurance Scheme (WBCIS) and 
• Modified National Agricultural Insurance Scheme (MNAIS)

Issues with these schemes:

1. The premium rates in the NAIS are administered — between 1.5 and 3.5 per cent — and have no actuarial basis (i.e to say that premium is fixed and not statistically calculated). However, the MNAIS and WBCIS are based on actuarial premium rates, varying between 8 and 10 per cent.
2. The sum insured in these schemes covers only the cost of cultivation, not the farmer’s prospective income. 
3. Claim settlements take as long as six to 12 months.
4. General points: pata hi nahin --> agar pata hai toh insurance co ke pass data nahin hai --> agar data hai toh --> farmer ke pass paisa nahin hai for insurance and agar insurance akrwa bhi li toh price flutuation hoti rehti hai for which insurance is not enough
1. Low literacy
2. Inaccurate data measurement - due to lack of Infrastructure
3. low financial credit penetration
4. no protection against price fluctuations

The challenge is to increase the area insured to, say, 100 mha, raise the sum insured, reduce actuarially sound premiums and quicken the process of damage-assessment and settlement of claims. 

Example: Kenya, where Kilimo Salama, a weather-based insurance product, is being sold by input companies, which share the premium with farmers. Claims are settled in four days.

Solutions? Drones, Doves, GPS devices, Entrepreneurship, Web Portal, Insurance, FIIS

• DRONE TECHNOLOGY:
• Drones are low-cost, can fly at low heights and capture images in all resolutions needed to assess crop damage. They are even better than satellites and remote sensing when it comes to avoiding cloud cover and have higher frequency images. The law will have to be tweaked to let them fly 
• Launching the new programme called “Kisan” (Crop Insurance using Space Technology and Geoinformatics) - pilot basis
• The programme will be jointly conducted by Mahalanobis National Crop Forecast Centre, Indian Space Research Organisation, India Meteorological Department, State Agriculture Departments and Remote Sensing Centres, Climate Change, Agriculture and Food Security (CCAFS).
• The Centre has decided to use satellite and drones (unmanned aerial vehicles) over farmers’ fields to collect crop yield data and to assess damage from natural calamities.
• The high resolution imagery of crop assessment from drones will be collated with satellite imaging and other geospatial technology to get accurate data to enable crop insurance companies to give proper compensation to affected farmers. The experiment will help develop index-based data for insurance companies.
•  At the same time, the Minister launched an Android mobile phone application to assess large-scale damage to crops from hail. Farmers with Android and smart phones will download the application which will allow them to immediately send photos of their crop damage to officials concerned for immediate relief. This will cut the red tape in reaching assistance to farmers
• DOVES:
• Planet Labs, a private US venture, has designed low-cost satellites called doves, which could be useful in crop monitoring. They have resolution of about three-five metres, fly on low orbit and are able to collect data from anywhere on earth. With these technologies, it has become much easier, faster and more cost effective to monitor and assess crop damage.
• If India can be proud of the Mars Orbiter Mission, which cost Rs 450 crore, it would feel doubly proud of insuring its farmers through drones and doves supplemented by all-weather stations (AWS, five in each block) that would cost less than Rs 500 crore.

• HAND-HELD DEVICES:
• could be used to verify the GPS coordinates of a farmer’s field to digitise land records --> Digitised records would need to be linked to farmers’ bank accounts and Aadhaar numbers to electronically transfer the claims in two-three weeks, if not in four days.
• ENTREPRENEURS
• rural agents to digitise land records and sell insurance, 
• crop-loss surveyors, 
• weather-station providers — in order to cover every farmer in the country.

Thus, a three-layer system for assessing crop damage, including AWS, satellite/ drone images and mobile-based technology, can ground the system in science and control corruption.

• INSURANCE WEB PORTAL

• FIIS: FARM INCOME INSURANCE SCHEME
• The Central Government formulated the Farm Income Insurance Scheme (FIIS) during 2003-04 --- withdrawn in 2004. 
• In 2015 NDA Government is considering to launch farm income insurance scheme (FIIS) so that these two important components i.e. production and price can be tackled under single policy instrument.
• Gujarat government to recently attempted to reintroduce FIIS
• Objective of scheme
• to protect the farmers by giving them insurance cover for their production and market risks.
• to ensure guaranteed income by insuring the difference between the farmer’s predicted income and the actual income. 
• Predicted income = (Unit area yields * prices at the district level)
• Any decrease in the predicted income due to yield fluctuations or market fluctuations is insured
• By only considering yield losses from natural perils, it also ensures that farmers are incentivised to produce more, and that inefficiency in farming is not rewarded. famers will do so as they would like to increase their predicted income
• Challenges:
• How to predict reliable yield?
• latest tech - as discussed above
• How to get accurate market price of commodity? how to do price discovery?
• integrating agricultural markets in India, and 
• ensuring the efficiency of commodity exchanges.
• Benefits:
• Provides the government an opportunity to streamline some recently announced initiatives, such as 
• Soil Health Cards, and 
• Rationalising fertiliser and 
• Rationalising Water usage by insuring only the efficient cost of production.
• Incentivises farmers to use the available agriculture markets and engage with formal markets to take advantage of insurance in case of income dips.
• bring transparency in agriculture prices and bridge the gap between price discovery and realisation for the smallholding farmer
• integrate farm-level subsidies and remove leakages
• Avoid distortion of market prices through instruments like MSP, and rely instead on other financial instruments to protect farmers

Conclusion

With some additional resources, India could enlarge the area covered to 100 mha, build an insurance system that is science-based, transparent, as well as free from the patwari system and ad hoc political interference.

[Reference: Indian Express, The Hindu]