A Study on Crop Insurance Schemes in Karnataka

Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-1(III) | January - 2025 62 A Study on Crop Insurance Schemes in Karnataka Mahadevaprasad M1 Dr. P M Shiva Prasad2 1Research Scholar,Teresian College Research Centre, (Recognised by University of Mysore) Mysuru 2Assistant Professor, Teresian College Research Centre, (Recognised by University of Mysore) Mysuru Manuscript ID: JRD -2025-170114 ISSN: 2230-9578 Volume 17 Issue 1|(III) P p62-65 January 2025 Submitted: 01 Dec. 2024 Revised: 24 Dec. 2024 Accepted: 20 Jan. 2025 Published: 31 Jan. 2025 Abstract: Crop insurance can provide financial protection to farmers in case of crop losses due to natural calamities or other unforeseen events. It can also encourage farmers to adopt improved technologies and practices, such as high-yielding seeds, fertilizers, irrigation and pest control, which can enhance productivity and resilience. However, the penetration of crop insurance in India is still low, covering only about 30% of the cropped area. One of the main challenges is the high cost and complexity of traditional crop insurance schemes, which rely on field-based assessments of crop damages and losses. These schemes are delays in claim settlement, moral hazard, adverse selection and fraud. Agriculture production and farm income in India are frequently affected by natural disasters such as droughts, floods, cyclones, storms, landslides and earthquakes. In recent times, mechanisms like contract farming and future trading have been established which are expected to provide some insurance against price fluctuations directly or indirectly. But, agricultural insurance is considered as an important mechanism to address the risk of output and income effectively which is resulting from various natural and manmade events. Keywords:Price, Corp Insurance, Agriculture Introduction Agriculture is the key sector for sustainable development in India. It remains an essential component of most rural development strategies. It employs, as per the World Bank report, 57% of the labour force and generates a significant portion of the labour force and generates, on average, a substantial contribution to Gross Domestic Product (GDP) growth. Additionally, agriculture plays a crucial role in ensuring for the country's growing population. Agriculture is a vital sector of the Indian economy, providing livelihood to millions of farmers. However, agriculture is also exposed to various risks that can affect the income and welfare of the farmers. Some of the major agricultural risks in India are climate and weather risks, price and market risks, institutional and policy risks, technological and innovation risks. The role of agriculture in India is crucial for its economy, food security, employment and trade. Agriculture contributes about 18.3% to the total GDP of India and provides livelihood to more than half of its population. India is the largest producer and exporter of several agricultural commodities, such as cotton, ginger, okra, potatoes, onions and brinjal. India is also the secondlargest producer of rice, wheat, sugarcane, fruits and vegetables in the world. Agriculture is not only a source of income for farmers, but also a supplier of raw materials for various industries, such as textiles, food processing, leather and biofuels. Agriculture also plays a key role in maintaining ecological balance and preserving biodiversity. Quick Response Code: Website: https://jrdrvb.org/ DOI: Access this article online This is an open access journal, and articles are distributed under the terms of the Creative Commons Attribution 4.0 International, The Creative Commons Attribution license allows re-distribution and re-use of a licensed work on the condition that the creator is appropriately credited Address for correspondence: Mahadevaprasad M,Research Scholar,Teresian College Research Centre,(Recognised by University of Mysore) Mysuru How to cite this article: Mahadevaprasad M, P M Shiva Prasad. (2025). A Study on Crop Insurance Schemes in Karnataka. Journal of Research and Development,62-65 Original Article Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-1(III) | January - 2025 63 Conceptual Framework Agriculture in India faces many challenges, such as low productivity, climate change, water scarcity, soil degradation, pests and diseases, market fluctuations and policy constraints. To overcome these challenges, the government has initiated various schemes and policies to support farmers, such as crop insurance, minimum support prices, irrigation facilities, organic farming, agroforestry and agricultural extension. Agriculture in India has the potential to achieve higher growth and sustainability with the adoption of new technologies, innovations and best practices. Crop insurances agricultural insurance that aim to protect farmers from the risks of natural disasters, weather events, pests, diseases, and price fluctuations. Crop insurance covers the actual losses of crops due to insured perils, while index insurance a predefined index that reflects the average losses in a region or a crop. Both types of insurance can help farmers cope with shocks, stabilise their income, and invest in their farms. Crop and index insurance have different advantages and disadvantages. Crop insurance is more tailored to individual farmers' needs, but it is also more costly and prone to moral hazard and adverse selection. Index insurance is cheaper and simpler to administer, but it may not match the actual losses of each farmer and suffer from basis risk. Therefore, choosing the best type of insurance depends on the context, the availability of data, the preferences of farmers, and the objectives of policymakers. Crop insurance can provide financial protection to farmers in case of crop losses due to natural calamities or other unforeseen events. It can also encourage farmers to adopt improved technologies and practices, such as highyielding seeds, fertilizers, irrigation and pest control, which can enhance productivity and resilience. However, the penetration of crop insurance in India is still low, covering only about 30% of the cropped area. One of the main challenges is the high cost and complexity of traditional crop insurance schemes, which rely on field-based assessments of crop damages and losses. These schemes are delays in claim settlement, moral hazard, adverse selection and fraud. The role of agriculture risk management in India is significant and growing. According to a recent report by the World Bank, it covered about 19 million farmers and 29 million hectares of land in India in 2016-17, accounting for about 45% of the total crop insurance market. IBI has also shown positive impacts on farmers' welfare, such as increased access to credit, reduced debt distress, improved crop diversification and adoption of climate-smart practices. Agriculture is the key sector for poverty reduction and sustainable development in India in the twenty-first century, and remains an essential component of most development strategies. It employs approximately two-thirds of the labour force and generates on average one-third of Gross Domestic Product growth In order to kick-start a process of agricultural development farmers should increase usage of modern agricultural techniques, including improved seeds and chemical inputs such as fertiliser. For example, improved seeds have the potential to increase income and improve rural livelihoods. However, it is well-known that adoption of modern inputs among Indian farmers remains incomplete due to lack of information, lack of liquidity to purchase inputs, and risks associated with adoption are based on insights from behavioural economics. Crop insurance schemes have become an increasingly important risk management tool for farmers. In India, the agricultural sector accounts for a significant share in the country's GDP and employs a large percentage of the population. The Indian Government has implemented various crop insurance schemes with the aim of providing financial protection to farmers in the event of crop failures. The available research on crop insurance schemes in India, exploring their impact on farmer’s livelihood and the sustainability of the insurance industry. This review of literature aims to provide a comprehensive overview of the existing research on crop insurance schemes. They are many government sponsored crop and index insurance schemes and private insurance schemes or company sponsored Crop and Index insurance schemes they are as follows: 1. First Individual Approach Scheme (1972-78) The Scheme was implemented in Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu and West Bengal. It continued up to 1978-79 and covered only 3,110 farmers for a premium of Rs. 4.54 lakh against claims of Rs. 37.88 lakh. 2. Pilot Crop Insurance Scheme (1979-84) The PCIS was based on “Area approach” and was launched in 1979 in 12 states as shown in Table I. The PCIS was voluntarily restricted to loaned farmers from 1979 to 1984 and covered 6.23 lakh farmers. The CCIS implemented from 1985 to 1999 was an extension of PCIS though made compulsory for loaned farmers. 3. Comprehensive Crop Insurance Scheme (1985-99) Comprehensive Crop Insurance Scheme (CCIS) was started from 1985 with the objective of providing financial support to the farmers in the event of crop failure due to drought, flood etc. Since inception of the scheme in 1985, about 5.82 crore farmers have been covered up to Rabi 199697 season. 4. National Agricultural Insurance Scheme (1999-2000) National Agricultural Insurance Scheme (NAIS) is being implemented in the country since Rabi 1999-2000, as a part of risk management in agriculture with the intention of providing financial support to the farmers in the event of failure of crops as a result of natural calamities, pests and diseases. Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-1(III) | January - 2025 64 5. Modified National Agricultural Insurance Scheme (2010-11) During Rabi 201011, twelve States notified the implementation of MNAIS in 34 districts insuring 3.70 lakh farmers. Index based Pilot Weather Based Crop Insurance Scheme (WBCIS) is under implementation from Kharif 2007 in selected areas on pilot basis. 6. Weather Based Crop Insurance Scheme (2007-08) Pursuant to the budget proposals, AICIL introduced a Pilot Weather Based Crop Insurance Scheme (WBCIS) in Karnataka during Kharif 2007 season, covering 70 Hoblis and eight rain-fed crops. During the Rabi 2007-08 season, the scheme was implemented in the states of Rajasthan, Chhatisgarh, Madhya Pradesh and Bihar. 7. Coconut Palm Insurance Scheme (2009-10) The “Coconut Palm Insurance Scheme (CPIS)” is being implemented by the Coconut Development Board, Ministry of Agriculture and Farmers Welfare, Government of India with the objective of insuring coconut palms against natural calamities, climatic risks, pests, diseases and other perils. 8. 2016 Pradhan Mantri Fasal Bima Yojana (PMFBY) The scheme was launched in India by Ministry of Agriculture & Farmers welfare, New Delhi from Kharif 2016 season onwards. National Insurance Company started participating in PMFBY from Rabi 2016 onwards and covered 8 States and 2 Union Territories during the past 5 seasons namely, Rabi 2016-17, Kharif & Rabi 2017 and Kharif & Rabi 2018 covering 70, 27,637 farmers. Farmer’s share of premium is Rs. 453 crores and with subsidy from State/Central Government RS.1909 Crores, gross Premium is Rs.2362 Crores for the 5 seasons together. Research Gap An exclusive attempt has been made to review the existing literature on crop insurance. Based on the literature review, it was found that these studies have focused on crop insurance schemes in India and around the world, and in which way weather based crop insurance scheme can be an effective tool in protecting the farmer’s economic loss incurred due to presence of adverse weather condition which have become regular phenomena in these days. No particular studies were made on the issues related to crop insurance scheme can be a better financial risk transfer tool during adverse effect of crop on yield loss and farm income losses, than traditional yield based crop insurance products, in developing country like India, particularly in rain fed areas growing food crops mainly in Karnataka. Objectives  To analyse the level of awareness among farmers towards crop insurance schemes.  To analyse the performance of crop insurance schemes. Review Of Literature Vanishree (2024) analysis of Pradhan Mantri Fasal Bima Yojana (PMFBY), reveals a comprehensive approach to crop insurance in India. The PMFBY, launched in 2016, is a significant initiative that provides insurance coverage for around 40 crops, focusing on food crops and horticulture. The scheme operates through three main stages: prenotification and notification, enrollment, and claims processing. During the enrollment stage, farmers are informed about the scheme, enroll through banks, and have their information entered into the system. Moreover, the PMFBY has faced challenges in execution, particularly in conducting crop-cutting experiments efficiently. Debasis (2024) explains Crop Insurance in India can be highlighted through the challenges faced by small and marginal farmers in accessing effective insurance coverage. Despite various schemes like the Comprehensive Crop Insurance Scheme (CCIS) and the National Agricultural Insurance Scheme (NAIS), issues persist. The premium subsidy for small and marginal farmers, shared by the government, aims to support them, but challenges such as discrepancies in area insured, delays in receiving crop-cutting data, and the quality of weather data hinder the effectiveness of these schemes. The complexity of crop insurance, asymmetry of information, and the need for coordinated efforts among multiple agencies further contribute to the struggles faced by farmers in securing adequate insurance coverage. Miranda (2024) explains crop index insurance can be an effective tool for building climate resilience among smallholder farmers in Nigeria, according to the research findings. Crop farmers in Nigeria's arid and semi-arid regions face significant risks from climate-related disasters like droughts and floods, which can lead to catastrophic crop losses and persistent poverty. Promoting sustainable development in these regions requires effective strategies to manage climate-related shocks. This study investigates the potential of index insurance as a risk-mitigation tool for crop production in Nigeria. Index insurance bases payouts on an easily measurable index like rainfall or average yields, providing low-cost protection for farmers facing predictable climate risks. Umamah (2024) examine crop insurance policies often use rainfall and temperature as the main parameters to determine payouts to farmers. To calculate the net single premium for such policies, researchers need to first fix the bivariate distribution of maximum daily rainfall and maximum daily temperature in the specific area covered by the policy. The benefit claim model for the insurance policy is then developed based on this bivariate distribution of rainfall and temperature. Indicators such as maximum daily rainfall and maximum daily temperature are used as the basis for the claim model. Once the bivariate distribution and claim model are established, actuaries can then determine Journal of Research and Development Peer Reviewed International, Open Access Journal. ISSN : 2230-9578 | Website: https://jrdrvb.org Volume-17, Issue-1(III) | January - 2025 65 the net single premium that should be charged for the crop insurance policy. This allows the insurance provider to accurately price the policy based on the weather risks in the covered region. Mamata Swain (2023) discusses the necessity of redesigning crop insurance schemes in India to cope with the challenges posed by climate change Innovative Insurance Products It may propose the development of innovative agricultural insurance products tailored to address the impacts of climate change on agriculture, such as weather index insurance and income insurance products. Role of Insurance Industry The role of the insurance industry in promoting agricultural risk protection, product innovation, and poverty alleviation through the development and implementation of climate-resilient insurance products. Weather index insurance is highlighted as a viable option for transferring climate change risks in agriculture, providing a transparent and flexible mechanism to compensate farmers based on meteorological factors and crop yields. Shripad Vishweshwar (2022) explains the performance of weather based crop insurance schemes in Karnataka. To assess the knowledge of farmers about the crop insurance schemes. To assess the constraints opined by farmers on weather based crop insurance. The present study considered the both primary data and secondary data. From each district (Dharawada and Gadaga) 50 respondents were selected by simple random sampling method. The study employed the Growth Rate Analysis, Relative Importance Index and Garrett's ranking technique. The study revealed that, the majority of farmers were not aware of the implementing agency and compensation payment for the Weather Based Crop Insurance. They suggested that, proper awareness of crop insurance scheme should be created and need to formulate suitable policy measures to provide door step service and subsidy in premium payment. Neerja Devi, (2022) explains the various crop insurance schemes in India. To study the growth and development of National Agricultural Insurance Scheme. To examine the important features, trend and Performance of National Agricultural Insurance Scheme. The Case Study method has been used and mainly depends on secondary data. The study revealed that, to protect the farmers from losses due to weather risk, we need to build an appropriate comprehensive risk mitigation strategy rather than just focusing on one strategy of crop insurance. Conclision Crop insurance scheme all crops and all farmers should be brought under the purview of the scheme, the premium rates should vary with the nature and crop production in different areas, the defined unit area for paying indemnity should be a village or group of village as against block, as is being considering at present, threshold yield should be worked out by considering indices of crop production over a 10-year period as against five year period, etc. References 1. Awondo S. N., Kostandini, G., and Setimela, P. (2020). Multi-Site Bundling of Drought Tolerant Maize Varieties crop Insurance. 71(1), 239–259. https://doi.org/10.1111/1477-9552.12344. 2. Biswal D., and Bahinipati, C. S. (2022). Progress in Disaster Science Why are farmers not insuring crops against risks in India ? A review. Progress in Disaster Science, 15, 100241. https://doi.org/10.1016/j.pdisas.2022.100241. 3. Fang L. Hu R. Mao H. and Chen S. (2021). “How crop insurance influences agricultural green total factor productivity : Evidence from Chinese farmers.” Journal of Cleaner Production, 128977. https://doi.org/10.1016/j.jclepro.2021.128977. 4. Jayanth J. (2021). Classification of Crops and Crop Rotation Using Remote Sensing and GIS-Based Approach : A Case Study of Doddakawalande Hobli, Nanjangudu Taluk. Journal of the Indian Society of Remote Sensing. https://doi.org/10.1007/s12524-020-01296-0. 5. Kumar V. and Rani M. (2023). International Journal of Advanced Research and Development www.multidisciplinaryjournal.net “Assessing the performance of Pradhan Mantri Fasal Bima Yojana in India