ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Weather-based Crop Insurance in India: Towards a Sustainable Crop Insurance Regime?

The enormous dependency of crop production on weather highlights the pressing need for an effective mechanism to cope with weather-related production risks faced by farmers. This paper focuses on the recent developments in the weather insurance market and evaluates the performance of the Weather-based Crop Insurance Scheme in India. Through a micro-analysis of indemnity payouts under the traditional and the weather insurance schemes, the study reveals the much larger spread of benefits under the latter, thus significantly reducing a prominent drawback of the decades-old area yield scheme. While the product has tremendous potential to emerge as a sustainable crop insurance model that can meet the risk management needs of the rural poor, there are critical issues that merit action to achieve the desired results.

Crop Insurance in India: Changes and Challenges

An evaluation of the crop insurance programme in India through the multi-peril yieldbased National Agricultural Insurance Scheme reveals that while it has done well on equity grounds, the coverage and indemnity payments are biased towards a few regions and crops, and there are delays in settlement of claims. And while the emergence of weather-based insurance as an alternative has addressed several limitations of traditional insurance, it is faced by challenges of a different kind. Both these forms of insurance must thus be looked upon as complementary to each other in order to evolve an efficient mechanism for dealing with natural disaster risks in agriculture.
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