A comprehensive crop insurance scheme was introduced by govt. of India in 1985. It is operated through general insurance corporation with the following Objectives: -

1.         To provide financial support to farmer in the event of crop failure on account of natural calamities

2.         To enable farmers affected by a crop failure to restore their eligibility for fresh borrowing from institutional credit institution.

3.         To stimulate production of cereals, pulses and oilseeds.

Features

1.         It would provide insurance facilities to all farmers, irrespective of the size of their holdings.

2.         It would cover all crops including cereals an oilseeds and 3 cash crops sugarcane, potato & cotton to be brought under the purview of the scheme in the Ist year.

3.         All other crops including horticultural and commercial crops would be places under insurance cover within next 3 years.

4.         There is no restriction on the total sum insured.

5.         The premium rates would be 35% of sum insured for bajra and oilseeds and 2.5% for other kharif crops. It would be 1.5% of the sum insured for wheat and 2% for other Rabi crops.

6.         The Scheme also has a provision of 50% subsidy on the premium amount for small and marginal farmers. However subsidy would be phased over the period of 5 years.

7.         The Scheme would be operated on the basis of area approach all farmers of a defined area affected by a calamity would be entitled to payment of insurance claim according to indemnity rates prescribed for the area.

8.         In the event of localized calamity, individual claims of affected farmers would be entertained separately. Localized calamities would include hailstorm, landslip, cyclone, flood etc.

Drawbacks

1.         It provided coverage to limited no of crops-wheat paddy, oilseeds millets and pulses with the exclusion of important cash crop such as sugarcane, potato, cotton etc.

2.         Its coverage was restricted to rainfed crops only and because of this scheme was not effective in states such as Punjab, Haryana a Western U.P.

3.         Scheme covered only those farmers who had taken loans from financial institution and sum insured was limited to maximum of Rs. 10,000

National Agricultural Insurance Scheme (NAIS)

New Insurance scheme known as National Agriculture Insurance Scheme or Rashtriya Krishi Bima Yojana (Central Sector Scheme) has been implemented from this Rabi Season (1999-2000).

Objectives

(i)   To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests and diseases.

(ii) To encourage the farmers to adopt progressive farming practices, high value in-puts and higher technology in agriculture.

(iii) To help stabilize farm incomes, particularly in disaster years.

Salient features

• Scheme is available to all farmers – loanee and non-loanee both
• Irrespective of the size of their holdings.
• Compulsory for loanee farmers and optional for non-loanee farmers.
• Sum insured may extend to the value of threshold yield of the area insured.
• Coverage of all food crops (cereals, millets and pulses), oilseeds and annual commercial/ horticultural crops in respect of which past yield data is available for adequate number of years.
• Among the annual commercial/horticultural crops, seven crops namely, sugarcane, potato, chillies, ginger, onion and turmeric are presently been covered.
• Premium rates are 3.5% for bajra, and oilseeds and 2.5% for other Kharif crops, 1.5% for wheat, and 2% for other Rabi crops.  In case the rates worked out on the basis of actuarial data are less than the prescribed rate, the lower rate will be applicable.
• In case of annual commercial/horticultural crops, actuarial rates are charged.
• Small and marginal farmers are provided subsidy of 50% of premium charged from them.  The subsidy will be phased out over a period of 5 years on sunset basis.
• To implement NAIS at lower unit of insurance i.e. Gram Panchayat it has been decided to adopt new technique i.e. Small Area Crop Estimation Approach devised by IASRI in one selected district of each implementing States/UTs from Rabi 1999-2000 season on an experimental basis.
• It is proposed to set up a separate agency for implementation of NAIS.
• Pattern of Assistance
• Expenses on account of indemnity claims, Corpus Fund, A & O Expenses, publicity, premium subsidy to small and marginal farmers etc. are shared between Central and State Governments on 50 : 50 basis in the initially. 

Eligibility

Central Government is the policy making authority for the scheme.  Presently, General Insurance Corporation of India (GIC) is the Implementing Agency.   The activities relating to the implementation of NAIS are carried out through GIC, rural financial institutions, State Governments/UT Administration and farmers.

Farm Income Insurance Scheme (FIIS)

In order to target the two critical components of a farmer’s income, namely yield and price, through a single policy instrument, the Department of Agriculture & Cooperation formulated the Farm Income Insurance Scheme (FIIS). This Scheme was conceived to provide income protection to the farmers by integrating the mechanism of insuring production as well as market risks. Initially the scheme has been taken up on a pilot basis in Rabi 2003-04 in 18 districts of 12 States for wheat and paddy. Based on the outcome of the pilot implementation, the scheme would be appropriately fine-tuned as necessary.

Main features of the Farm Income Insurance Scheme (FIIS)

• Farmers will be protected by ensuring minimum guaranteed income.
• If the actual income of the farmers falls short of the guaranteed income (product of average yield and MSP) of the farmers they would be eligible for compensation to the extent of indemnity from the Agriculture Insurance Company of India  Ltd. (AICI)
• Area approach as in NAIS would be used for actual yield and price measurement of the insured corp.
• Initially the scheme would cover paddy and wheat only.
• The Scheme would be available for all the States and would be compulsory for farmers availing crop loans.
• NAIS will be withdrawn for the crops covered under FIIS but would continue to be applicable for other crops.
• Additional provision of Rs.10,000 crore for Gross Budgetary Support (GBS) for plan; programmes such as Food for Work.

The scheme was discontinued in 2004 but recently there were talks about reintroducing it.

Pradhan Mantri FasalBima Yojana

• The scheme will provide insurance cover for all crops (including horticulture) for which past yield data is available.
• The uniform premium paid by farmers will be- Kharif-2%, Rabi-1.5%, and commercial/ horticulture- 5%.
• Rest of the costs will be shared by Centre and State governments.
• Use of technology to be encouraged- use of smartphones to capture and upload data.          Also, use of remote sensing to calculate yields, damages etc.

How can PMFBY be seen as an improvement over previous schemes like MNAIS?

• The premium rate which ran as high as 15% in MNAIS was a major deterrent for its widespread adoption. Low premium rates in PMFBY will attract farmers.
• There is no upper limit on government subsidy. Earlier there used to be an upper cap on government subsidy to ensure limited outgo. This often led to low claims being paid to the farmers.

Drawbacks

It does not cover crop losses by wild animals which could have been instrumental in preventing man-animal conflict.

Agricultural credit

The bulk of short term and long tern agricultural credit is routed through the cooperative credit system. Apart from this, there are other provisions include

Kisan Credit Card Scheme

The Kisan Credit Card Scheme, was introduced in 1988-99, it has been launched by all public sector banks (PSBs.). These cards provide timely credit to farmers in a flexible and cost-effective manner. It has now been extended to livestock and fisheries in 2018-19.

Regional Rural Banks (RRBs)

The reform measures initiated to strengthen and restructure the Regional Rural Banks (RRBs) will continue.

Self-help group (SHGs)

NABARD and SIDBI have launched schemes for the promotion of SHGs and NGOs as a channel for flow of funds to micro-enterprises. The programme of linking self-help group (SHGs) of the poor with the banking system was launched as a pilot project in 1992. A redeeming feature of the programme is that 90 percent of the groups linked with banks are exclusive women groups.

Priority sector lending

To augment the flow of credit for food and agro-processing industries lending by banks to this sector will be treated as priority sector lending.

Need for Reforms in Agriculture Credit

According to NSSO  70th round data, as much as 40 per cent of the finances of farmers still comes from informal sources, despite an increase in the flow of institutional credit to agriculture in recent years.

Of all the credit disbursed by the banks in India only 10% is towards rural areas.

Usurious moneylenders still account for a 26 per cent share of total agricultural credit.

The reasons for the low penetration of formal credit in rural areas are several-

• Low penetration of formal banking institutions in rural areas ( this is being slowly rectified by RBI through its successive banking licencing policies)
• Poor credit-worthiness of the rural poor as they have little or no assets to pledge.
• Widespread illiteracy and ignorance among rural masses coupled with complicated banking procedures.
• Due to poor recovery rates of loans and high amount of defaults the banks are not enthusiastic about the rural lending.

The default is due to two reasons-

1.   Poor repayment capacity due to crop loss. This is being dealt by schemes like KCC, NAIS, and PMFBY.

2.   Wilful default due to politically motivated loan waivers.

To deal with this there are Interest Subvention Schemes.

Even in the formal credit disbursed by banks under Priority Sector Lending there are certain facts that reveal that even the formal credit institutions have failed to reach the targeted beneficiaries-

The banks have no regional targets under priority sector lending. As a result, most of the PSL-loans are given in rich-n-developed states e.g. Gujarat, Andhra, TN, Punjab, Haryana etc. where a farmer is more likely to repay the loan, compared to a farmer in Assam or Arunachal Pradesh (there have been even cases of agricultural loans being given to Urban areas).

Therefore the needy farmers of these states have no access to formal credit.

• Studies conducted by the RBI and National Bank for Agriculture and Rural Development (NABARD) indicate that the crop loans are not reaching intended beneficiaries and there are no systems and procedures in place at several bank branches to monitor the end-use of funds.

As a result the loans instead of being invested to increase productivity are often utilized for consumption.

• As per a study most of the PSL loans are given in the month of March instead of the months of June and November when they are most needed.
•  Also, although overall credit flow to theagriculture sector has increased over the years, the share of long-term credit in agriculture or investment credit declined from 55 per cent in 2006-07 to 39 per cent in 2011-12.

This shows that there is need to even reform the PSL loan practices so that the real intended beneficiaries get to avail the benefits of formal credit.

To this effect NachiketMor committee recommends that there should be differential weightage for lending to hardship areas and less credit worthy individuals to encourage loan disbursal to the poor farmers in backward regions like Arunachal Pradesh which is least served by formal banking institutions.