Rainfall Insurance in India: Does It Deal With Risks in Dryland Farming?
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Transcript of Rainfall Insurance in India: Does It Deal With Risks in Dryland Farming?
Mar
ch 2
015
Rainfall Insurance in India: Does It Deal With Risks in Dryland Farming?Kattarkandi Byjesh, Uttam Deb and Cynthia Bantilan
Introduction• Semi-arid tropical environment in India is highly vulnerable to weather risks • Climatemodelshavepredictedfrequentincidencesofextremeeventssuchasdrought,flood
etc. and increased weather variability• Anticipationoflossesaffectshouseholdbehavior,causingunprotectedfarmerstoavoid
investment,innovationandrisktaking(Hill,2009)• Hence,farmers’shouldbeequippedwiththecapacitytoabsorbtheselossesinthefuture• Efficientsupportmechanismisneededthroughdifferentpoliciesandsafetynetprogramsto
reducethevulnerabilitytoclimaticrisks.• Weatherbasedcropinsurancescheme(WBCIS)isexpectedtoaddressthisriskresultingfrom
unfavorable natural events.
Science with a human faceAbout ICRISAT: www.icrisat.orgICRISAT’sscientificinformation:http://EXPLOREit.icrisat.org
VILLAGE DYNAMICS IN SOUTH ASIA
Funding support:Bill&MelindaGatesFoundation
InternationalCropsResearchInstitutefortheSemi-AridTropics,India
Frequency of occurrence of drought in the semi-arid region of India. SourceGOI,2009
Objectives• TostudyoperationalmodalitiesoftherainfallinsuranceschemeinIndiasuchaseligibility
criteria,paymentofpremium,benefitstructureandpayouts,andtechnicalhassles.• Tocomputeandcomparerainfallindexatvariousadministrativeleveli.e.district,mandaland
village level. • Toanalyzetheriskminimizingability,effectivenessandconstraintsinimplementationofthe
rainfall insurance.
Methodology and data• VDSA household panel data • Extensive literature review and rainfall data analysis• Key informant interviews and focus group discussions of farmers, insurance providers, and
agents• Meso-level data analysis• Payoutscalculation.
Comparison of cumulative distribution function of rainfall received during the kharif season at villages and corresponding reference station.
Correlation graph of kharif rainfall data observed in the villages and their respective mandal.
Results
Rainfall insurance in India failed to reduce risks in dryland farming. Why?
• Rainfall insurance started extensively in 2007, but failed to gain popularity• VillagevsReferencedata:widevariationinKharifrainfall(2005-2013)• Coverage: Important crops grown by farmers are not included• Compensation(<50%ofloss)islessattractive• Computingmethodologyforstrikeandpayouts:nottransparent• Price and liquidity constraints among poor farmers• Lack of trust among farmers and insurance provider.
ReferencesAFC.,2011.Impactevaluationof‘Pilotweatherbasedcropinsurancestudy(WBCIS).ReportsubmittedtoDepartmentofAgricultureandCooperation,MinistryofAgriculture,GovernmentofIndia.pp238.
AIC,2014.AgriculturalInsurancecompanyofIndiaLtd.http://www.aicofindia.com/AICEng/Pages/Default.aspx
GineXL,MenandR,TownsendandJVickery.2010.Micro-insurance.ACasestudyofIndianRainfall Index Insurance market. Policy Research Working Paper. Development Research Group,FinanceandPrivateSectorDevelopmentTeam.TheWorldBank.pp.45.
Working example of pay outs calculated for Cotton crop as per the AIC policy term in Mahbubnagar district of Telangana.
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Compensation is insignificant for the insured farmer even during the worst crop season (2007-13). Source:GOI2014