Saturday, February 20, 2016

[Editorial # 69] Farm solutions : The Indian Express

[Following editorial has been published in The Indian Express on 20th February 2016. Read through it and try to answer the questions that follow. Please do not copy and paste answers. The objective of this exercise is to get you in the groove of answer-writing. Try to write in your own words. Don't hesitate to write in a bulleted-format, if you are uncomfortable in writing in paragraph form.]

Farm distress resulting from back-to-back monsoon failures and falling price realisations in most crops has arguably posed the biggest challenge, economically and politically, for the BJP-led Centre. It has prompted initiatives that may not have received official priority in the normal course — which is always the case with agriculture. On Thursday, Prime Minister Narendra Modi unveiled the operational guidelines for a new crop insurance scheme, the Pradhan Mantri Fasal Bima Yojana (PMFBY), at a farmers’ rally in Madhya Pradesh. He also announced the creation of a National Agriculture Market (NAM), a digital platform for farmers to sell their produce to buyers anywhere in India, from April 14. Whatever may be the political calculations behind their launch and timing, both are potentially game-changing.
Currently, insurance penetration extends to hardly a fifth of the country’s cropped area. This is only to be expected when policy claims cannot cover even half of the value of produce in the event of crop failure. The PMFBY not only keeps the premiums low at 1.5-2 per cent for seasonal and 5 per cent for annual horticultural crops, but also removes any artificial capping of the sums insured that result in low claims being paid to farmers. That makes it more attractive for farmers to take insurance protection. True, such low premiums and allowing farmers to claim the full value of a crop linked to its normal threshold yields and MSP could entail additional fiscal costs. But subsidy on crop insurance is any day preferable to that on electricity, water or fertiliser. The former encourages farmers to invest in productivity improvements and new technologies; the latter promotes inefficient resource use. Also, with more farmers joining in, the actuarial premiums would come down through increased spreading of risks, thereby helping to contain the government’s subsidy burden.

Equally welcome is the move to expand the farmer’s universe of buyers beyond traders/ commission agents licensed to operate in the designated mandis of his area. Giving farmers the choice to accept the bids of local traders or those of online buyers can lead to higher price realisations, just as a robust crop insurance system is the best way to deal with weather and disease risks that are intrinsic to agriculture. India’s farmers need more such long-term solutions, as opposed to populist loan waivers and distortionary subsidies.


1. What factors are responsible for generation of monsoon winds? Is India the only country to receive monsoon? If yes then why does this phenomenon not occur anywhere else? If yes then where else on the globe does monsoon exist?

2. What is meant by crop insurance? What are various crop insurance schemes available in India? 
What is the penetration of crop insurance in India?

3. Highlight the features of Pradhan Mantri Fasal Bima Yojana (PMFBY)? 

4. What is meant by National Agricultural Market? How is it different from APMC Mandis?

5. What are the risks faced by farmers against which insurance is required?

6. What is horticulture? Mention the names of horticultural crops produced in India? What is the share of horticulture in Indian agricultural?

7. What is MSP? What is the purpose behind MSP mechanism ? Which agency/authority decided MSP?

8. What are various types of subsidies being offered to farmers today? How much subsidy does Indian government provide for various such subsidies?

9. How is farm insurance a better tool of for improving farm productivity vis a vis farm subsidies?

10. Why are subsidies being called distortionary? 


  1. 3. Highlight the features of Pradhan Mantri Fasal Bima Yojana (PMFBY) ?
    • For many years now, a number of complex crop insurance schemes have existed. Farmers, however, have been unable to avail the benefits of these schemes. The Pradhan Mantri Fasal Bima Yojna has now replaced all other crop insurance schemes and integrated the benefits in one single yojana.
    • This means that earlier schemes such as the National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS) will no longer be available.
    • In most of the earlier crop insurance schemes, premium rates had risen drastically in recent years. This means that the premium charged was about 25 percent of the sum assured – the rise in premium was anywhere between 22 and 57 percent. The compensation derived by farmers in the eventuality of a crop failure, was in contrast, very low.
    • The Pradhan Mantri Fasal Bima Yojana is premised on a premium amount of 2 percent for Kharif crops and of 1.5 percent for Rabi crops. This covers most food crops and oil crops cultivated in India. The premium is pegged at 5 percent for commercial or horticultural crops (including cotton) for one year.
    • This means that the farmers shall derive “maximum benefits by paying minimal premium”. The government has decided to get rid of the “capping” mechanism that did not allow farmers to derive legitimate benefits previously.
    • This drastic reduction in crop insurance premium is likely to result in an increase of the Center’s financial load by about 500 percent. The benefits will, however, be derived by the farmers, the government said.
    • Apart from relief on premium, the farmers shall derive the benefits of this scheme where assessment of crop losses shall be quick. Smart phones, remote sensing technology and even drones shall be used to estimate losses, assess compensation, and settle claims without much delay.
    • The Pradhan Mantri Fasal Bima Yojana will be applicable from the forthcoming Kharif season of 2016.

    PM Modi releases guidelines for PMFBY
    On 18 February 2016, PM Narendra Modi unveiled the guidelines for operationalization of the Pradhan Mantri Fasal Bima Yojana (PMFBY). The guidelines were issued at a farmers’ convention that was held at Madhya Pradesh’s Sherpur village. The Yojna, which aims at boosting India’s agriculture sector, will come into force from the 2016 Kharif season.

  2. monsoon is the seasonal change in the direction of prevailing winds. This causes wet and dry regions it is generally associated with India. It always blow from cold regions to hot regions and the climate of India is largely dependent on India.
    It is basically large scale sea breezes and land breeze. Major monsoon systems of the world are in West African and Asia-Australia.

  3. Crop insurance is purchased by agricultural producers. This is generally done to protect them in case of destruction of crops because of natural disasters or in case of loss of revenues due to low price of agricultural commodities. The former is called crop-yield insurance and the latter is called crop-revenue insurance.
    Pradhan Mantri Fasal Bima Yojana (PMFBY)
    National Agriculture Insurance Scheme(NAIS).
    Currently, insurance penetration extends to hardly a fifth of the country’s cropped area.

  4. PMFBY is the new crop damage insurance scheme. This is going to replace the National Agricultural Insurance scheme. It will come into force from the starting of the kharif season.
    Crops covered-Rabi,kharif, annual commercial and horticultrul crops.
    Premium- For kharif 2% of the sum insured. Rabi it will be 1.5%. For annual commercial and horticultrul it will be 5%.
    Losses covered- The new scheme will cover post-harvest losses also. further it will also provide farm level assesment for local calamaties.
    Technology-Mandatory use of remote sensing, smart phones and drones for quick estimation of crop loss. will help in speeding up the claim procedure.
    The scheme aims to bring 50% of farmers under the scheme within 2-3 years. There will not be any capon reduction of the sum insured.

  5. National Agricultural Market is a pan-India electronic trading portal which has a aim of integrating Agriculture Produce Market Committees. So that there is a unified market for the agricultural commodities. It will also have a physical market.
    Initially 585 APMCs are to be linked. It will be implemented through Agri-tech Infrastructure fund. The central government is going to provide softwae to the state free of cost and initial payment of 30lakhs will also be given. Even private mandis will be given software benefits but not the monetary support.
    Agricultrul marketing is a state subject under the constitution of India. Thus the agricultural markets are established and regulated through various state APMC Acts. It provides for the first sale in the notified agricultural commodities produced in the region such as cereals, Pulses, edible, Oil seed, fruits and vegetables even chicken, goat, sheep etc.

  6. Various risks faced by farmers
    1.Price risks
    2.Production risks
    3.Human or personal risk(lack of machine and technology) manual work adverse weather conditions might lead to death of farmers.
    5.Institutional risk- If the policy which is framed is not effective or has loop holes which ultimately diverts from fulling the objects of policy.
    6.Financial risks- Repayment of loans in case of crop failure. Further lack of insurance coverage.
    7.External risks-Pests, war etc.

  7. Horticulture is a branch of agriculture that deals with the art, science, technology and business of growing plants. It includes both cultivation and plant conservation.
    Sweet Potato
    Plantation Crops
    Chillies (Dried)
    Cinnamon/Tejpata,Celery,Dill & Poppy
    Horticulture accounts for 30% of India’s agricultural GDP from 8.5% of the cropped area.
    India’s share in the global market is insignificant – it accounts for 1.7% of the global trade in vegetables and 0.5% in fruits.

  8. 1. What factors are responsible for generation of monsoon winds? Is India the only country to receive monsoon? If yes then why does this phenomenon not occur anywhere else? If yes then where else on the globe does monsoon exist?
    A. Monsoon means seasonal reversal of winds. the follwing are the reasons responsible for monsoons.
    differential heating of asiatic land and indian ocean:
    the high pressure created in the indian ocean will results in the movement of monsoons to the low pressure regions created in the tibet plateau. Hence this pressure difference acts as driving force for the motion of monsoon winds.
    south asia receives monsoon rainfall. the presence of himalayas acts as the barrier for the monsoon winds. Hence the reversal of monsoon takes place in the months of nov and december leading to NE monsoons.
    south asia
    south east asia
    central and west africa
    north america