[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?