Page 23 - Insurance Times April 2017 Special Issue on Newindia

PRADHAN

MANTRI

FASAL BIMA

YOJANA :

A Major Farmer's Friendly

Initiative Transforming Indian

Farmer's Destiny

Crop insurance resulting from uncertainty of practically all natural factors
beyond their control such as rainfall (drought or excess
Crop insurance is purchased by the agricultural producers,
rainfall), flood, hails, other weather variables like
including farmers, ranchers, and others to protect
themselves against either the probability of loss of their (temperature, sunlight, wind), the pest infestation, etc.
crops due to natural disasters, such as hail, drought, and
It is a financial tool to minimize the impact of loss in farm
floods, or the expected loss of revenue due to declines in
the prices of agricultural commodities unexpectedly. Thus income by factoring in a large number of uncertainties
occurring which affect the crop yields of the farmers. As
Crop insurance was conceived as an instrument of risk
such it is a risk management alternative process, where the
management process in agriculture and as a measure to
production risk element is transferred to another party at
provide relief to innumerable Indian farmers whose crops
a cost, which is called premium. To design and implement
were damaged by one or the other means.
an appropriate insurance programme for the agriculture is
therefore very complex process and a challenging task.
Need For Crop Insurance
Crop insurance is one alternative available to manage risk There are two approaches to crop insurance, namely, the
in yield loss by the farmers. It is a potent mechanism to individual approach method, where yield loss on individual
reduce the overall impact of income loss on the farmer farms forms the basis for indemnity payment, and the
(family and farming). Thus, it is a means of protecting homogeneous area approach method, where a
farmers against the probable variations in their yield, homogeneous crop area is taken as a unit for assessment
of yield and the payment of indemnity. Infact in both the
About the author cases the reliable and the dependable yield data for past

Dr Ashish Barua 8-10 years are needed for the fixing premium on actuarially
sound basis.
BA, LLB, MA(Eco.), MBA (Finance),
Ph.D. (Economics), D. Litt(Economics)
Former: Director/Professor IIRM India is a land of farmers where the maximum proportion
of rural population depends on agriculture. Agriculture is

The Insurance Times, April 2017 23

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