Answer:

Many small and marginal farmers in India are getting low prices for their produce because of increased global production and lower demand for various commodities.

The latest NSSO report highlights the increasing input costs in agriculture and the alarming increase in consumption expenditure vis-à-vis income, especially among households with less than two hectares of land holdings.

The Farm Income Insurance Scheme (FIIS), originally introduced in 2003 and withdrawn the next year, has been revived in Gujarat. The scheme’s main thrust is that it tries to ensure guaranteed income by insuring the difference between the farmer’s predicted income and the actual income.

It calculates the predicted income by using the product of unit area yields and prices at the district level. Any decrease in the predicted income due to yield fluctuations or market fluctuations is insured under the scheme.

By only considering yield losses from natural perils, it also ensures that farmers are incentivised to produce more, and that inefficiency in farming is not rewarded. The success of FIIS will depend on whether the government is willing to move away from the current mundane system of manual inspection and data gathering to the new era of big data and technology.

When the FIIS pilot was tried a decade ago, it proved to be premature, but the time is right now to correct some of the errors in the previous scheme and move ahead.

The concerns over reliable yield and price data in the earlier attempts can be largely eradicated using present technologies. The maturing of satellite-based yield monitoring systems, integrating agricultural markets in India, and ensuring the efficiency of commodity exchanges will remove most of the concerns that arise over the large amounts of data needed for such a revolutionary scheme.

Additionally, leveraging mobile phone penetration levels and mobile-enabled technologies can ensure the availability of real time data, and reduce the moral hazard problems that afflict current insurance schemes.

The present National Crop Insurance Programme covers prevented/ failed sowing, post- harvest losses, and losses from natural calamities on an individual basis. It is an area- based approach that covers a wide variety of food, oilseed and horticulture crops.

However, low literacy, the absence of infrastructure to measure data accurately at the farm level, and the limited penetration of formal financial credit have made the scheme inefficient, leading to reduced trust among farmers. Additionally, in the current globalised market with widely varying market prices, the scheme is unable to protect farmers against price fluctuations.