Rainfall Insurance in India: Does It Deal With Risks in Dryland Farming?

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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