Introduction
Agriculture in India remains highly vulnerable to natural calamities such as droughts, floods, cyclones, pests, and diseases. Small and marginal farmers, who form the majority of India’s agricultural sector, often bear the brunt of these risks. Crop failure not only reduces farmers’ income but also leads to indebtedness and poverty.
To address these challenges, the Government of India introduced the National Agricultural Insurance Scheme (NAIS). This scheme provides financial support to farmers against crop losses due to natural disasters, pest attacks, and unforeseen events, ensuring economic stability and social security.
NAIS forms a key component of India’s risk mitigation strategy in agriculture and complements other initiatives like Kisan Credit Card (KCC), Pradhan Mantri Fasal Bima Yojana (PMFBY), and National Agriculture Market (e-NAM).
History and Evolution of NAIS
Early Agricultural Insurance Efforts
- Pre-1970s: India had limited experience with crop insurance. Early experiments were mostly pilot programs in selected districts.
- 1972: The General Crop Insurance Scheme (GCIS) was launched to protect farmers from natural calamities.
- 1979: The Agriculture Insurance Scheme (AIS) replaced GCIS, providing broader coverage.
Launch of NAIS
- 1999–2000: NAIS was launched by the Ministry of Agriculture and Farmers’ Welfare as a national-level scheme, replacing earlier fragmented insurance schemes.
- The scheme aimed to provide comprehensive coverage for food crops, oilseeds, and commercial crops.
- Administered by the Agriculture Insurance Company of India Limited (AIC), a specialized insurance company under the Ministry of Finance and Ministry of Agriculture.
Objectives of the National Agricultural Insurance Scheme
The core objectives of NAIS are:
- Financial Support: Protect farmers against losses due to natural calamities, pests, and diseases.
- Stabilize Income: Ensure stable farm income, reducing dependence on moneylenders.
- Promote Credit Flow: Enable banks to provide crop loans without fear of default due to crop failure.
- Encourage Modern Agriculture: Farmers are more likely to adopt innovative technologies when financial risks are mitigated.
- Inclusive Coverage: Target small and marginal farmers and encourage participation across India.
Key Features of NAIS
- Coverage of Crops
- NAIS covers food crops, oilseeds, and commercial/horticultural crops.
- Both pre-sowing and post-sowing risks are included.
- Area Approach
- The scheme follows an area approach, where the insured unit is the ‘Gram Panchayat’ or defined area.
- This ensures uniform assessment of crop damage across regions.
- Compulsory and Voluntary Participation
- Farmers taking loans from banks must participate in NAIS.
- Other farmers may join on a voluntary basis.
- Sum Insured
- Usually based on average yield of previous years multiplied by the Minimum Support Price (MSP).
- Covers partial and total crop loss.
- Premium Rates
- Farmers pay a nominal premium (1.5–3.5% for Kharif, 1.5% for Rabi crops; varies by crop type).
- The government subsidizes the rest of the premium.
- Compensation & Claims
- Claims are paid based on actual crop loss assessed in the defined area.
- Losses are measured through yield data, crop cutting experiments, and local assessment reports.
Working of NAIS
- Farmer Registration – Farmers register with the scheme through local Agriculture Departments or banks.
- Crop Selection – Eligible crops for insurance are selected based on state-specific lists.
- Premium Payment – Farmers pay the nominal premium before the sowing season.
- Risk Monitoring – Crop health and yield are monitored throughout the season.
- Loss Assessment – Post-harvest, crop cutting experiments (CCEs) are conducted to assess losses.
- Claim Settlement – Compensation is disbursed to the farmer’s account, covering a portion of the loss.
Types of Risks Covered
- Natural Calamities – Droughts, floods, cyclones, unseasonal rainfall.
- Pests and Diseases – Locusts, fungal infections, bacterial or viral crop diseases.
- Prevented Sowing Risk – Inability to sow crops due to adverse weather conditions.
- Post-harvest Losses – Some states provide coverage for post-harvest storage losses.
Benefits of NAIS
For Farmers
- Financial security against crop failure.
- Reduction in dependence on informal credit sources.
- Encourages adoption of modern seeds, fertilizers, and irrigation.
- Supports small and marginal farmers who are most vulnerable.
For Banks and Financial Institutions
- Reduces credit risk for lending to farmers.
- Enables wider credit flow for agriculture development.
For Economy
- Stabilizes rural income and reduces farmer distress.
- Encourages agricultural growth and productivity.
- Promotes risk management culture in the farming sector.
Challenges Faced by NAIS
- Delayed Claim Settlement – Slow assessment and bureaucratic procedures.
- Lack of Awareness – Many farmers are unaware of the scheme and benefits.
- Limited Coverage – Initially limited to major crops; many horticultural and minor crops were excluded.
- Moral Hazard – Some farmers may neglect crop management, expecting insurance payouts.
- Area Approach Limitations – Individual farmers may face losses despite area-wide average yield being satisfactory.
- Premium Burden on Farmers – Despite government subsidy, premium for certain commercial crops is high.
Reforms and Transition to PMFBY
While NAIS laid the foundation, several limitations led to the launch of the Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2016, which improved upon NAIS:
- Lower Premiums: PMFBY offers 2% for Kharif crops and 1.5% for Rabi crops.
- Individual Crop Loss Assessment: PMFBY uses smart technologies and remote sensing for precise assessment.
- Broader Crop Coverage: Includes horticultural crops and commercial crops.
- Faster Claim Settlement: Digital processes reduce delays.
- Encourages Technology Adoption: Crop cutting experiments and satellite monitoring for accuracy.
Despite PMFBY, NAIS continues in some states or for specific crops where PMFBY has not been implemented.
Future of Agricultural Insurance in India
- Digital Transformation – Integration of mobile apps, satellite data, AI, and blockchain for faster claims.
- Expansion of Coverage – Including all crops, allied activities, and post-harvest storage losses.
- Farmer Awareness Campaigns – Educating farmers on scheme benefits and enrollment procedures.
- Integration with Banks and FPOs – Strengthening rural credit and market linkages.
- Climate-Resilient Insurance Products – Tailored to address climate change risks in agriculture.
Conclusion
The National Agricultural Insurance Scheme (NAIS) has played a pioneering role in risk mitigation for Indian farmers, providing financial security against natural and economic uncertainties. By stabilizing farm income, reducing indebtedness, and encouraging credit flow, NAIS has contributed to rural economic stability and agricultural growth.
While challenges like delayed settlements, limited coverage, and low awareness persist, the scheme has evolved over time, laying the groundwork for modern initiatives like PMFBY. Moving forward, with technology integration, expanded coverage, and farmer-centric reforms, agricultural insurance can become a cornerstone for achieving sustainable and resilient agriculture in India, empowering millions of small and marginal farmers.
