Rural distress

Rural distress

The CAG report on Performance Audit of Agriculture Crop Insurance Schemes (Report no. 7 of 2017), which was tabled in the Parliament on 21 July, 2017 (please click here to access) says that the Government of India (GOI) has introduced several crop insurance schemes over the past three decades to insure the farming community against various risks like natural calamities, pests and disease that lead to partial or full failure of crops. The Comprehensive Crop Insurance Scheme (CCIS), launched in 1985, was the first nation-wide scheme. The CCIS was replaced by the National Agriculture Insurance Scheme (NAIS) in 1999, and Agriculture Insurance Company of India Ltd. (AIC), was designated as implementing agency (IA), with effect from 1st April, 2003. The GOI also introduced a Pilot Weather Based Crop Insurance Scheme (WBCIS) from kharif season 2007 in 20 states to cover the risks to farmers against extreme climatic conditions such as deficit, excess or untimely rainfall, frost, variations in temperature, etc.

The GOI introduced the Modified National Agriculture Insurance Scheme (MNAIS) and implemented it on pilot basis in 50 districts from the rabi season 2010-11. From the rabi season 2013-14, the GOI merged MNAIS and WBCIS into a new programme, the National Crop Insurance Programme (NCIP) replacing NAIS. However, at the request of states, NAIS continued till rabi season 2015-16. AIC and other empanelled private insurance companies were designated as Implementing Agencies (IAs) under NCIP. Unlike the NAIS, where the GOI and state governments subsidised insurance premium (over and above the farmers’ share) and insurance claims (above a threshold to be borne by AIC), from WBCIS onwards, government subsidy was limited to insurance premium alone. From kharif season 2016, the GOI replaced NAIS and NCIP, and introduced the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Re-structured WBCIS.

The Department of Agriculture, Cooperation and Farmers’ Welfare (DAC&FW) under the Ministry of Agriculture and Farmers’ Welfare is responsible for budgetary control, release of funds and overall administration of the schemes at the Central level. Funds under the schemes are released by both the GOI and state governments to the Agricultural Insurance Company of India Limited (AIC), who had been designated as the sole insurance company (or Implementing Agency) under NAIS and as the channelizing agency through whom insurance premia are remitted to the insurance company (including itself) from GOI and the relevant state government, under the other schemes.

The payment of insurance premium is subsidised to the farmers (over and above the farmers’ share) under the schemes, with GOI and the concerned state governments equally sharing the subsidy burden. Claim payments are equally shared by the GOI and the concerned state governments in the case of NAIS (above a threshold to be paid by AIC). In all other schemes, the burden of claim payments is entirely borne by the concerned insurance company.

The present performance audit report reviews the utilisation of governments’ funds, implementation of the schemes and monitoring during the period 2011-12 to 2015-16.

In short, the CAG report on Performance Audit of Agriculture Crop Insurance Schemes finds that despite the three decade long efforts of GOI to provide crop insurance, coverage of farmers under these schemes continues to remain low. The coverage of non-loanee farmers continues to be particularly low, primarily because the schemes have been targeted at loanee farmers, for whom the schemes stipulate mandatory coverage.

It was also found by the CAG report that the GOI and state governments did not maintain databases of insured farmers. The AIC also did not maintain comprehensive data under any of the schemes. Most of the farmers had opted for sum insured equivalent to loan amount under NAIS indicating that either the loanee farmers were intent on covering the loan amount only (in which case, the scheme acted more as loan insurance than as crop insurance) or were not aware or were not informed appropriately by loan disbursing Bank/FIs about the full provisions of the scheme.

There were discrepancies in the data relating to area sown and area insured. Further, the integrity of the data provided by the state governments in this respect and used by AIC was not ensured. The delays and omissions by state governments and by loan/insurance disbursing banks and financial institutions, resulting in denying or delaying insurance coverage to the farming community were noticed. There was no effective mechanism to monitor the implementation of the schemes.

The key findings of the Report of the Comptroller and Auditor General of India on Performance Audit of Agriculture Crop Insurance Schemes, Report no. 7 of 2017 (please click here to access), are as follows:

Financial management

• Though DAC&FW invariably released their share on time, instances of delayed release by state governments were observed. Such delays impacted on the release of insurance compensation to affected farmers defeating the objective of providing timely financial assistance to the farming community.

• The guidelines were silent on the utilisation of savings, if any, due to difference between premium collected and claims payable by AIC under NAIS and AIC retained the savings.

• AIC failed to exercise due diligence in verification of claims by private insurance companies before releasing funds to them.

• AIC failed to take reinsurance cover on behalf of GOI and state governments under NAIS despite requirement in the guidelines. At the same time, AIC took reinsurance cover for its own share of claim liability.

• AIC furnished Utilisation Certificates (UCs) to DAC&FW only at the time of demand for fresh funds and not within a week of release of funds as required in the guidelines.

• Since implementing agencies did not ensure submission of UCs by Bank/FIs, even the minimum assurance that claims had been distributed to beneficiary farmers is lacking.

Implementation of schemes

• Scheme guidelines did not require the GOI and state governments to maintain databases of insured farmers despite substantial financial contribution by way of premium subsidy (Rs. 10,617.41 crore) and claim liability (Rs. 21,989.24 crore). Consequently, GOI and the state governments were dependent on information furnished by loan disbursing branches of Bank/FI and IAs (AIC and private insurance companies).

• The coverage of farmers under the schemes was very low compared to the population of farmers as per Census 2011. Further, coverage of non-loanee farmers was negligible.

• The coverage of small and marginal farmers under the schemes was very low compared to the population of farmers as per Census 2011.

• No data of sharecroppers and tenant farmers was maintained despite the fact that the guidelines provided for their coverage under the schemes.

• Though the annual budget allocations included specific provisions for coverage of SC/ST category, no data of such coverage and utilisation of funds for this category were maintained.

• It was noticed that 97 percent of the farmers had opted for sum insured equivalent to loan amount under NAIS indicating that either the loanee farmers were intent on covering the loan amount only (in which case, the scheme acted more as loan insurance than as crop insurance) or were not aware or were not informed appropriately by loan disbursing Bank/FIs about the full provisions of the scheme.

• Even though the schemes provided for notifying the lowest possible unit of defined area, only Odisha has achieved this by defining the village as the unit for paddy.

• There were delays in issue of notifications, receipt of declaration from Bank/FIs within cut-off dates, delays in receipt of yield data from state governments, delay in processing of claims by IAs, and irregularities in disbursement of claims by Bank/FIs to farmers’ accounts.

• Deficiencies were noticed in Crop Cutting Experiments (CCEs) and functioning of Automatic Weather Stations.

• There were discrepancies in the data relating to area sown and area insured. Further, the integrity of the data provided by the state governments in this respect and used by AIC was not ensured.

Monitoring and awareness of schemes

• Monitoring of the schemes by GOI, state governments and Implementing Agencies was very poor as (i) Technical Support Unit (TSU), an independent agency under the guidance of DAC&FW, has not been set up to monitor implementation of the crop insurance schemes, (ii) Periodical Appraisal Reports were not prepared by the DAC&FW despite 14 years of operation of the schemes, (iii) State Level Coordination Committees on Crop Insurance and District Level Monitoring Committees did not carry out the work allocated to them effectively, and (iv) Implementing Agencies also did not carry out the monitoring of the schemes as assigned to them effectively.

• Despite provision of large amount of funds under the schemes to private insurance companies, there was no provision for audit by the Comptroller and Auditor General of India (even though WBCIS provided for oversight agency by independent government agency).

• Capping of premium under NCIP, introduced with the aim of restricting the liability of the governments under the schemes, also resulted in loanee farmers being denied their full entitlement.

• Two-thirds of the farmers surveyed during audit were not aware of the schemes.

• Grievance redressal systems and monitoring mechanisms for speedy settlement of farmer’s complaints at GOI and state government levels were inadequate.



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