21 THEINDIANEXPRESS,THURSDAY, JANUARY21,2016THERURAL Tracking the changing India in itsVillagesWWW.INDIANEXPRESS.COM

T U E S D A Y : G O V E R N A N C E | W E D N E S D A Y : B U I L D I N G I N D I A | T H U R S D A Y : T H E R U R A L | F R I D A Y : N U S E | S A T U R D A Y : T H E U R B A N

SOME ASSURANCEHow new crop insurance scheme can be a game-changerHARISHDAMODARANNEWDELHI, JANUARY20

THAT INSURANCE penetration amongstIndias farming community is abysmal is aknownfact.Outof thegrosscroppedareaof195.26millionhectares in the country, only42.82million hectares or 22 per cent wascoveredundercropinsurancein2014.Whilethecoveragewashigherinsomestateses-pecially Rajasthan and also Chhattisgarh,Odisha,BiharandKarnatakaitwashardlya tenth or less for the likes of Gujarat,WestBengalandUttarPradesh (see table).

But the lowspreadof agricultural insur-anceone inevery fivehectaresisnt theonly issue. Equally important is the inade-quacy of cover, in terms of the sum insured(SI)orthemaximumamountthatinsurancewouldpay in theeventof cropdamage.

According to the Commission forAgriculturalCostsandPrices(CACP), theav-erage SI per hectare under the existing na-tionalagriculturalinsuranceschemewasjustRs 18,464 (Rs 19,141 in kharif andRs16,927in rabi) in 2013-14. This is way below thegross value of output (GVO) formost crops.

Take paddy, where the GVO on an all-Indiaaverage yield of 36 quintals andminimumsupport price (MSP) of Rs 1,310/quintal in2013-14workedouttoRs47,160perhectare.Or tur (arhar), where these numbers stoodat 8.5 quintals, Rs 4,300/quintal and Rs36,550perhectare, respectively.

If policyclaimscannotcoverevenhalf ofthe value of producewhen the crop suffersheavy damage, it only showswhy farmersarent really interested in taking insuranceprotection. And it also explains the poorspread of crop insurance in a country thathas experienced five full-fledged droughtyears (2002, 2004, 2009, 2014 and2015) inthis centuryalone.

The NarendraModi governments newPradhanMantri FasalBimaYojana (PMFBY)promisesadeparturefromtheexistingcropinsuranceschemes.Thesecurrentlycapthepremiums at 8-9 per cent of the SI for rabifoodgrains and oilseeds, and at 12-13 percentforannualcommercialandhorticulturecrops. Inthenormalcourse, if theSIsweretobesetclosertotheGVOs,theactuarialpremi-umsi.e.basedonproperstatisticalriskas-sessmentwouldworkoutevenhigher. Inthis case, thepremiumshavebeen lowered

simplybykeepingtheSIsmuchbelowGVOs.ThePMFBY, goingbywhathas beenno-

tified, removes any artificial capping of theSI,resultinginlowclaimsbeingpaidtofarm-ers. TheSIwill be calculatedbymultiplyingtheMSP of a cropwith the average seven-year threshold yield (excluding calamityyears) for the particular village panchayatareawhereitisgrown.Thepremiumswouldbe determined by the SI and not the otherway round, as is the casenow. Farmerswill,however, have to fork out a uniform pre-miumof just 2 per cent for all kharif crops,1.5 per cent for rabi and5per cent for com-mercial/horticulturecrops.Thegapbetweentheactuarialpremiumsandtheratespayableby farmers would be fullymet by the gov-ernment. There is no upward limit on gov-ernmentsubsidy.

If the scheme is implemented as prom-ised, itwillcertainlybeasignificantstepfor-ward.Butthereareafewcatches.Thefirst isthatPMFBYwillbeapplicableonlyfromthenextkharif season,whichmaywellwitnessanormalmonsoon.Thefactthatitwouldnotbenefit farmers today,when they are in thegrip of anexcruciatingdrought,may some-what limit theschemespolitical appeal.

Secondly, implementing the scheme inletter and spirit will entail huge premiumsubsidyoutgo,moresoinadroughtyear.Theimplicit assumption seems tobe that if lowpremiums attract more farmers, the in-creasedinsurancepenetrationandcropareacoveragewillsucceedindrivingdownactu-arial rates, as it has happenedwithmobilecall charges. The CACP reckons the premi-umstodropto3.5percentofSIif50percentof Indias gross cropped area is insured. Onan SI of Rs 50,000 per hectare, this wouldcome to Rs 1,750. For the farmer, the pre-miumcostwillbeRs350perhectareassum-ing80percentgovernmentsubsidy.

Lastly, its not clear whether and howmuchof the subsidy burdenwill have to beborneby the states.Whatwouldhappen tofarmers in stateswhosegovernments insistthatthetabbefullypickedupbytheCentre?

On the whole, though, there is a lot tocommendaboutthePMFBYfromafarmersstandpoint. If the conditions of low premi-ums and the SI covering the entire GVO aremet alongwith quick claim settlementsenabledbymobileandsatellitetechnologyit can turn out to be a game-changer forIndianagriculture.

Under theCentresPradhanMantri FasalBimaYojana, farmerscanbenefitwithboth lowerpremiumsandhighersums insuredSTATE-WISEAREACOVEREDUNDERCROP INSURANCE (2014)

Area (1)as%Insured of gross(1) cropped

areaRajasthan 122.67 50.06Karnataka 40.24 33.37Bihar 25.31 33.10Odisha 16.14 32.51Chhattisgarh 17.88 31.57MadhyaPradesh 54.77 24.32Maharashtra 48.61 22.18Jharkhand 2.03 16.18AndhraPradesh 18.60 13.52TamilNadu 7.83 13.29Gujarat 13.89 10.61WestBengal 8.04 8.60UttarPradesh 16.66 6.46Uttarakhand 0.51 4.51Source:CACP

(lakhhectares)

HARISHDAMODARANNEWDELHI, JANUARY20

STATEGOVERNMENTSandpowerdistribu-tion companies (Discoms) can save hugesums on electricity subsidies to farmers bysimply replacing old inefficient pump-setswithnewonesthatconsumelessenergyforwatering fields.

A standard 5-horsepower (HP) electricmotor pump-set shouldnt under idealfieldconditionsofthree-phasesupplyatcon-sistent440Vvoltageconsumemore than3.73kilowatt-hoursofenergy(oneHPequals0.746kilowatts).

Butmost 5-HP pumps that farmers usetoday consume at least 5 units (kilowatt-hours) of electricity, going up to even 7-7.5units. The bulk of the 2.1-2.2 crore electricpump-sets presently energised in India are10-years-oldormore.Farmersrarelyreplacetheir pumps even after repeated motorburnouts. They, instead, choose to rewindthese locally, often using poor-quality cop-perwiresthatleadtolowermotorefficiencyand increased energy consumption, saysShashi Kant, seniormanager (Technical) atEnergyEfficiencyServicesLtd(EESL),a jointventureofpublicsectorundertakingsundertheMinistryof Power.

Simplyput,what isa5-HPpump,onpa-per, actually draws electricity that a 6.7-HPmotorwould,consuming5unitsratherthan3.73unitsperhour.

The implications of this arent small forDiscoms that, according to Power FinanceCorporationdata,sold150.98billionunitstothefarmsectorin2013-14.Whileagricultureaccountedfor21.69percentof totalelectric-ity consumption, it generated just 8.03 percent of the revenues of Discoms. The aver-age revenueperunit of electricity fromsaleto agricultural consumerswas only Rs 1.75,asagainstRs6.66 to industry.

Farmers inmanystatesarenowchargedona fixedper-HPpermonthbasis.Atanav-eragerateofRs300perHP,themonthlyelec-tricity bill for a farmer with a 5-HP pumpconnectionworksouttoaflatRs1,500, irre-spectiveofhowmanyunitsheactuallycon-sumes.Butthatalsomakeshimlessinclinedtoinvest inanenergy-efficientpump,whileencouragingoverdrawingof groundwater.

An old 5-HP pump that guzzles 5 units

perhourandrunssixhoursdailyfor300daysoftheyearwillconsume9,000units. If,how-ever, replaced by a new star-rated pump ofsimilarhorsepowerrequiringonly3.73unitsan hour, the annual consumptionwill dropbyover25percenttoaround6,715units.Theannualsavingsfromit,takinganaveragecostof supply of Rs 5/unit, comes to Rs 11,430.That is significant, when seen against theroughlyRs35,000cost foranewenergy-ef-ficient5-HPpump-set.

We have replaced nearly 2,000 pump-setsof farmersinHubliandMandyadistrictsof Karnataka with new BEE (Bureau ofEnergy Efficiency) star-rated pumps. Ourfindings show the resultant energy savingsto be anywhere from 25 to 35 per cent,claimsShashiKant.EESLisalso implement-ing a similar project of replacing 2,500pump-sets in Rajanagaram mandal ofAndhraPradeshsEastGodavaridistrict.

The immediate beneficiary of replacingold energy-guzzling pumpswould be theDiscoms, totheextent theirsaleofpoweratbelowcosttofarmerscomesdownby25percent.TheDiscomsare, infact, fundingthere-placement of pump-sets under EESLs pilotscheme,asthepaybackonaninvestmentofRs35,000 isnoteven3.5years.

Buthowdoes the farmergainby replac-ing inefficient pump-sets, especially in aregime of flat-rate pricing for agriculturalpower that reduces the marginal cost ofpumpingwater tonear-zero?

The farmer spends around Rs 3,000every time his old overheated submersiblepump is takenout from100 feet belowandputback after its burnt-outmotorhasbeenrewound. Here, not only arewe giving thenew pump free (since it is funded by theDiscoms), but alsonot charginghimfor anyrepair andmaintenance for five years, ex-plainsShashiKant.

Saurabh Kumar, managing director ofEESL, believes that stategovernments/Discomsshouldevenconsidersupplyingsolarpumpsagainstnewconnec-tions free of cost. A 5-HP solar pump cur-rentlycostsaboutRs4.5lakh.ButitalsocostsRs 1.75 lakh or so to provide a new electrictube-wellconnectionwiththetransformer,switchgear,cablesandotherfittings.Thesav-ings from this, and also not having to incurlossesonfuturepowersales,canpayforgiv-ing freesolarpumps inover6-7years time.

Afarmerwatershiscropsusingapump. ExpressPhoto

Cutting powersubsidies by givingnew pumps free!

Farmerswaitingwiththeirproduceatacottonmarket in India.Growersof thecropacrossGujaratarerealisinganincrease inaveragepricesinceDecember. ExpressPhoto

Pakistan comes toGujarat farmers rescue

COTTONPRICES

GOPALKATESHIYARAJKOT, JANUARY20

COTTONFARMERS inGujarat, thecountryslargestproducerofthefibre,areseeingsomerecovery in prices this year thanks to acombinationofPakistanscrophittingan18-year-lowandtheannouncementofaRs550per quintal bonus by the state governmentover andabove theCentresminimumsup-portprice (MSP).

I sold 25quintals ofmy kapas (raw, un-ginned cotton) last week at Rs 4,625 perquintal. This ismore than the average of Rs4,125 that I got last year, but nowhere nearthe Rs 6,750 peak of 2011-12, says PravinPatel from Goral village of Idar taluka inNorthGujarats Sabarkanthadistrict.

This43-year-oldfarmerhasplantedcot-toninthreeoutofhisnine-hectaresholding.While his production is 10 quintals belowlast years 60 quintals, it has been compen-satedbyhigherrealisations. Iwontsellmybalance 25 quintals until prices climb fur-ther, addsPatel.

Farmers in Saurashtra, too, are realisinganaveragepriceofRs4,600perquintalsinceDecember,wayabove theRs4,050MSPde-clared by Centre for long-staple Shankar-6and Shankar-10 varieties grown in Gujaratin thecurrent2015-16season. Farmersareholdingbacktheircrop.Andthatitself iscon-tributingtobetterprices,notesBharatWala,president of the Saurashtra GinnersAssociation.

TheSaurashtra regionaccounts for two-thirds of Gujarats production, which is ex-pectedtodip from10.8to9.65millionbales(eachcontaining170kgof lintafterginning)in 2015-16 due to poormonsoon rains. Thecountrys total production, according to theCottonAssociationof India,willbeonly35.7millionbales,asagainst38.275millionbalesin2014-15.

While lower domestic production hashelpedpropupprices,therealpush,though,hascomefromPakistan.TheUSDepartmentof Agriculture has pegged its output at 7.2millionbales for2015-16,down32per centfrom last years 10.6million bales. The cul-prit has been heavy rains during June-Julyand increased pest pressure fromwhiteflyand pink bollworms, which also causeddamage in Punjab and Gujarat. Pakistansimports are projected tomore than trebleto 2.7 million bales, much of it sourcedfromGujarat.

Besides, there has also been theGujaratgovernmentsdecisionlastmonthfollow-ing the battering received by the ruling BJPinNovembersdistrictandtalukapanchayatpolls, linkedtoruraldistressfromfallingfarmcommoditypricestograntaRs550bonustakingtheeffectiveMSPtoRs4,600perquin-tal. But thismove, effective fromDecember18, seems to have had positive sentimentimpactmore thananythingelse.

The Gujarat government hasmade thebonusconditionaluponfarmerssellingtheircroptotheCottonCorporationof India(CCI).The latter, in turn, has procured a mere

37,500quintalsof kapas (7,500balesof lint)in Gujarat because of market prices rulingabove the CentresMSP.Most of these pur-chases, moreover, were made before thebonusannouncement.CCIbuyingverylittle entirely in northGujarat and not a singlebaleinSaurashtrahasrenderedthebonusmeaningless inpractical terms.

Only some quantity of the cotton wehave purchasedwill be eligible for bonus.Our mandate is to intervene only at theCentresMSP level, admits SwapanKumarDas, general manager of CCI in Gujarat.Yet,whatseemstohavehelpedisthetimingof the bonus announcement, coincidingwithPakistansproductionwoesand resortto imports.

CCI estimates only around 3.3 millionbalesor45percentofGujaratscroptohavearrived in themarkets so far. Themarketstartedverylow,buthasbeengoingupsince.Whenever there is an upward trend, farm-erstendtoholdbacktheircotton.Also,farm-ers in Gujarat havemore holding capacitycompared to their counterparts in otherstates,pointsoutDas.

Thissituationdoesnotapplytomarginalfarmers, though.Mahesh Sadadiya sold hisentire 22 quintals of cotton in October andinearlyNovember.Ineededmoneyforaso-cialoccasion.Therefore,Isoldmycropintwobatches, fetching an average of Rs 4,317perquintal, says the 22-year-old fromHadmatiya Khanda village in Jasdan talukaofRajkotdistrict,whocultivatescottoninhisentire1.5hectares land.

While Sadadiyas realisationwas betterthantheRs4,150hegotlastyear,hisproduc-tion has fallen by four quintals due to defi-cientrains.Also,thehigherpriceisfarbelowtheRs7,000rateherealisedfourseasonsago.

Meanwhile, therearesomefarmerssell-ing to CCI even withmarket prices rulinghigherthantheCentresMSP.MukeshPatel,who has planted cotton in 3.5 out of his 4hectaresfield,soldhisfirstpickingof20quin-tals in late-October at Rs 4,100 per quintal,slightly more than the MSP. But only lastweek,hesoldanother60quintalsthistimetoCCIattheMSP,despitemarketpricesatRs4,500-plus. Theauctionprocess takes timeat the APMC (agriculture producemarketcommittee)yardandthetractor-trailerdriv-erschargemorefordelays.So,IsoldtoCCI,forwhich I have received an SMS intimationof money at the Rs 4,050 rate beingcredited to my bank account. Now, I amawaiting the bonus, says this farmer ofSadatpuravillage in Idar.

However, IndrajitsinhChampavat,secre-taryof the IdarAPMC, claims that the farm-erssellingtoCCIaremainlythosewhosecot-ton is of inferior quality, making themreluctant to sell at the prices discoveredthoughopenauctions.CCIisnotparticipat-ingattheAPMCauctionandis, instead,ask-ingfarmerstounloadtheircottonatginningfactoriesidentifiedbyit.TheCCIis,then,pro-vidingthedetailsof thesefarmers,whichweare further feeding to Gujarat StateAgricultural Marketing Board, the nodalagency fordisbursalof bonus,hestates.

Importdemandfromneighbouringcountrypushesupkapas realisations