Agriculture Insurance in India – Challenges and way forward

ORIGO COMMODITIES INDIA

AGRICULTURE INSURANCE – EXPERIENCE & SCOPE

PUBLIC PRIVATE PARTNERSHIP

ORIGO OVERVIEW

AGRICULTURE INSURANCE IN INDIA – EXPERIENCE & SCOPE

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Huge geography with limited irrigated area Unpredictable and erratic monsoon Limitations in contingency crop planning Almost 16% contribution to GDP Total Food Grain Production is 265 MMT + Total Post harvest losses close to 5- 6% Lack of robust and integrated supply chains from farm to fork Farmer realization as percent to consumer prices is only 35-40% 6 % of production goes into processing, as compared to 25-30% in developed countries Cold storage requirement gap in India is 10 MMT Estimated gap of scientific storage space (dry) around 35-40 MMT Infrastructure support for value added services at farm gate – Negligible Constraints in micro level weather forecast capabilities

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The Facts – Indian Agriculture

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Agriculture in India is highly susceptible to risk of draught , flood etc GOI introduced many insurance schemes to protect farmers from natural

calamities and ensure there credit eligibility for next season CCIS ( Comprehensive Crop Insurance Scheme)

Compensation equal to shortfall in yield ( guaranteed – actual) Scrapped in 1997

Experimental Crop Insurance Scheme Introduce in 1997-98 , covering non loanee small and marginal

farmers Selected crops in specified districts Premium subsidized Premium collected Rs 3 Crs against claim amount of Rs 40 Crs GOI discontinued it in 1997 – 98 itself

Agriculture Insurance in India

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National Agriculture Insurance Scheme ( NAIS) or Rashtriya Krishi Bima Yojna ( RKBY)

Introduced in 1999 – 2000 , after failure of CCIS Cover all food crops ( Cereal , Pulses) , Oilseed , Horticulture and

Commercial crops Both loanee and non – loanee farmers Premium rates vary from 1.5% to 3.5 % for food crops 50% subsidy for small and marginal farmers , equally by State and

Central Govt Scheme operates on the basis of

Area approach – defined areas for each notified crops for widespread calamities

On Individual basis - for localized calamities such as hailstorms, landslides, cyclones and floods

Agriculture Insurance in India

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Farm Income Insurance Scheme ( FIIS) By Agriculture Insurance Company of India

Started 2003 -04 Loanee farmers for wheat and rice initially Guaranteed income basis (Average yield multiplied by MSP) Protection to farmers by insuring production and market risks Withdrawn in 2004 Recent attempt by Govt of Gujarat to re introduce Can reform Agriculture Insurance Prevent farm level distress

Agriculture Insurance in India

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Post harvest management solutions Warehouse building insurance Food grain stock insurance Transit insurance Quality insurance ?

Fidelity Insurance

Huge scope for innovation and comprehensive products

Agriculture Insurance –Along the value chain

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Stake holders along the value chain

FarmerFarmers/ Aggregators

Farmers/ Traders/ Processor

Farmer/ Processor

Agriculture Production

Aggregation/Logistics

Inventory & storage

Processing &Consumption

Agriculture Commodity supply chain continuum

Stake holders along the value chain of Agro commodities

Risks and Mitigants along the value chain

Premium for risks to be apportioned at every value chain and stake holder to bear the same as a part of pricing.

integrated insurance to make the commodities tradable at premium

Agriculture Insurance- The current challenges

Awareness at farm gate level is still in nascent stages

Agriculture insurance to be mandated by IRDA to Insurance companies (Similar way of policy of PSL for banks)

Limited insurance companies in the space This space is with limited INNOVATION and

needs more innovative products to be designed Less synergies between Banks, Insurance

companies and other stake holders in this space

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AGRICULTURE INSURANCE - PUBLIC PRIVATE PARTNERSHIPS

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Risks and Coverage

Type of Risk; Classification of Risks

Crop risks

Weather (Drought, Floods, Fire & Inundation)

Crop Yield

Commodity and Warehouse related risks

Stock Insurance (Fire, Burglary, STFI and Warehouse insurance)

Transportation Risks Transit Insurance

Quality Risks

Weight loss

Quality significance loss

Fidelity (Commodities Related)

Human related , On roll , outsourced and third party

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Challenges for PPP

Farmers Awareness of risk and impacts Survey and assessment of loss - Accuracy and

transparency Standard production practices – Individual practices Claim settlements Perception of burden, not a value add

Investors Return on investment Historical data Contractual obligation of farmers Control and monitoring through life cycle

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Opportunities for PPP

Product innovation – Inputs and/ or Labour , returns Process standardization Unit base survey , inspection and loss assessment Seamless and transparent claim settlement Weather research , crop research and advisories to be easily

accessible to the farmers Participation of farmer bodies - Awareness, implementation

and improvisation happens at all stages Holistic approach and group insurance concept rather than

Individual farmers may reduce the premium and smoothen claim settlement.

Govt to formulate simple and transparent guidelines and monitoring systems

Govt to cross subsidies the Viability Gap for investors till the time products and process matures 14

Integrated approach

Integrated approach to cover the risks through value chain

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Crop Insuran

ce

Produce

Insurance

Mandate Components

Riders

STFISpecial perils

Mandate Components

RidersQuality RisksTransit risksPrice RisksTerrorismRiots & Earthquake

Weather Rainfall & Drought

Standard Fire & Burglary

Covered till

liquidation and

realization of better returns

for farmers

Increases Accessibility to farmers

More innovative products to help cover more risks in agriculture

Value addition through smooth loss configuration and settlement

Access to wider and diversified risk mitigants

Create value along the supply chain and buyer incentivisation on risks coverage would be transferred to farmers

We together can save many lives of farmers

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Impact on farmers

ORIGO OVERVIEW

Presence 15 States including Rajasthan, Madhya Pradesh, Delhi, Maharashtra, Andhra Pradesh, Karnataka, Gujarat, Uttar Pradesh, Bihar, West Bengal, Uttarakhand, and Punjab.

Storage capacity ~35,00,000 MT

Asset Under Management Rs. 8,500 crores +

Number of Locations/ Warehouses 200 +/ 300 +

Government Projects / Association PUNGRAIN (Punjab State Grain Procurement Corporation Limited)

NABARD (Promote NWR financing through Primary Agriculture Cooperative Societies)

State Trading Corporation (STC)Cotton Corporation of India (CCI)PSWC ( Punjab State Warehousing Corporation)

Collateral Management Agreement Punjab National Bank, Canara Bank, Central Bank of India, ICICI Bank, Axis Bank, IndusInd Bank, Ratnakar Bank, Reliance Commercial Finance, ABFL (Promoted by NABARD), Edelweiss

Exchange Accreditations NCDEX Spot Exchange

ACE Derivatives and Commodity Exchange

ICEX (Indian Commodity Exchange)

Associations / Membership Warehousing Regulation and Development Authority (WDRA)

Indian Chamber of Commerce (ICC)

Food Safety & Standard Authority of India (FSSAI) APEDA (Agricultural & Processed Food Products Export Development Authority)

Fumigation & Pest Management PPQ Compliance Fumigation licenses

Quality Laboratories 5 stationary labs and 200+ mobile labs kitsEmployee Strength 1,050+

FACT FILE

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Origo has a unique service basket offering customized end-to-end commodity management solutions fostering better utilization of resources. Each service is a part of supply chain as well as an independent service offering

Reducing Cost & Wastage

Reducing Pest Risk

Reducing Market Adoption Risk

Reducing Liquidity Risk

Reducing Credit Risk

Professional Warehousing

Collateral Management

Quality &Certification Preservation &

ProtectionTrade Support

Price Discovery for Farmers

Procurement at Farm Gate

Procurement Storage Financing Market Linkage

Sourcing of Business for Commodity Financing

A COMPLETE SOLUTIONS PROVIDER

In a short time Origo has been able to establish a footprint in most parts of the country having production or trade of commodities

Presence in 15 States including Rajasthan, Madhya Pradesh, Delhi, Maharashtra, Andhra Pradesh, Karnataka, Gujarat, Uttar Pradesh, Bihar, West Bengal, Tamil Nadu, Uttarakhand, Haryana, Chattisgarh and Punjab.

Footprint in states with major port locations

Execution capability of multi lines of business across the states

PAN INDIA PRESENCE

Corporate

Commodity Exchanges

Banking Associates / FIs

(PUNGRAIN)`

PSU

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