Here's why the new crop insurance scheme's success pivots around supporting infrastructure

Sometime in the next few weeks, farmers in Madhya Pradesh or Rajasthan may find drones circling their fields. These drones would likely be flown by insurance companies as part of surveying standing crops.

"The litmus test of effective crop insurance is how quickly assessment is done and claims settled," says Ashok Gulati, Infosys chair professor at the Indian Council for Research on International Economic Relations. Government funded crop insurance has been around in the country for more than 30 years but despite it changing avatars twice, has hardly been effective. Majority of Indian farmers are small and marginal and cannot afford expensive insurance. They also do not get reliable information on new technologies, weather and prices, making it difficult for them to plan production.

In March-April 2015, rogue weather destroyed crops across large swathes of northern and western India. The government had to raise the compensation, which was capped at Rs 4,500 per hectare for dry land and Rs 9,000 per hectare for irrigated land, to Rs 6,750 for dry and Rs 13,500 per hectare for irrigated land respectively That was hardly enough. In Haryana, for instance, the average wheat yield is about 4.7 tonnes per hectare, the value of which had then worked out to about Rs 60,000. A farmer would have typically spent Rs 30,000 per hectare but got a compensation of only Rs 13,500 per hectare.



Besides, assessment and claim settlement is a cumbersome, time-consuming process. Minister Jaitley has now set aside Rs 5,500 crore in the Budget for crop insurance. In January, the government had announced the new insurance scheme Pradhan Mantri Fasal Bima Yojana with ultra low premiums. Farmers have to pay just 2% of the actuarial premium during Kharif season and 1.5% during Rabi season. Commercial and horticultural crop farmers will pay 5%.
Gulati says for the crop insurance to work well the government will need to quickly set up supporting infrastructure. It needs to have weather stations in every block, use drones to assess damage and low-earth orbit satellites, or LEOs, to geo-tag plots to identify farmers. He says India needs LEOs that more frequently monitor a point on earth compared to the remote-sensing satellites the country owns now. China launched over a hundred LEOs in 2014. Drones and LEOs are a globally mushrooming industry, Gulati says.

With all this in place, if, say, a hailstorm flattens crop in a district in Madhya Pradesh, the satellites could pin-point the plots and the geo-tags could identify the owner of the land. The weather stations would have already reported the hailstorm and drones would assess the damage more closely. The data is enough to make a quick assessment and the insurer can identify the farmer with the geo-tag and pay the claim directly into her Aadhar-linked bank account.

Gulati says if the government puts its might behind implementing the scheme, the infrastructure could be in place in six months. But with business as usual, it could take at least two years.