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Adoption of Crop Insurance Schemes in Tamil Nadu

V. Karthick1, A. Anbarassan2 and C. Cinthia Fernandaz3

ABSTRACT

The study was conducted in Southern zone of Tamil Nadu a constituent state of
India. One hundred and eighty farmers who had adopted crop insurance schemes were
selected through random sampling procedure. The respondents were interviewed using
a pre-tested questionnaire for identifying factors influencing and constraints in adoption
of crop insurance schemes. The study revealed that lack of scope for crop diversification
and definite crop loss due to adverse climatic condition were the major factors
influencing the adoption of crop insurance schemes. The study inferred that lack of
compensation from the crop insurance scheme, delayed payment of indemnity, lack of
awareness about the scheme and lengthy procedure to avail crop insurance were the
major constraints.

Keywords : Crop insurance; Factors; Constraints; Suggestion; Tamil Nadu

1. & 3.Assistant Professors, Forest College and Research Institute, Tamil Nadu Agricultural University, Mettupalayam-
641 301 and 2 Research Associate, Department of Agricultural Economics, Tamil Nadu Agricultural University,
Coimbatore- 641 003.

Received : 09-09-2017; Accepted : 29-09-2017

INTRODUCTION

Agricultural risk is associated
with negative outcomes that arise from
imperfectly predictable biological variables
like outbreak of pest and diseases,
adverse climatic factors like drought,
flood and storm, resource risks like non-
availability or poor quality of inputs,
and price risks, which altogether are not
within the control of farmers (Mani et.al
2012). Managing risks in agriculture is a
big challenge to the farmers, researchers
and the policy makers. The, adoption of
appropriate risk coping measures are the
prerequisites to protect farm economy

and stabilize farm income. Different
strategies viz., providing tax reductions,
waiving off loans and interest on loans,
drought or flood relief measures, etc
have been evolved by the government
to combat the risks and uncertainties.
However, a major hurdle in such types
of relief is that they depend primarily on
the policies as well as the resources of
the government. Therefore, though these
measures guarantee some security in a
situation of uncertainty, it makes the
farmers to wait in anticipation for some
relief when there is a loss. Farmers,
on the other hand, attempt to reduce

Journal of Extension Education
Vol. 29 No. 1, 2017
DOI:https://doi.org/10.26725/JEE.2017.1.29.5780-5786

5781

risks by utilizing modern technology,
diversifying the agricultural operations
through intercropping, flexible use of
fertilizers, pesticides, etc., (Mohanty &
Sandeep, 2012).

Crop insurance is one of the
anticipatory adaptation measures proven
worldwide as an effective institutional
mechanism to overcome the adverse
impacts of climate variability. helps in
stabilization of farm production and
income through promoting technology,
encouraging investment, and increasing
credit flow in the agricultural sector of the
farming community. It helps in optimal
allocation of resources in the production
process. The basic principle underlying
crop insurance is that the loss incurred by
a few is shared among others in an area,
engaged in a similar activity. Also, losses
incurred in bad years are compensated
from resources accumulated in good
years. Crop insurance contributes to
self-reliance and self-respect among
farmers, since in cases of crop loss they
can claim compensation as a matter of
right. Thus, it cushions the shock of
crop loss by assuring farmers’ protection
against natural hazards beyond their
control. Realizing the importance of crop
insurance as a tool for managing risk and
uncertainties in agriculture, the present
study was conducted to identify factors
which are influencing the purchase of
crop insurance products by farmers and
constraints faced by farmers in adopting
crop insurance.

METHODOLOGY

This study was conducted in
Southern Zone of Tamil Nadu, which
is highly vulnerable to climate change
and variability (Palanisamy et. al.,
2011). In Southern Zone, Pudukkottai,
Virudhunagar and Sivagangai districts
were selected purposively to represent the
National Agricultural Insurance Scheme
(NAIS), Weather Based Crop insurance
scheme (WBCIS) and Modified National
Agricultural Insurance Scheme (MNAIS)
based on maximum number of farmers
enrolled under crop insurance scheme
during 2012-13. One block (Avuyadurkoil
block in Pudukkottai district, Thiruchuli
block in Viridhunagar district and
Ilayankudi block in Sivagangai district)
were selected purposively from each
district based on maximum number of
farmers enrolled for the crop insurance
scheme. Primary data from the sample
farms were collected with the help of a
pre-tested interview schedule through
personal interviews. A total of 180 farm
households were randomly interviewed
at the rate of 60 per district. The results
were analyzed with the help of different
statistical tools such as, percentage, and
count.

FINDINGS AND DISCUSSION

There were many important
qualitative factors that influenced the
adoption of crop insurance scheme.
Crop insurance formed a great support
to resource poor farmers who had no
alternatives other than borrowing under

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5782

adverse situations. Eventhough the crop
insurance scheme was in operation for a
long time, there existed many speculations
and scepticism among farmers about
the scheme. Though the benefits of the
scheme were well known, it still have not
acheived the expected coverage from the
point of view of either the implementing
agency or the beneficieries. It would

mean that the realisation of financial
benefits out of the scheme was not the
sole factor governing the adoption of crop
insurance. Instead, there must be some
other factors which might influence the
adoption. The factors that influenced
the adoption of crop insurance were
identified and the results are presented
in Table 1.

Table 1.
Factors Influencing the Adoption of NAIS, WBCIS and MNAIS

Sl.
No.

Particulars

NAIS
(n=60)

WBCIS
(n=60)

MNAIS
(n=60)

Mean
Score

Rank
Mean
Score

Rank

1
Lack of scope for crop
diversification

61.62 1 30.00 6 53.08 2

2
Definite crop loss due to
adverse climatic condition

54.02 2 62.53 1 60.92 1

3
Aware of the benefits of crop
insurance scheme

47.07 3 49.78 3 # #

4
Mandatory for availing crop
loan

39.97 4 55.25 2 42.50 4

5
Encouraged by the
experienced farmers

37.52 5 42.67 4 34.57 5

6 Easy access to loan 36.17 6 35.02 5 32.56 6

7 Financial Security 0.0 - 0.0 - 50.52 3

The lack of crop diversification
was the important factor that influenced
the adoption of NAIS (Pudukottai district)
and MNAIS (Sivagangai district). Paddy
was the only crop cultivated under rainfed
condition in Pudukkottai district during
rabi season. The main source of irrigation

was tank water, and soil in the study
block was sandy coastal alluviam which
can withhold the rain water upto 10-
15 days. In this field condition, growing
paddy crop alone was feasible. Farmers in
the Sivagangai district cultivated paddy
and chilies in larger area and cotton in

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smaller area under rainfed condition, if
residual soil moisture was available.

In a situation of prolonged
drought, farmers failed to cultivate crop
and therefore, the spread of prosopis into
the cultivable land made the land unfit
for crop cultivation. Therefore, adoption
of crop insurance offered the financial
security (i.e., the indemnity that could
be received in case of financial loss due
to adverse weather parameters). Hence,
lack of crop diversification was the major
factor influencing the adoption of crop
insurance. Farmers had a constant fear
about crop loss due to adverse climatic
conditions (either flood or drought or
pest and diseases) and this was the
important factor that influenced the
farmers to adopt crop insurance in the
study districts. The next important
factor that influenced the adoption of
crop insurance was awareness about
the benefits of adopting crop insurance.
Farmers felt that adopting crop insurance
would minimise income loss occurred
due to adverse weather events, pest and
disease and so on. Crop insurance was
mandatory to those farmers who were
availing credit from institutional sources.
At present, service for insurance to loanee
farmers was provided by the institutions
like Primary Agricultural Co-operative
Credit Banks or commercial banks. Those
farmers who availed crop loan from these
institutions compulsorily came under
insurance coverage. Encouragement by
the fellow farmers who had already reaped
the benefit of crop insurance and easy

access of loan from financial institutions
(Similar findings were observed in the
study conducted by Manohari and Desai,
2015 in Tamil Nadu) were the other
factors that influenced the adoption of
insurance by the farmers.

Constraints in the Adoption of Crop
Insurance Scheme

Farmers in the study area faced
several constraints in taking up crop
insurance. Therefore, it was important
to identify such constraints so that
necessary remedial measures can be
taken to increase the enrolment of the
farmers under such scheme. Based on
the opinion of the selected respondents,
the constraints were ranked and the
results are presented in Table 2.

It is observed from Table 2 that,
lack of compensation from the NAIS to
the farmers of Pudukkottai district so
far, whatever be the yield loss was the
major constraint in adoption of NAIS
which was expressed by 90 per cent of
the respondents.

Around 83 per cent of the farmers
who had adopted NAIS revealed that
they were not satisfied with the delay in
indemnity settlement. The main reason
for this was that the banks did not notify
about claims at the appropriate time to
the farmers (the claim settlement process
took a very long time-normally six
months and even one year in some cases)
and therefore, farmers were unable to
get compensation against their losses at
right time.

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Table 2.
Constraints in Adoption of Crop Insurance Scheme

Sl.
No.

Particulars
NAIS

(n=60)
WBCIS
(n=60)

MNAIS
(n=60)

1 Lack of awareness about the scheme
7

(11.67)
52

(86.67)
18

(30.00)

2 Low premium paying capacity
10

(16.67)
15

(25.00)
31

(51.67)

3 Availability of relief fund from the government
12

(20.00)
0

3
(5.00)

4 Administrative reasons

a Banks were not available nearby
13

(21.67)
10

(16.67)
27

(45.00)

b Difficulty in opening bank account
9

(15.00)
12

(20.00)
15

(25.00)

c Lengthy procedures
46

(76.67)
45

(75.00)
32

(53.33)

d Lack of awareness about the cut off dates
25

(41.67)
37

(61.67)
21

(35.00)

e Delay in payment of indemnity
50

(83.33)
35

(58.33)
0

f
Insurance was not available for the farmer’s
other crops

0
13

(21.67)
0

g Indemnity level was very less
33

(55.00)
0 0

5
No compensation was paid even if loss occurred
due to crop failure

54
(90.00)

0 0

The major constraints in the
adoption of WBCIS were lack of awareness
of the scheme and its provisions (87 per
cent) like crops covered, sum insured,
premium charged and loss assessment
method. In most cases, the deduction
of premium from the loan amount was
not informed to the borrowers and in
some cases, the borrowers also did

not take much care to know about the
interest rate charged and deduction as
premium from their accounts and so on.
Therefore, the insurers and bankers are
required to clarify all the details about
the various components of WBCIS to
the farmers. Majority of the farmers in
the study area were growing a variety of
crops, but WBCIS was available only for

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5785

paddy and sugarcane and this prohibited
the farmers in adopting insurance to the
other crops which were also affected by
weather variability but not permitted
to have insurance coverage. Lengthy
procedures to avail insurance coverage
was the main constraint in adoption of
insurance as expressed by 75 per cent
WBCIS farmers 53.33 per cent of MNAIS
farmers.

Farmers’ Suggestions to Refine the
Crop Insurance Scheme

The suggestions for improvement
in implementation of the NAIS, WBCIS
and MNAIS schemes are presented

in Table 3. The beneficiary farmers
highlighted several suggestions to refine
the crop insurance scheme. A majority of
NAIS beneficiaries (83 per cent) suggested
that unit of insurance coverage should
be village level or individual farmer level
and they were not in favour of firka level.
About 47 per cent of the beneficiaries
suggested that there should be timely
payment of compensation amount. A
majority of the beneficiaries (43 per cent)
suggested that there should be more
number of crop cutting experiments, if
individual based crop insurance was not
practicable.

Table 3.
Suggestions of Beneficiary Farmers

Sl.
No.

Particulars
NAIS

(n=60)
WBCIS
(n=60)

MNAIS
(n=60)

1 Unit area may be individual or village level
50

(83.33)
0 0

2
Timely payment of compensation should be
ensured

28
(46.67)

32
(53.33)

3 Crop insurance should not be compulsory
18

(30.00)
15

(25.00)
28

(46.67)

4
More number of crop cutting experiment
should be conducted

26
(43.33)

0 0

5
Weather stations should perform more
efficiently and their number should be
increased

0
44

(73.33)
0

6
Crop cutting experiment should be properly
carried out

0 0
27

(45.00)

The major suggestions made by
the WBCIS respondents were quick
settlement of claims to (53 per cent)
and prompt information about the claim

settlement to be sent to the farmers
by the bankers. About 73 per cent
of the beneficiary farmers suggested
establishment of more number of

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weather stations and improvement in
their functioning. Local representatives
should be appointed to monitor and
record the rainfall and temperature
data. The major suggestions expressed
by the MNAIS farmers were delinking
crop insurance from the crop loan and
conducting of crop cutting experiment
(CCE) at the respective field as identified
strictly following appropriate statistical
procedures i.e., random selection of field
according to the allotment of random
number. However, in most cases, the
respondents observed that, the team
of government officials conducted the
CCE along the road-side plots and not
in an actual field number as identified
by random number or following the
appropriate statistical procedures.

CONCLUSION
Taking the results of the study
into consideration, necessary steps
should be taken up by the implementing
agency and the agricultural department
to conduct crop cutting experiments at
the earliest possible and claims should be
settled within one month after the receipt
of the yield data. To make the scheme
more administratively efficient, the
implementing agency need to establish its
branch offices atleast at district level for

taking up monitoring and implementing
the crop insurance schemes effectively.
Besides, it should appoint its own staff at
grass-root level to gain the confidence of
farmers. Earnest efforts should be taken
to make the farmers realize the real
purpose of the scheme, beyond perceiving
it as a mere fund granting developmental
programme.

REFERENCES
Mani, K., Chandrasekaran, M.

& Selvanayaki, S. (2012). Adaptability
of crop insurance schemes in Tamil
Nadu. Agricultural Economics Research
Review. 25(2), 279-290.

Manohari, P.L. & Desai, G.R. (2015).
Factors influencing farmers decision
in rainfed areas. Journal of Extension
Education. 27 (3), 5477-5484.

Mohanty, B.K. & Sandeep, K. K. (2012). A
perspective of crop insurance in India:
Approaches and challenges. Journal of
Economics, Commerce and Research.
2(2), 25-33.

Palanisami, K., Ranganathan, C. R. &
Kakumanu, K. R. (2011). A Hybrid
model to quantify the impact of climate
change on agriculture in Godavari
basin, India. Energy and Environment
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Adoption of Crop Insurance Schemes in Tamil Nadu