Crop Insurance: Who Benefits?

West Bengal Chief Minister Mamata Banerjee has announced that from now her government will pay the full premium of crop insurance in the State. She has said that the Centre bears only twenty per cent of the cost of the crop insurance scheme, the State bearing the lion’s share of eighty per cent but New Delhi claims it to be a fully centrally-funded scheme named Pradhan Mantri Fasal Bima yojana. The State will now do away with this twenty per cent also, and make the scheme fully State-funded. She has claimed that her decision will benefit 7.5 million rural families dependent on agriculture.
The more important question, however, is not who bears how much burden of the scheme but who benefits ultimately. So far, according to statistics published, the Modi Government’s crop insurance scheme has largely benefited by the insurance companies, rather than the farmers for whom the insurance scheme is ostensibly made. In the fiscal 2017-18m the insurance companies have reportedly earned around 85 per cent profit. And this excluding the expenditure on administrative overheads and re-insurance.
According to data released by the Ministry of Agriculture, seventeen insurance companies – twelve in the public sector and five in the public sector – have made a net profit of Rs. 15,029 crore and settled claims of just Rs. 2,767 crore against the Rs. 17,796 crore that they collected as premium. In other words, the insurance companies have been the beneficiaries at the cost of the tax payer. In West Bengal also, the State Government will have to depend on the insurance companies – whether private or public – and it is they rather than the farmers who will benefit. A far more beneficial scheme for the farmers will be the complete elimination of the middlemen or, as they are called in local parlance, phores. The elimination of this intermediary class of people will ensure better price for the farmers and cost less for the consumer.
The Chief Minister has, of late, been giving emphasis on doing away with the middlemen. She has asked the State procurement agencies to buy directly from the farmers and pay them by cheque, completely doing away with cash transaction. As a matter of principle, it is praiseworthy but how it actually works on ground will have to be seen. Doing away with cash payment will contribute to greater transparency and give little space for corruption.

Thursday, 3 January, 2019