If you want to help the farmer

Farmer woman shows mustard crop damaged in unseasonal rain at Malaca village, outskirts of Allalhabad, Uttar Pradesh. (Source: AP photo)

By: Vani S. Kulkarni, Katsushi S. Imai and Raghav Gaiha

As the toll of human misery and suicide mounts, official estimates of farm losses due to unseasonal rains and hailstorms in March remain controversial, with hasty downward revision. Since these estimates are largely notional, without validation from field visits, such revision smacks of deliberate fiddling. On March 24, the agriculture ministry reported that crops on 18 million hectares — about 30 per cent of the rabi crops — were damaged. Two days later, it dropped to 11 million hectares.

A rain deficit during the kharif season last year was followed by a huge excess of rainfall during this rabi season, especially in March. This is normally the time when dry weather and rising temperatures ripen the wheat crop, making it ready for harvesting.

Several states experienced heavy crop damage. Among the worst affected are Rajasthan, Uttar Pradesh and Haryana. Rajasthan recorded 10 times the normal rainfall, Haryana 4.6 times and UP 4.4 times. Wheat production was worst affected, followed by mustard and pulses.

The case of a farmer in Mathura (UP) — not an isolated one, as the death of Rajasthani farmer Gajendra Singh in Delhi shows — is gruesome. Last year’s rain deficit had damaged his paddy crop. This year’s excess rain wiped out his wheat crop. He had accumulated a debt of Rs 10 lakh. In 2013, he was locked up for his failure to repay a loan of Rs 5 lakh. The standing wheat crop was his only hope of survival. Shortly after the wheat crop was destroyed, he collapsed and died on his farm. Action Aid has recorded 54 farmer suicides in the Bundelkhand region of UP. Many farmers ended their lives not just because of a consecutive failure of crops but, more importantly, because of harassment, corruption and the burden of compound interest for years.

The Narendra Modi government at the Centre was quick to announce a slew of measures to mitigate the distress. These include compensation for losses, directions to insurance companies to process claims within 45 days and to banks to restructure farm loans. It is intriguing, however, why farm labourers whose hardships are just as severe are overlooked.

In an ostensibly generous gesture, the prime minister announced that compensation will be hiked by 50 per cent and given to those who have lost a third of their crops, higher than earlier limits. As the compensation is a fraction of losses per hectare and limited to two hectares, it is an unsurprisingly measly amount. Worse, the process of determining losses is cumbersome, arbitrary and reeks of corruption.

A list of those affected and the amounts of damage are determined by the lekhpal (the local revenue official) in consultation with the panchayat head and local MLA. Although official compensation rates range from Rs 4,500 (unirrigated crops) to Rs 12,000 per hectare (perennial crops), a lekhpal in Faizabad (UP) was suspended for giving out cheques for Rs 75 to Rs 300. Allegations abound of cheques made out in the names of dead persons. These aberrations are, however, not just a feature of UP, but far more pervasive.

Quick processing of insurance claims is feasible but on an over-optimistic assumption of the assessment of losses, as it normally takes up to six months to do so. Besides, barely 5 per cent of farmers are insured. A tiny fraction of bank loans (2.5 per cent) is reserved for crop insurance. But availing of this facility is further hampered by the fact that insurance is given only if the damage in the subdivision of a district is 80 per cent.

In a recent article by Ashok Gulati (‘A Baisakhi gift for the farmer’, IE, April 13), an over-emphatic case is made for crop insurance as the means to mitigate farm distress. But it rests on heroic assumptions of expanding coverage from 15 million hectares to 100 million hectares in a total net sown area of 140 million hectares, high insured values and substantial contributions from the Central and state governments. It is moot whether the fragile public finances of the Centre and the states would allow them to take on this huge fiscal burden. So private insurance companies must pick up the slack.

The high administrative costs of public crop insurance are compounded by perverse incentives. One, the collusion of insurance staff and farmers in filing exaggerated claims or losses (for example, high bribery rates in claiming indemnities) is rife; two, the undermining of sound insurance practices by governments during election cycles (higher compensation paid than required) is not uncommon; and three, premium rates are determined by government decree at unrealistically low levels.

Weather/ rainfall insurance pays the insured when rainfall is below a specified target, irrespective of actual crop yields. Besides, administrative costs are low, it is easier to market, and affordable to the poor. Above all, it is financially viable. Satellite and remote sensing technologies make the measurement of rainfall/ soil moisture less expensive than in the past, but they offer a block- or taluk-level assessment. Covariate risks (for example, excess rainfall) expose the insurer to huge indemnities. International financial markets could be tapped for reinsurance to hedge against such risks.

From a broader perspective, much vulnerability can be reduced without involving insurance per se. Both efficiency and equity, for instance, could be enhanced through better information about risks, mobilisation of savings as a form of self-insurance and risk-coping measures such as the MGNREGA.

The MGNREGA is an attractive “option” as the wage rate is fixed while labour market wages are uncertain and employment is not guaranteed. An analysis of West Bengal data for the period 2009-12 shows that, if poor households participate in the MGNREGA over a period, they are not only able to increase their food consumption or income but also enjoy easier access to informal credit and stable consumption. However, its self-targeting potential is undermined by frequent hikes in the wage rate and dilution of the provisioning of local goods (for example, roads, percolation tanks) by favouring private assets (such as wells). For these reasons, the recent budgetary “nudge” to the MGNREGA is unlikely to make a difference.

In conclusion, as more evidence of human misery unravels, it would be tragic if the Modi government didn’t broaden its policy focus and learn from its experience of why policies haven’t worked.

Kulkarni is associate, Urban Ethnography Project, Department of Sociology, Yale University; Imai is senior lecturer in economics, School of Social Sciences, University of Manchester; Gaiha is a former professor of public policy, Faculty of Management Studies, Delhi University

Source:: Indian Express