A Study on the Performance of National Agricultural Insurance Scheme and Suggestions to Make it More Effective

Agricultural production and farm income in India involve several risks. Crop insurance is the only mechanism available to safeguard against production risks. Against this background, this paper has examined the features and performance of National Agricultural Insurance Scheme (NAIS) operating in the country and has suggested some modifications to make it more effective. NAIS coverage in terms of crop area, number of farmers and value of agricultural output is very small. If crop insurance programme is to be made an important tool in agricultural risk management, the present level of coverage will have to be improved, at least by 3-4 fold. Such an expansion can occur only with improvements in and broad-basing of the insurance scheme. Every suggested improvement has financial implications and affect the concerned insurance practices. It requires renewed efforts by the government in terms of designing appropriate mechanisms and providing financial support to agricultural insurance. Providing of similar support to the private sector insurers would help in increasing the insurance coverage and improving the viability of insurance schemes over time. The study has also suggested that different general insurance companies in the country may be assigned some reasonable targets to cover agricultural insurance, and to begin with, it could be equal to the share of agriculture in the national income.