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 onlymechanism available to safeguard against production risks. Against this background, this paper hasexamined the features and performance of National Agricultural Insurance Scheme (NAIS) operatingin the country and has suggested some modifications to make it more effective. NAIS coverage interms of crop area, number of farmers and value of agricultural output is very small. If crop insuranceprogramme is to be made an important tool in agricultural risk management, the present level ofcoverage will have to be improved, at least by 3-4 fold. Such an expansion can occur only withimprovements in and broad-basing of the insurance scheme. Every suggested improvement has financialimplications and affect the concerned insurance practices. It requires renewed efforts by the governmentin 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 insurancecoverage and improving the viability of insurance schemes over time. The study has also suggestedthat different general insurance companies in the country may be assigned some reasonable targets tocover agricultural insurance, and to begin with, it could be equal to the share of agriculture in thenational income.