Instability, Supply Response and Insurance in Oilseeds Production in India

Yield and price instability and covariate risks have been examined formajor oilseeds, viz. groundnut, rapeseed/mustard, sunflower and soybean,in selected states of India using time series data. Risk behaviour and effectsof price and price risk on production have been analyzed in a rationalexpectations framework. The study has also estimated social gains fromyield and revenue insurance in oilseeds. While instabilities in yield, pricesand gross return have shown mixed responses, covariate risks haveincreased. The results of econometric analysis have indicated that theexpected prices and price risk are important determinants of oilseedsproduction. Price elasticities of oilseed production have been found tovary between 0.26 and 0.88 and price risk elasticities of production between–0.006 and –0.07 in different Indian states. The potential efficiency gainsfrom insurance schemes based on rainfall and other meteorologicalvariables have been estimated to be 17.5 to 43 per cent over self-insurancein oilseeds production.