is highly susceptible to risks like droughts and floods. It is necessary to protect the farmers from natural calamities and ensure their credit eligibility for the next season. For this purpose, the Government of India introduced many agricultural schemes throughout the country.
The Central Government formulated the Farm Income Insurance Scheme during 2003-04. The two critical components of a farmer's income are yield and price. FIIS targeted these two components through a single insurance policy so that the insured farmer could get a guaranteed income. The scheme provided income protection to the farmers by insuring production and market risks. The insured farmers were ensured minimum guaranteed income. If the actual income was less than the guaranteed income, the insured would be compensated to the extent of the shortfall by the Agriculture Insurance Company of India. Initially, the scheme would cover only wheat and rice and would be compulsory for farmers availing crop loans. NAIS would be withdrawn for the crops covered under FIIS, but would continue to be applicable for other crops. The FIIS was withdrawn in 2004. The recent attempt by the Gujarat government to reintroduce the Farm Income Insurance Scheme can reform agricultural insurance and prevent farm-level distress.
The Government of India experimented with a comprehensive crop insurance scheme which failed. The Government then introduced in 1999-2000, a new scheme titled “National Agricultural Insurance Scheme” or “Rashtriya Krishi Bima Yojana”. NAIS envisages coverage of all food crops, oilseeds, horticultural and commercial crops. It covers all farmers, both loanees and non-loanees, under the scheme. The premium rates vary from 1.5 percent to 3.5 percent of sum assured for food crops. In the case of horticultural and commercial crops, actuarial rates are charged. Small and marginal farmers are entitled to a subsidy of 50 percent of the premium charged- the subsidy is shared equally between the Government of India and the States. The subsidy is to be phased out over a period of 5 years. NAIS operates on the basis of
Area approach- defined areas for each notified crop for widespread calamities.
On individual basis- for localized calamities such as hailstorms, landslides, cyclones and floods.
Under the scheme, each state is required to reach the level Gram Panchayat as the unit of insurance in a maximum period of 3 years. Agriculture Insurance Corporation of India is implementing the scheme.
