Farm Income Insurance Scheme (FIIS) - To alleviate financial distress of small farmers

Farm Income Insurance Scheme (FIIS) - To alleviate financial distress of small farmers

Question - Schemes can go a long way in alleviating the financial distress of small and marginal farmers in India. Discuss the Farm Income Insurance Scheme/FIIS implemented by Gujarat in this context.

Farm Income Insurance scheme is the most effective amazon for boosting the prospects of small and marginal farmers through help in fighting falling prices in a globalised marketplace

• The Gujarat government has reintroduced the Farm Income Insurance Scheme for reforming agricultural insurance and eliminating farm level distress

• The current National Crop Insurance Programme offers coverage of prevented/failed sowing as well as post harvest losses and losses incurred from natural calamities too

• This is an area based approach for covering a wide variety of crops including foods, oilseeds and horticultural ones.

• But low literacy, lack of infrastructure for measuring data at farm level and limited presence of formal financial options for farmers have made these schemes ineffective

• FIIS introduced in 2003 is a scheme which aims at ensuring guaranteed income by providing insurance for the difference between the predicted and actual income of the farmer

• The predicted income is calculated through the product of unit area yields as well as prices at district level

• Decrease in predicted income resulting from yield or market fluctuations is insured under this scheme

• The scheme also ensures that inefficiency in farming is not encouraged because only yield fluctuations resulting from natural perils and disasters are covered under this scheme

• Any concerns regarding correct estimate of yield and price data can be eliminated using current technologies such as satellite based yield monitoring systems

• FIIS will integrate agricultural markets in the nation and using new technologies such as mobile enabled technologies can also contribute towards increasing real time data

• This will also resolve the problem of reliable estimates affecting current insurance schemes

• FIIS also proves advantageous in streamlining recently announced initiatives such as assessment of soil health through soil heath cards and rationalisation of fertiliser and water usage through insurance for the efficient cost of production

• This scheme also motivated farmers to use prevailing agriculture markets and engage with formal markets to avail of advantages in the event of fall in income

• FIIS also brings more transparency and accountability to the agricultural pricing system and bridges the gulf between price discovery and realisation for small as well as marginal farmers

• FIIS also integrates farm level subsidies and prevents subsidy leakage

Facts and Stats

• The National Sample Survey Organisation/NSSO estimates that around 60% of rural households depend on agriculture for livelihood

• Data also shows that more than 50% of these are placed at risk for defaulting on debts with banks or informal moneylenders

• Debt burden is the leading cause for farmer suicides in India, according to many reports

• Small and marginal farmers are obtaining low prices for produce arising out of massive international production and fall in demand

• An FAO/Food and Agriculture Organisation report indicated that declining food price index is prevalent for common commodities such as meat, cereals and sugar

• NSSO report points to rising input costs in agriculture and increase in consumption expenditure in terms of income, more so for households with lower than 2 hectares of land holding

• MSPs or Minimum Support Prices have not been effective in fighting declining prices; WTO also opposed MSP
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