by admin | May 25, 2021 | Commodity Market, Corporate, Corporate finance, Corporate Governance, Economy, Finance, Investing, Markets, News
By Saurabh Katkurwar,
New Delhi : It is yet to be seen how much the Modi government’s ambitious crop insurance scheme has benefitted farmers, but one section that has definitely hit the jackpot is the insurance industry, which collectively earned around 85 per cent profit, excluding expenditure on administrative purposes and reinsurance, during the 2017-18 kharif season, government data shows.
According to the Agriculture Ministry’s data, all 17 insurance companies — five public and 12 private — empanelled under the Pradhan Mantri Fasal Bima Yojana (PMFBY) registered a margin of Rs 15,029 crore as they paid out claims of a mere Rs 2,767 crore against the Rs 17,796 crore collected as premium.
PMFBY is exempted from Service Tax (now a part of GST), as per its operational guidelines.
Similarly, these companies have earned over 96 per cent profit under another crop insurance scheme — Restructured Weather-Based Insurance Scheme (RWBCIS) — during kharif 2017-18 as they received Rs 1,694 crore as premium and paid out just Rs 69.93 crore as claim compensation, figures accessed by the IANS show.
During the last kharif (2016-17) season, the insurance companies had earned 44 per cent profit as they received Rs 15,735 crore while they incurred expenditure of Rs 8,862 crore in claims made by the farmers.
According to the Agriculture Insurance Company of India (AICI), the nodal agency for these schemes, the business has been “profitable” since they were launched in February 2016.
“A good monsoon has certainly helped increase food production, which we think has led to such profits,” said a senior AICI official, who wished not to be named.
Earlier, under previous insurance schemes, the AICI had paid as much as Rs 2.80 as compensation claim against the premium of Rs 1, causing it to incur significant losses, said the official.
The government and insurance companies cite a “good monsoon” and “higher production” for the low claims. But there were cases of extreme climatic conditions, drought like situations, and floods at many places, said Chandra Bhushan, deputy director of the non-profit Centre for Science and Environment (CSE).
“You cannot call it a good year to back low pay-outs since issues such as extreme climate and floods have been reported at many places. There are issues with assessment, payment dispersal along with technology issues. If claims are so low like 15 per cent (of premium collected), the country’s agriculture has no problem. There is no need to have any such crop insurance scheme then,” he added.
Interestingly, these insurance companies are bound to safeguard their interests by taking reinsurance cover and the government is to provide protection to them in case premium to claims ratio exceeds 1:3.5 or the percentage of claims to “Sum Insured” exceeds 35 per cent, whichever is higher.
Farm activists find a “big lacuna” in the design of the PMFBY, saying it has been more beneficial to the insurer than farmers.
Kavitha Kuruganti of non-profit Alliance for Sustainable & Holistic Agriculture (ASHA) said Crop Cutting Experiment (CCE), which is done to obtain accurate estimates of crop output, is conducted in a unscientific manner.
“The samples collected for CCE are not scientific. The consequences are that the farmers are not benefitted but the companies,” she said.
In addition, claims made by farmers for crop loss have found not to be settled by the insurance companies on time.
“Claims are not provided in time. Also, banks do not send data (to companies) in time. There are several lacunae with the implementation. But the big laucuna is with the design of the product,” Kuruganti said.
As many as 3,31,96,239 farmers bought crop insurance under PMFBY to insure 3,34,73,346 hectares of land during kharif 2017-18.
However, claims of only Rs 2,767 crore were paid against the reported claims of Rs 5,052 crore.
Interestingly, the government could not yet complete claims settlement for winter crops cultivated during rabi 2017-18 when the process “ideally” should get over in “a month” after the harvesting.
According to the ministry data, claims worth Rs 14 crore were made under PMFBY for rabi 2017-18 and the payout was Rs 12.1 crore till early June against the premium of Rs 5,128 crore collected by the insurers.
A top official told IANS that the ministry was “aware” of the “big profits” and delays in settling claims.
“Although companies are earning more profit now, there are chances that they may incur losses in future if significant crop losses are reported. Also, we have asked the companies and states to speed up the settlement process by adopting new technology,” said the official, who requested anonymity.
Under the scheme, farmers have to pay just 2 per cent of total premium in case of kharif, 1.5 per cent for rabi and 5 per cent for horticulture and remaining premium is shared equally by the Centre and the states.
However, there is no cap on the actuarial premium rates charged by the insurance companies, which Kuruganti said was “very high” for some crops.
(Saurabh Katkurwar can ne contacted at saurabh.k@ians.in)
—IANS
by admin | May 25, 2021 | Corporate, Corporate finance, Corporate Governance, Economy, Finance, News, Politics
Bengaluru : Karnataka on Thursday waived farm loans totalling Rs 34,000 crore, giving relief to distressed farmers across the state.
“I propose to waive farm loans totalling Rs 34,000 crore, with Rs 2 lakh per farmer family,” Chief Minister H.D. Kumaraswamy announced in the Assembly while presenting his maiden state budget for fiscal 2018-19.
“All crop loans defaulted by farmers to December 31, 2017 are waived in the first stage. Only loans borrowed from district cooperative banks and state cooperatives are waived in the first stage.”
The budget has also proposed to allot Rs 6,500 crore to enable farmers avail new loans after they submit a clearance certificate from the department concerned that their loan arrears have been waived.
“All crop loans defaulted up to December 2017 are waived in the first stage. Farmers who repaid loans within the stipulated time will be entitled to fresh credit up to Rs 25,000 or repaid amount, whichever is less,” the Chief Minister said.
The budget, however, proposes to tax people by increasing petrol price by Rs 1.14 per litre and diesel Rs 1.12 per litre.
“I also propose to increase excise duty on Indian made foreign liquor by 4 per cent to raise additional revenue for meeting the budget expenditure,” Kumaraswamy said.
Power tariff will also be increased by 20 paise per unit.
Assuring the legislators and the people that his coalition government would continue the flagship programmes of the previous Congress government, Kumaraswamy told the legislators that the overall size of the state budget would be Rs 2,13,734 crore.
Under the free Annabhagya (rice) scheme, the quantity of rice for free distribution has been cut to 5 kg from 7 kg per individual per month.
“I propose to allocate Rs 150 crore for agriculture development based on Israel mode. We will focus on agriculture as well as the services sector,” the Chief Minister said.
The budget has earmarked Rs 50 crore for natural farming on the lines of Andhra Pradesh for higher yields and better price.
As Kumaraswamy holds the finance portfolio, he decided to present a full budget of the Janata Dal-Secular-Congress government.
For key sectors like education, the allocation is Rs 26,581 crore, water resources Rs 18,142 crore, urban development Rs 17,727 crore, energy Rs 14,499 crore, social welfare Rs 14,123 crore and Public Works Department (PWD) 10,200 crore.
—IANS
by admin | May 25, 2021 | Commodities, Commodities News, News, Politics
Ram Vilas Paswan
New Delhi : Union Minister Ram Vilas Paswan on Tuesday said there cannot be two different policies for farmers and businessman even as he demanded assured 50 per cent profit for agricultural commodities.
“Nobody knows the production cost of cars and the profit margin by the companies. Farmers cannot decide the production cost of their crops. Farmers should get Minimum Support Price (MSP) of 1.5 times the input cost. It should be neither less nor more,” Paswan, the chief of the Lok Janshakti Party, told reporters on the sidelines of National Executive of his party’s farmer cell.
He welcomed Prime Minister Narendra Modi’s recent announcement of 50 per cent profit to the notified crop produce.
“(A) Policy decision has been taken to double farmers’ income and MSP of 1.5 times (the input cost). A committee is working on it (price fixation),” said Paswan, but refused to divulge much about the formula to be used to fix the MSP.
To a query on anticipated impact of higher MSP on inflation, he asked why only this issue was being raised when there was silence on the rising prices of other commodities.
“Is there anything that has not become costly? Be it cars or houses. However, the crop prices have been stagnant in last five years,” he said, adding that the government will take care of the expenditure on higher MSP.
Paswan also said that the government was “aware” of the delay in paying claims under crop insurance schemes by private insurance companies.
“We are alert this time,” he said.
—IANS
by admin | May 25, 2021 | News, Politics
Kalaburagi (Karnataka) : Prime Minister Narendra Modi on Thursday urged the people of Karnataka to vote for a change in the Assembly elections, saying their mandate would decide the future of farmers and youths.
“This election is going to decide the future of Karnataka, its farmers and youth. It is about the safety of women. Do not assume that it is only about electing an MLA, it is much beyond that,” Modi told an election rally at Navodaya Vidyalaya Grounds in Kalaburagi, about 630 km northwest of Bengaluru.
Modi, who is campaigning for the Bharatiya Janata Party (BJP) for a second day, addressed the rally for some 30 minutes in Hindi.
Accusing the state’s Congress government of being indifferent to farmers, Modi said the state failed to ensure that the benefits of central government’s schemes reached the farmers.
“Kalaburagi is known for dal (pulses) cultivation. Our farmers are working hard here but the Karnataka government is insensitive towards their condition,” Modi said.
He said the BJP’s Chief Ministerial face, B.S. Yeddyurappa, was a farmer’s son who understood the concerns of the farmers.
“In Yeddyurappa, we have a leader who is devoted to the welfare of the farmers. For him, their (farmers’) welfare is top priority.”
Modi will later address rallies in the mining district of Ballari and in Bengaluru.
—IANS
by admin | May 25, 2021 | Opinions
By Amit Kapoor,
The 180 km-long march of Maharashtra’s farmers from Nashik to Mumbai that swelled to about 40,000 in number by the time it reached the state capital is a potent reminder of the burgeoning problem of agrarian distress in India. It is also indicative of how this segment of the Indian population — which comprises about 60 percent of the total — has found itself repeatedly short-changed in the country’s developmental process.
Farmers in Maharashtra have gone through a particularly bad phase, with agricultural growth turning negative in the last three of four years. A spate of droughts and pest attacks — combined with the disruptions in cash flow due to demonetisation and the cow slaughter ban — have had an inimical impact on the state’s agricultural sector.
Thus, the march centred on a few major demands: A complete farm loan waiver, the effective implementation of the Forest Rights Act, 2006, and revision of the minimum support price (MSP) as per the Swaminathan Committee recommendations. The government agreed to relax the eligibility criterion of loan waivers and address implementation issues for clearing land titles and setting the MSP.
There remain numerous fiscal and administrative difficulties in the actual fulfilment of these commitments, which themselves need to be explored in detail. However, the fact of the matter remains that these are by no means a sustainable long-term solution to the problem which arises each year across the country.
This year’s Economic Survey pointed out that the level of real agricultural GDP and real agricultural incomes has remained constant over the last four years. During the same period, the gross capital formation (or investment) in agriculture has also declined from 2.9 per cent of GDP in 2013-14 to 2.17 in 2016-17. Therefore, a more effective mechanism needs to be adopted to address these problems by increasing the productivity yield of farms and reducing their vulnerability to seasonal variability, price shocks and pests.
There is also a strong economic logic behind the need for agrarian reforms. The World Development Report of 2008 surveyed several developing countries over 25 years and found that growth in agriculture by one percent reduces poverty by two to three times more than a similar growth in non-agricultural sectors. In China’s case, it was 3.5 times more effective and for Latin American countries, it was 2.7 times more effective. Given that more than half of India is engaged in agriculture and that almost 75 per cent of poverty is concentrated in rural areas, the economic gains from reforming the sector are self-explanatory.
The Chinese experience with agrarian reforms holds a few lessons for India. Unlike India, when China enforced economic reforms, it began by focussing on the agricultural sector. The commune system was dismantled and replaced with the household responsibility system and much of the stifling price controls were removed from agricultural goods.
Following the reforms, the sector grew at over seven per cent per annum between 1978 and 1984 as compared to a paltry 2.3 per cent in the pre-reform period of 1952-77. Also, due to this growth spurt, real rural income rose at 15.5 per cent per year during the same period, bringing poverty levels down from 33 per cent in 1978 to 15 per cent in 1984. The reduction in poverty increased the purchasing power of the masses and created a demand for industrial goods that paved the way for manufacturing reforms and the eventual revolution that brought about its historic growth phase for the next three decades.
In contrast to China, Indian reforms were less strategic and more by stealth. They were undertaken to resolve an economic crisis by adjustments in trade policy and delicensing of the industrial sector. Agriculture was kept out of these reforms and only later were piecemeal attempts made by tinkering with the agricultural policy. The reforms did help in ushering in macro-economic stability within the economy and boosting the overall rate of economic growth, but it only impacted the rural masses through shaky dynamics that resembled a trickle-down approach.
Most of the benefits that accrued to the sector came primarily either through indirect reforms of the exchange rate or from the transmission of rising global prices between 2004 and 2011. As a result, India managed to halve its poverty rate in over 18 years (from 45 per cent in 1993 to 22 per cent in 2011) as compared to merely six in China.
Prime Minister Narendra Modi aimed to double the income of farmers by 2022 when he came to power, but maintenance of status quo can hardly make such goals a reality. Quite a few structural changes are necessary to ensure sustainable growth in the sector.
First, the incentive structure for the farmers needs to be corrected. There is a consumer bias in agricultural policies to provide food security and price stabilisation, which often comes at the detriment of farmers who end up bearing the brunt. Ad hoc and unpredictable export bans are a case in point. Such trade-restricting policies should be avoided to provide a similar incentive structure as provided to the industries.
Second, considering that more than half of Indian agriculture is still rain-fed, a higher proportion of investment needs to be devoted to improving the agricultural infrastructure. In the total agricultural budget for 2018-19, merely 12 per cent has been allocated for investment while the rest is meant to be utilised for subsidies and safety nets.
Finally, there is practically no attempt at research and development (R&D) in agriculture. India spends merely 0.46-0.6 per cent of its agricultural GDP on R&D of the sector against a recommended norm of at least one percent for developing countries. With such a lopsided policy intent, where is the scope of doubling farm incomes?
(Amit Kapoor is chair, Institute for Competitiveness. The views expressed are personal. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Manisha Kapoor, senior researcher, Institute for Competitiveness, has contributed to the article)
—IANS
