Eleventh Five Year Plan - of Planning Commission

22 Eleventh Five Year Plan
received. Moreover, being compulsory for all borrowers
from banks in States where it is in force, and with
relatively few non-loanee farmers involved, it mainly
insures banks against default following poor harvest.
Further, its popularity with farmers is limited since it
is based on crop-cutting experiments, which delays
claims payments until well after harvest and the risk
covered is only of yield shortfalls at the block level.
There is a scope for improving the coverage of NAIS
in terms of regions and crops, substitution of longterm
yield rate as a benchmark, and ensuring prompt
payment of the indemnities. Decision to devolve the
area of damage assessment from blocks to smaller
units may be done with care, as the costs of such decentralization
and the moral hazards will be very high
compared to the likely benefits. Other indicators, such
as rainfall, could be used for assessing the damage due
to natural factors. Some States are devising their own
crop insurance policies including weather insurance,
which can be supported in suitable ways. However,
for the next few years they should not be treated as a
substitute to NAIS.
1.68 An important lacuna, which many researchers
have pointed out, is the rather indifferent attitude
of the banks towards crop insurance. All commercial
banks, RRBs, and the co-operative banks should
make crop insurance mandatory for all agricultural
loanees, especially because such insurance can indirectly
contribute to the viability of rural banking.
An equally important aspect is the need for much
larger involvement of the States in the functioning
of the scheme. The government needs to take up
agricultural reinsurance more extensively with appropriate
insurance products. Recently some of the
successful insurance products like Weather based
Insurance have been developed by Agriculture Insurance
Company of India Ltd (AIC), ICICI-Lombard
General Insurance Company, and by IFFCO-Tokyo
General Insurance Company. Under the scheme,
coverage for deviation in rainfall index is extended
and compensations for economic losses due to the
less or more than normal rainfall are paid. There is a
lot of interest in private sector for insurance business.
Necessary incentives should be devised for insurance
companies to design suitable products for the agriculture
sector.
MARKETING
1.69 The agriculture sector needs well-functioning
markets to drive growth, employment, and economic
prosperity in rural areas. Currently agricultural markets
are regulated under respective State Agricultural
Produce Marketing (Regulation) Acts, generally known
as APMC Act. Besides, there are other regulations,
viz. Essential Commodities Act and various Control
Orders issued thereunder. All these have created
restrictive and monopolistic marketing structures,
which have resulted in inefficient operation and
high degree of marketing costs. They have also had
an adverse impact upon agricultural production and
system, inefficient flow of commodities, and lack of
competitiveness.
1.70 The markets lack even basic infrastructure at
many places. When the APMCs were first initiated
there was significant gain in market infrastructure development.
However, this infrastructure is now out of
date, especially given the needs of a diversified agriculture.
At present only one-fourth of the markets have
common drying yards, trader modules, viz., shop,
godown, and platform in front of shop exist in only
63% of the markets. Cold storage units are needed in
the markets where perishable commodities are brought
for sale. However they exist only in 9% of the markets
at present and grading facilities exist in less than onethird
of the markets. The basic facilities, viz., internal
roads, boundary walls, electric lights, loading and unloading
facilities, and weighing equipment are available
in more than 80% of the markets. Farmers’ rest
houses exist in more than half of the regulated markets.
Covered or open auction platforms exist in only
two-thirds of regulated markets. It is evident from the
above that there is considerable gap in the facilities
available in the market yards. Also the farmers have to
deal with non-transparent methods of price discovery
and there is often lack of auction of graded items.
Some modern markets with electronic auctioning have
been introduced, but they are the exception. A major
modernization of this aspect of the infrastructure is
urgently needed.
1.71 On the basis of the recommendation of the
Inter-Ministerial Task Force, Ministry of Agriculture
drafted a model law on marketing which would allow