Lack of Crop Insurance

As stated earlier, production process in unirrigated agriculture is entirely different than in other kind of farming. It has been observed through the variability and instability in production and productivity and high cost of cultivation. These factors lead severe impact negatively on most rural households simultaneously and are therefore difficult to manage through traditional risk sharing and coping strategies. However, the risk bearing capacity of the average farmer in the unirrigated agriculture is very limited. As a result, government policy may sometimes play an important role in helping farmers manage risk. In this context, the Government Policy of Crop Insurance was established to manage risks in agriculture (Walker and Jodha, 1986; Rao et al., 1988).

Conclusion and Policy Suggestions

In Tamil Nadu, low rainfall districts are Namakkal, Erode, Tiruchirappalli, Karur, Perambalur, Madurai and Virudhunagar. Therefore, the authorities need to evolve management practices for farmers of the districts. Besides, choice of remunerative crops without degradation of the natural resource base has to be suggested and also to define agro ecological zones where such cropping systems can be adopted sustainably. Simultaneously, need based policy incentives are required to encourage farmers adopt agro ecology compatible cropping systems so that the farmers income is maintained and the natural resource base of the country is not degraded.

Financial assistance to the farmers in the low rainfall area is highly imperative. But, formal sector funds often are not available due to rationing and bureaucratic hassles. The neediest farmers would be made better off if concessional lending were abandoned and bank managers were given more autonomy and protection against political interference. Banking operations could be made simpler and more decentralized in order to reduce transactions costs of both banks and their clients. Higher interest rates would help banks become viable credit institutions rather than merely a means for channeling concessional funds. Under these circumstances, banks could attract deposits, and they would have more incentive to develop better loan portfolios. In short, this step would help develop greater professionalism in the banking sector (Hanumantha Rao and Gulati, 1994).

Crop insurance is provided by the public sector in many countries. However, it fails to reach its target in unirrigated agricultural areas. The primary reasons are follows : Majority of the unirrigated holdings is in small and marginal farm categories and these farms have poor access to institutional credit. Since crop Insurance was linked to crop loans, many small and marginal farmers could not participate in the crop insurance scheme. The threshold yield was fixed on the basis of the average of the preceeding 10 years whereas the trend in the growth of yield levels for most of the crops was positive. Further, the threshold yield or level of non indemnifiable yield was very high even for low risk areas and the high risk areas in unirrigated agriculture are exclusion of from crop insurance scheme. As a result, the farmers in unirrigated agriculture not prefer to adopt the crop insurance policies. In particular, unawareness among the farmers about the crop insurance scheme and non availability of insurance coverage for the major commercial crops like cotton and others were excluded from the crop insurance scheme. Therefore, the agencies for crop insurance need reform the policies and insurance coverage to include the different type of farmers and crops for managing the uncertainty and risks in unirrigated agriculture (Bhende, 2005).

As a whole, the policy makers have to look into the above mentioned

problems and suggestions thereby to improve the agricultural production,

farmer's livelihood and sustainable agricultural development.

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