Poll year bounty? After rich harvest, Gujarat farmers get crop-loss claims

It’s good time to be a farmer in Gujarat, especially a grower of groundnut or cotton.

These farmers had a bumper kharif last year. Yet, the BJP government in the State, eyeing a re-election in the upcoming Assembly polls, is allegedly pushing insurance companies to pay them crop-loss ‘claims’.

According to highly-placed insurance industry sources, the demand has been disputed as all evidence points to groundnut and cotton farmers in the State, particularly from the Kathiawar region where maximum crop insurance policies were sold, having had a windfall season last year. No way groundnut and cotton farmers would have been eligible for compensation given the bountiful production, the sources said.

In Gujarat, the coverage of the Pradhan Mantri Fasal Bima Yojana (PMFBY) has been most extensive in the six-seven Kathiawar districts, including Rajkot, Amreli and Junagarh, where groundnut and cotton are major crops. The sum insured for these crops (under the PMFBY) is said to be around ₹1,200 crore. Among those who provide crop insurance in the State are HDFC Ergo and the state-owned Agricultural Insurance Corporation of India.

According to the sources, the issue is now before the Prime Minister’s Office (PMO) and expected to be resolved soon. One thing that may be of some solace for the insurance industry is the presence of PK Mishra, Additional Principal Secretary in the PMO. Mishra, a former Union Agriculture Secretary, was the chief architect of PMFBY. “We hope that he would be able to see merit in our case,” they said.

With the State receiving good monsoons last year, there was about 20 per cent increase in the area under groundnut cultivation, leading to nearly a 97 per cent surge in production over the previous season. “The production was so good that the government had to resort to procurement to prop up falling groundnut prices,” they said.

A researcher from the Directorate of Groundnut Research in Junagarh confirmed a ‘very good’ groundnut production in the State last year. Gujarat accounts for nearly 37 per cent of the country’s groundnut production.

“Still, we are being forced to pay for an ‘imaginary’ crop loss based on the yield data provided by the State government showing a drastic drop in production, which is not true,” the sources told BusinessLine . They alleged that the data had been fudged to pay farmers, with an eye on the elections ahead.

There is a misunderstanding that insurance companies settle claims from their pocket. Not many understand that it is the customers who pay for it. “Last year’s claims, yet to be settled, have pushed up the actuarial premium for groundnut in Gujarat by one-third. Actuarial premium rate for groundnut and cotton in Rajkot has gone up to 58.7 per cent from 44 per cent last year,” the sources said.

A July study of PMFBY by New Delhi-based Centre for Science and Environment (CSE) showed that Gujarat pays the highest actuarial premium. “For strange reasons, the actuarial premium paid is not commensurate with the total production or the crop loss reported from the State,” said Chandra Bhushan, CSE Deputy Director-General.

“It is after all taxpayers’ money,” said the insurance industry sources, pointing out that Central and State governments share 95-98 per cent of the premium subsidy for most crops.