Agriculture Reference
In-Depth Information
￿ Facilitation of decision-making in political
organizations
￿ Creation and improvement of a structure that
incorporates different stakeholders involved in
drawing up specifi c action plans
income can be addressed. Crop insurance
incentivizes farmers to adopt innovative options
by spreading the risks over space and time. It also
stabilizes farm incomes, thereby enabling farm-
ers to repay debts, which not only preserve the
viability of formal fi nancial institutions but also
save huge government expenditures incurred in
writing-off agricultural loans. Defi ciencies in the
existing framework of assessment of crop dam-
age and prompt settlement of claims need to be
addressed so that a disaster mode of operational
effi ciency is institutionalized. Research and
development activities for developing new insur-
ance products in the light of new risks emerging
from climate change also need to be taken up as a
medium- to long-term strategy. An effective
design and effi cient implementation mechanism
is required to ensure timely benefi ts especially to
the small and marginalized farmers.
Over the last 40 years, natural catastrophes
have caused a sevenfold increase in economic
losses (Dlugolecki 2004 ). Therefore, to address
such risks, an effective insurance system is
needed that meets the following criteria:
￿ Affordable and accessible to all rural people
￿ Compensation for income losses to protect
consumption and debt repayment capacity
￿ Practical to implement, given potential limits
on data availability
￿ Can be provided by the private sector with
little or no government subsidies
￿ Avoids the problems of moral hazard and
adverse selection
Effective crop insurance schemes should be
evolved to help the farmers in reducing the risk of
crop failure due to these events. Both formal and
informal, as well as private and public, insurance
programs need to be put in place to help reduce
income losses as a result of climate-related
impacts. However, information is needed to
frame out policies that encourage effective insur-
ance opportunities. Micro-fi nance has been a suc-
cess among rural poor, including women.
Low-cost access to fi nancial services could be a
boon for vulnerable farmers. Growing network
of mobile telephony could further speed up
SMS-based banking services and help the farm-
ers in having better integration with fi nancial
12.8.2 Disadvantages
The majority of EWSs were established to pre-
vent or reduce the impacts of climate-related
disasters (such as fl oods and hurricanes). By
comparison, the capability of these systems to
forecast droughts, extreme colds, and Indian
summers has been less effective. Droughts are
particularly distinguishable from other extreme
weather events in that they begin slowly and
gradually and are less “obvious” at the outset. In
addition, drought can last extended periods of
time and affect extensive areas. Given these com-
plexities, EWSs should be complemented with
historical data on droughts, along with available
climatological, hydrological, physical, biologi-
cal, and socioeconomic statistics. Only by com-
bining these data can the complex causes of
droughts be better understood and different sce-
narios modeled with the aim of developing prog-
noses (such as the probable start date of the rainy
season or possible variations in rainy and dry sea-
sons) to be disseminated via appropriate commu-
nication channels.
12.9
Crop Insurance Schemes
12.9.1 Key Issues
￿ Developing various models for risk assessment
￿ Designing user-friendly decision support sys-
tems to help assess risks and develop region-
specifi c contingency plans
￿ Strengthening existing risk cover mechanism
under NAIS and weather-based crop insur-
ance scheme
￿ Implementing region-specifi c contingency
plans based on vulnerability and risk scenarios
Agricultural insurance is an important mecha-
nism by which risks to agricultural output and
 
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