agriculture insurance in india – challenges and way forward o rigo c ommodities i ndia
TRANSCRIPT
Huge geography with limited irrigated area Unpredictable and erratic monsoon Limitations in contingency crop planning Almost 16% contribution to GDP Total Food Grain Production is 265 MMT + Total Post harvest losses close to 5- 6% Lack of robust and integrated supply chains from farm to fork Farmer realization as percent to consumer prices is only 35-40% 6 % of production goes into processing, as compared to 25-30% in developed countries Cold storage requirement gap in India is 10 MMT Estimated gap of scientific storage space (dry) around 35-40 MMT Infrastructure support for value added services at farm gate – Negligible Constraints in micro level weather forecast capabilities
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The Facts – Indian Agriculture
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Agriculture in India is highly susceptible to risk of draught , flood etc GOI introduced many insurance schemes to protect farmers from natural
calamities and ensure there credit eligibility for next season CCIS ( Comprehensive Crop Insurance Scheme)
Compensation equal to shortfall in yield ( guaranteed – actual) Scrapped in 1997
Experimental Crop Insurance Scheme Introduce in 1997-98 , covering non loanee small and marginal
farmers Selected crops in specified districts Premium subsidized Premium collected Rs 3 Crs against claim amount of Rs 40 Crs GOI discontinued it in 1997 – 98 itself
Agriculture Insurance in India
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National Agriculture Insurance Scheme ( NAIS) or Rashtriya Krishi Bima Yojna ( RKBY)
Introduced in 1999 – 2000 , after failure of CCIS Cover all food crops ( Cereal , Pulses) , Oilseed , Horticulture and
Commercial crops Both loanee and non – loanee farmers Premium rates vary from 1.5% to 3.5 % for food crops 50% subsidy for small and marginal farmers , equally by State and
Central Govt Scheme operates on the basis of
Area approach – defined areas for each notified crops for widespread calamities
On Individual basis - for localized calamities such as hailstorms, landslides, cyclones and floods
Agriculture Insurance in India
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Farm Income Insurance Scheme ( FIIS) By Agriculture Insurance Company of India
Started 2003 -04 Loanee farmers for wheat and rice initially Guaranteed income basis (Average yield multiplied by MSP) Protection to farmers by insuring production and market risks Withdrawn in 2004 Recent attempt by Govt of Gujarat to re introduce Can reform Agriculture Insurance Prevent farm level distress
Agriculture Insurance in India
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Post harvest management solutions Warehouse building insurance Food grain stock insurance Transit insurance Quality insurance ?
Fidelity Insurance
Huge scope for innovation and comprehensive products
Agriculture Insurance –Along the value chain
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Stake holders along the value chain
FarmerFarmers/ Aggregators
Farmers/ Traders/ Processor
Farmer/ Processor
Agriculture Production
Aggregation/Logistics
Inventory & storage
Processing &Consumption
Agriculture Commodity supply chain continuum
Stake holders along the value chain of Agro commodities
Risks and Mitigants along the value chain
Premium for risks to be apportioned at every value chain and stake holder to bear the same as a part of pricing.
integrated insurance to make the commodities tradable at premium
Agriculture Insurance- The current challenges
Awareness at farm gate level is still in nascent stages
Agriculture insurance to be mandated by IRDA to Insurance companies (Similar way of policy of PSL for banks)
Limited insurance companies in the space This space is with limited INNOVATION and
needs more innovative products to be designed Less synergies between Banks, Insurance
companies and other stake holders in this space
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Risks and Coverage
Type of Risk; Classification of Risks
Crop risks
Weather (Drought, Floods, Fire & Inundation)
Crop Yield
Commodity and Warehouse related risks
Stock Insurance (Fire, Burglary, STFI and Warehouse insurance)
Transportation Risks Transit Insurance
Quality Risks
Weight loss
Quality significance loss
Fidelity (Commodities Related)
Human related , On roll , outsourced and third party
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Challenges for PPP
Farmers Awareness of risk and impacts Survey and assessment of loss - Accuracy and
transparency Standard production practices – Individual practices Claim settlements Perception of burden, not a value add
Investors Return on investment Historical data Contractual obligation of farmers Control and monitoring through life cycle
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Opportunities for PPP
Product innovation – Inputs and/ or Labour , returns Process standardization Unit base survey , inspection and loss assessment Seamless and transparent claim settlement Weather research , crop research and advisories to be easily
accessible to the farmers Participation of farmer bodies - Awareness, implementation
and improvisation happens at all stages Holistic approach and group insurance concept rather than
Individual farmers may reduce the premium and smoothen claim settlement.
Govt to formulate simple and transparent guidelines and monitoring systems
Govt to cross subsidies the Viability Gap for investors till the time products and process matures 14
Integrated approach
Integrated approach to cover the risks through value chain
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Crop Insuran
ce
Produce
Insurance
Mandate Components
Riders
STFISpecial perils
Mandate Components
RidersQuality RisksTransit risksPrice RisksTerrorismRiots & Earthquake
Weather Rainfall & Drought
Standard Fire & Burglary
Covered till
liquidation and
realization of better returns
for farmers
Increases Accessibility to farmers
More innovative products to help cover more risks in agriculture
Value addition through smooth loss configuration and settlement
Access to wider and diversified risk mitigants
Create value along the supply chain and buyer incentivisation on risks coverage would be transferred to farmers
We together can save many lives of farmers
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Impact on farmers
Presence 15 States including Rajasthan, Madhya Pradesh, Delhi, Maharashtra, Andhra Pradesh, Karnataka, Gujarat, Uttar Pradesh, Bihar, West Bengal, Uttarakhand, and Punjab.
Storage capacity ~35,00,000 MT
Asset Under Management Rs. 8,500 crores +
Number of Locations/ Warehouses 200 +/ 300 +
Government Projects / Association PUNGRAIN (Punjab State Grain Procurement Corporation Limited)
NABARD (Promote NWR financing through Primary Agriculture Cooperative Societies)
State Trading Corporation (STC)Cotton Corporation of India (CCI)PSWC ( Punjab State Warehousing Corporation)
Collateral Management Agreement Punjab National Bank, Canara Bank, Central Bank of India, ICICI Bank, Axis Bank, IndusInd Bank, Ratnakar Bank, Reliance Commercial Finance, ABFL (Promoted by NABARD), Edelweiss
Exchange Accreditations NCDEX Spot Exchange
ACE Derivatives and Commodity Exchange
ICEX (Indian Commodity Exchange)
Associations / Membership Warehousing Regulation and Development Authority (WDRA)
Indian Chamber of Commerce (ICC)
Food Safety & Standard Authority of India (FSSAI) APEDA (Agricultural & Processed Food Products Export Development Authority)
Fumigation & Pest Management PPQ Compliance Fumigation licenses
Quality Laboratories 5 stationary labs and 200+ mobile labs kitsEmployee Strength 1,050+
FACT FILE
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Origo has a unique service basket offering customized end-to-end commodity management solutions fostering better utilization of resources. Each service is a part of supply chain as well as an independent service offering
Reducing Cost & Wastage
Reducing Pest Risk
Reducing Market Adoption Risk
Reducing Liquidity Risk
Reducing Credit Risk
Professional Warehousing
Collateral Management
Quality &Certification Preservation &
ProtectionTrade Support
Price Discovery for Farmers
Procurement at Farm Gate
Procurement Storage Financing Market Linkage
Sourcing of Business for Commodity Financing
A COMPLETE SOLUTIONS PROVIDER
In a short time Origo has been able to establish a footprint in most parts of the country having production or trade of commodities
Presence in 15 States including Rajasthan, Madhya Pradesh, Delhi, Maharashtra, Andhra Pradesh, Karnataka, Gujarat, Uttar Pradesh, Bihar, West Bengal, Tamil Nadu, Uttarakhand, Haryana, Chattisgarh and Punjab.
Footprint in states with major port locations
Execution capability of multi lines of business across the states
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