Farming distress – government washing off its hands – 1/3

This entry is part 1 of 3 in the series Insuring the State

After the death of more than 100 farmers in one month, Tamil Nadu government has announced some token relief measures for the distressed farmers. Lack of state support, denial of Cauvery water by Karnataka, failure of North East monsoon all contributed to a drought like situation in the cauvery delta districts as well as in other parts of the state.

Political parties and civil society demanded immediate relief to the farmers and People’s Power announced that a day long Dharna will be conducted on January 11, 2017 in Thiruvarur to force the state to act.

… the Government can in future tell peasants to pursue their individual claims against financial firms, and not turn up at its door…

Now comes the announcement by the state government.

One of the key components of the announcement is the role of crop insurance in providing compensation to farmers. The state restricts its commitment to Rs 5,465 per acre for paddy and other irrigated crops, Rs 3,000 per acre for rain fed crops and Rs 7,287 per acre for long term crops. Families of farmers who were forced to commit suicide will get a Rs 3 lakh compensation

This compensation is a mockery of the state’s commitment to providing relief to farmers. Let us take 70 year old Seenivasan from Nagapattinam district who died yesterday (January 10, 2017). Had he lived on to receive the state’s compensation for crop loss, he would have received Rs 10,910 for his 2 acres of paddy crop. This will not even cover his expenditure on these 2 acres so far, will not help him pay off his debts, not to speak of surviving till next year and resuming farming again.

After announcing such a meagre amount as compensation, the state is pushing the farmers to the doors of insurance companies for more compensation.

It is important to understand that crop insurance scheme is a fraud practiced on farmers by the state; It is meant to insure the state against the claims of peasantry as argued in this RUPE article.

This article establishes that not only crop insurance, medical insurance is also economically illogical and socially nonviable way of providing care to the people. This article was published immediately after the presentation of union budget for 2016-17.

Insuring the Government against the Peasantry

Before the Union Budget, the Government announced a new crop insurance scheme, the Pradhan Mantri Fasal Bima Yojana (PMFBY). This has been touted as a flagship programme of the Modi government in the agricultural sector, a ‘game-changer’, a solution to the problem of peasant suicides, part of a broader shift to ‘pro-farmer’ policies, and so on.

.. a scheme to politically insure the Government against the peasantry, … which is now to be pauperised even more by aggressive neoliberal policies.

The rationale for insuring peasants can hardly be questioned. Peasants face enormous insecurity in eking out a livelihood. Since they engage, even more than other sections of the workforce, with natural processes, they are particularly affected by the uncertainties inherent in such processes. Since they are very small operators in the market, they are at the receiving end of market fluctuations, and are unable to affect it by their actions. As shown both by the National Sample Survey data for 2012-13, the majority of peasants struggle to make ends meet, particularly in the absence of off-farm income. Without doubt, they need protection against all sorts of natural and man made calamities. The question is, how.

The real significance of the PMFBY lies not in the details of its benefits in comparison with earlier schemes, or how it could be improved further. Its real significance lies in the fact that it is a necessary part of the drastic reshaping of India’s agriculture under neoliberal rule.

Despite more than two decades of neoliberal ‘reform’ in agriculture, the Government even now is forced to accept at least nominal responsibility for the condition of the peasantry, and so must face their collective wrath from time to time. That situation compels the Government to make concessions to peasant demands from time to time. These concessions can interfere with further ‘reforms’.

The Government therefore wants to erect effective institutional barriers between itself and the peasantry.[1] Once it has put a system of insurance in place for agriculture, covering the majority of cropland, the Government can in future tell peasants to pursue their individual claims against financial firms, and not turn up at its door. It is, then, a scheme to politically insure the Government against the peasantry, a peasantry which has been immiserised over the last two decades, and which is now to be pauperised even more by aggressive neoliberal policies.

Broad contours

Whether or not it benefits peasants, the present scheme is certainly far more attractive to the insurance firms than earlier such schemes.

First, the details of the scheme. The 2016-17 Budget has provided Rs 5,500 crore towards the scheme; a matching sum is to be provided by the state governments. The Prime Minister has declared that he aims to bring 50 per cent of the country’s farmers under the scheme in the next two years. In fact, he tweeted that the scheme is his Government’s “gift” to farmers on the occasion of Lohri/Pongal/Bihu.

The scheme has received a largely favourable reception from the corporate media. It is said to be an improvement on the existing crop insurance scheme in several respects. The premium to be paid by the cultivator has been reduced to 1.5 per cent of the sum insured on rabi crops, 2 per cent on kharif crops, and 5 per cent on commercial crops or horticulture. There is no upper limit on the subsidy to be given by the Government; even if the balance premium is 90 per cent, the Government will bear it.

Earlier, the premium rate itself was capped, so that there would be a limit to the Government outgo on subsidy for the premium. As a result the sum insured was low, and correspondingly the claims paid to farmers were low. This capping has now been removed, so that the sum insured can be as large as the crop value itself. Now, it is claimed, the cultivator is to receive full cover, and the insurance company will collect the full actuarial rate (i.e., taking fully into account the statistical risk of claims). The sum insured will be determined by multiplying the average yield of the previous seven years with the minimum support price for the crop. The scheme will cover losses on account of natural calamities, including yield losses; losses due to prevented sowing; and post-harvest losses. It is claimed that it will use “technology” to speed up settlement of claims, presumably meaning photographs taken on mobile phones and the like.

Whether or not it benefits peasants, the present scheme is certainly far more attractive to the insurance firms than earlier such schemes. The Government has notified 10 private firms for the PMFBY, along with a token public sector firm, the Agricultural Insurance Corporation of India. The major public sector general insurance companies (GIC, New India, and Oriental), which actually possess the broadest network of agents and have large market shares, have been kept out of the scheme, despite their demand that they should be included. It has been announced that only one insurance firm will operate in each state, thus giving short shrift to the hallowed free-market principle of competition. In effect, it appears the firms will be provided captive markets at rates of profit guaranteed by State subsidy.

The scheme covers only losses due to natural calamities; it does not cover the even more important man-made calamity of a fall in crop prices. Indeed, it is frequently the case that peasants suffer losses amid bumper crops. In the past two years we have witnessed an even stranger phenomenon in the case of many crops: a drop in prices despite a drop in production. This is due to the current demand depression.

It is not clear how tenant cultivators and sharecroppers, who are in fact the poorest sections, can be beneficiaries, since the overwhelming majority of tenancies are oral, so the tenant would have no documents to submit. Of course, this lacuna exists even with existing Government relief measures for those affected by natural calamities.

Broader significance

When we hear the word ‘insurance’ today, we think of a policy we buy from an insurance firm. But it is important to realise that in fact it need not at all take the form of a financial contract.

The point is that the now common usage of the term “insurance”, to denote a financial contract between an individual and a profit-oriented firm, is merely one type of insurance, and not the better form.

What, indeed, is insurance? The word “insure” comes from the same root as the word “sure”. Among the dictionary definitions of “insure” are “to make sure or secure; to guarantee”, “to take measures to try to prevent an event leading to loss, damage, difficulties, etc.” and “to arrange for the payment of an amount of money in the event of the loss or theft of or damage to property or injury to or death of a person, etc by paying regular amounts of money to an insurance company.”

The essence of insuring, then, is to secure a person/a group of persons against the risk of an adverse event; the ways one might do so are very varied. One can do so by preventing the event itself from taking place: for example, one can insure against floods by preventing deforestation, or insure against fires by preventing the causes of fires. Another method of insurance is to minimise the damage that can be done by the event: for example, one can construct buildings capable of withstanding an earthquake; one can prevent construction on floodplains of a river; one can construct and maintain village tanks as an insurance against drought; and so on.

Savings are also a form of insurance. Individuals routinely insure themselves against adverse events by saving out of their earnings. A rural collective may insure itself by setting grain aside for years of poor crops. A building society sets aside a sinking fund for various eventualities.

The State is meant to take a variety of measures to protect the citizens against physical harm. (Indeed, the bourgeois theory of the State, as propounded by, say, Locke, is that it is a form of insurance created by a social contract: citizens delegate part of their rights to the State, so that it may defend them against injury.) But further, when the State guarantees certain goods and services to all citizens, that too limits the possible damage caused by an adverse event. For example, the provision of free universal health care insures a person against being unable to afford healthcare for lack of money. Public procurement of foodgrain is supposed to insure the peasant against a fall in prices to unremunerative levels; and public distribution is supposed to insure the citizen consumer against being too poor to obtain minimum nutrition. Indeed, public distribution is referred to by the likes of the World Bank a ‘safety net’, which precisely is the meaning of insurance.

The point is that the now common usage of the term “insurance”, to denote a financial contract between an individual and a profit-oriented firm, is merely one type of insurance, and not the better form. By the contract, the firm in a capitalist system promises to pay the individual a sum of money once a particular loss or injury has occurred. Such a sum, while better than nothing, is clearly inferior to preventing the event in the first place, if that were possible. It also may be inferior to universal measures, which do not depend on whether individuals have had the money and foresight to purchase insurance, or on how quickly and scrupulously insurance firms settle claims.

One should be clear, moreover, that the insurance policy is not the purpose for which the insured person pays a fee. The insured person cannot eat the policy document or use it to rebuild a collapsed building. The purpose is the settled claim, i.e., the actual payment obtained at the time of the injury or loss. So mere coverage of a particular number of people is not the criterion by which to judge the efficacy of insurance. Rather, we need to see whether it truly secures them against harm when they need it.

[1] Analogously, the setting up of Electricity Regulatory Commissions in different states has allowed electricity distribution firms to hike tariffs without the state governments coming under fire from consumers.

(part 2) (part 3)

Courtesy : RUPE

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