Nohar (Hanumangarh, Rajasthan): Approximately 135 Kisan Credit Card (KCC)-holding farmers in Nohar tehsil of Rajasthan’s Hanumangarh district have been denied insurance claims under the Pradhan Mantri Fasal Bima Yojana (PMFBY) for kharif 2017. Why? Apparently because Axis Bank debited insurance premiums for cotton crops – which they had not cultivated.
Crop-cutting experiments (CCEs) for assessment of yield loss couldn’t be performed as cotton crops were not found and consequently, insurance claims were denied by Bajaj Allianz General Insurance Company Limited. The farmers then decided to protest – they have claimed that Axis Bank insured them for cotton on purpose, as its premium amount is higher.
Banwari, a farmer from Surapura village in Nohar, was insured for cotton when he went to renew his KCC loan in 2017 for the kharif season. As per his pass book, accessed by The Wire, Axis Bank debited an insurance premium of Rs 62,780 from his KCC account for 24.35 hectares of land – but he has received no claims till date.
As per PMFBY guidelines, maximum insurance charges for commercial crops like cotton is 5% of the sum insured (the estimate total cost that would be incurred by the farmer to cultivate a particular crop on a particular amount of land). For foodgrain and oilseed crops, it’s 1.5% to 2% for rabi and kharif seasons, respectively.
The cost of cultivating cotton in Hanumangarh, set by the state-level coordination committee on crop insurance, was Rs 51,568 per hectare in 2017. Accordingly, the insurance premium payable by the farmer for this crop (5% of the sum insured) was equal to Rs 2,578 per hectare. (Banwari’s land area was 24.35 hectares. So the premium = 24.35×2578 = Rs 62,774.)
“Cost of cultivation in Rajasthan used to be low but under PMFBY, it has been significantly raised for optimum security of the farmers. In return, this has increased the premium to be paid by the farmers,” said Siraj Hussain, former secretary of agriculture and farmers’ welfare.
When it comes to loan disbursement by the private banks, the guidelines are blurred. To maximise their profit, the banks while disbursing KCC loans and subsequently insuring them under PMFBY, assume all land owned by the farmer to be the cultivable area, when practically, the area where the crop can be cultivated is quite small.
Axis Bank did the same thing with Banwari. As per the land record accessed by The Wire, he has a landholding of approximately 30 hectares, of which 21 hectares is rain-fed and so cannot be used for cotton cultivation. The other 9 hectares is being irrigated by the canal system.
Also, his village Surapura is situated at the end of the Sidhmukh irrigation project, which as per the irrigation department’s report has only 16% irrigation efficiency during the kharif season. Therefore, his land isn’t suitable for cotton cultivation, which requires a fairly good amount of water.
“If one closely analyses the loan applications of the farmers in Nohar, it can be clearly noticed that the cultivable area shown by the banks is the entire landholding. It is technically not possible as in this rain-fed region, a farmer can’t irrigate a large land size depending only on the canal irrigation,” Pavan Deharu, the All India Kisan Sabha (AIKS) member leading the protest against Axis Bank, told The Wire.
Apart from this, on the high limit loans availed by farmers from private banks, they are automatically exempted from seeking the benefit of NABARD’s interest subvention scheme that provides 3% interest subvention on KCC loans under the limit of Rs 3 lakh.
“Private banks have the capacity and permission to disburse high limit loans. So farmers in need of large sums of money approach these banks and get easily trapped,” Deharu added.
In February this year, the bank had also issued Banwari a notice saying it would auction his property if didn’t pay Rs 21,80,410 in a month. Totally dependent on crop yield for his livelihood, he feels betrayed.
“It is embarrassing for me to sit on a road demanding monetary relief for the loss I suffered, which should have been given to me promptly as my right. Not even once have the bank officials said that they made a mistake,” Banwari told The Wire.
Was it a mistake?
Essentially, the banks disburse KCC loans according to the report of the revenue board that declares notified crops that may be insured in the notified areas. In this case, while both cotton and guar were notified crops, the bank insured the farmers for cotton even though they grew guar.
While farmers rarely stick to the same crop every year, RBI guidelines on fixing the limit of a KCC loan say, “It is assumed that the farmer adopts the same cropping pattern for the succeeding four years.” It says that the limit may be reworked if the farmer changes the cropping pattern. However, in practice, neither do the banks inform the farmer about such an option, nor does the farmer have the requisite awareness.
“Banks generally issue KCCs to farmers on that particular notified crop that has the highest premium without informing the farmers. While there is a letter format for change of crop available in each bank issuing KCC which the farmers need to submit if they wish to change their crop, bank officials often fail to intimate the farmers about it due to work overload,” an Axis Bank official in Jaipur said, on the condition of anonymity.
As per the operational guidelines of the PMFBY, if farmers plan to change their crop, they need to intimate the change to the insurance company at least 30 days before buying insurance through the bank, accompanied by the sowing certificate issued by concerned official of the state.
Despite these provisions, loans are disbursed according to the data from the revenue board, which notifies certain crops that can be cultivated in the area but not the specific crop a farmer seeking loan is cultivating on his land.
“It’s true that the farmers didn’t cultivate cotton, for which the insurance premium was deducted by the bank. The onus of verifying the crop, for which the loan is sought, is on the bank officials. If there is a mistake, the bank is responsible,” Jai Kaushik, tehsildar in Nohar, told The Wire.
Other issues with the claim disbursement
CCEs couldn’t be conducted in 22 patwar circles in Nohar for the assessment of cotton yield for kharif 2107 as the cotton genes were not found there.
As per clause XI of the PMFBY guidelines, if the required number of CCEs couldn’t be conducted due to the non-availability of adequate cropped area, the yield estimate for such insurance units can be generated by using methods as
- clubbing with neighbouring/contagious units
- adopting yield estimate of next higher unit, or
- adopting the yield of neighbouring insurance unit with maximum correlation.
While the state government has clubbed the patwar circles where the CCEs couldn’t be performed with the neighbouring patwar circles where the assessment was done, the farmers believe that it tactfully selected areas where the actual yield of crop was higher than the guaranteed yield to prevent them from getting compensation.
For instance, Sonadi and Chaksardarpura patwar circles were clubbed with Gorkhana and Birkali patwar circles, where the actual yield to guaranteed yield ratio was 2,560:1,236 kg per hectare (kph) and 2,312:1,154 kph respectively.
As per the Rajasthan’s agriculture commissionerate’s order on the matter, issued on February 26 this year, only 19 out of these 154 KCC holding farmers have been considered eligible for the insurance claim. This is done because Axis Bank had included land of farmers in more than one village under a single patwar circle when it belonged to different patwar circles, to cut short the claim burden on the insurance company.
Under pressure from protesting farmers, the bank compensated 19 farmers recently.
“The bank is just a mediator between the insurance companies and the administration. Our responsibility is only to credit the companies with the premium, after which the administration has to take care of the damage assessment. For kharif 2017, claims of 154 farmers had not come. We had a meeting with the agriculture commissioner and he has also pointed out that only 19 farmers are eligible for the claim, but these farmers don’t listen. They think that if they sit on a protest outside the bank, they’ll get the insurance claim,” Ashish, manager at Axis Bank in Nohar, told The Wire.
Returning the premium
Under pressure from the protesters, Axis Bank is now returning the premium for cotton it had debited in 2018 without farmers’ consent. As per Naurang Ram’s passbook, he was charged Rs 12,791 as insurance premium for cotton for kharif 2018 but as the protests intensified, the bank had to accept their mistake and return him 9,948.
Then there is a long list of charges that the private banks incur on the maintenance of the account. For instance, Indraj was forced to close his KCC account because of the numerous service charges he had to paythe bank. As per his pass book, Axis Bank debited a processing charge of Rs 34,500, documentation charge of Rs 1,725, consolidated charge of Rs 5,500 and other charges worth Rs 2,850.
Note: The Wire reached out to Bajaj Allianz General Insurance Company Limited for a response, and this story will be updated when they reply.