Research on World Agricultural Economy

Adoption of Crop Insurance by Smallholder Farmers: Farm-Level Evidence from India

Rajesh Acharya H

School of Humanities, Social Sciences and Management, National Institute of Technology Karnataka, Surathkal, Mangalore 575025, India

DOI: https://doi.org/10.36956/rwae.v5i4.1197

Received: 26 July 2024 | Revised: 23 August 2024 | Accepted: 2 September 2024 | Published Online: 16 October 2024

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Abstract

The paper aims to analyse the extent and determinants of smallholder farmers’ adoption of crop insurance. The study conducted a primary survey and collected data from farmers in a drought-prone area of Karnataka state in India using a structured questionnaire. The study has applied a binary logistic regression model to identify the determinants of crop insurance adoption. Empirical results reveal that though most farmers experienced crop loss, only a small percentage subscribed to crop insurance regularly. Lack of money to pay premiums and lack of information are the most common reasons for not subscribing to crop insurance schemes. Further, farmers feel the premium is expensive and do not receive the promised compensation due to the stringent eligibility rules. Most farmers who received compensation think the money is inadequate to cover the cultivation cost. Farmers feel each farm should be treated as a unit against the area-based insurance concept, and more crops should be brought under insurance. They also highlighted the need to further subsidise the premium. Results of the logistic regression confirm that socially marginalised groups and farmers practising agriculture as an ancestral profession are less likely to insure their crops.

Keywords: Crop insurance; Logistic regression; Pradhan Mantri Fasal Bima Yojana (PMFBY); Small holder farmer

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