Role of agricultural insurance in mitigating the impact of El Niño on smallholder farmers

Piyush Jindal in Voices, Business, Economy, India, TOI

The Indian agriculture and allied sectors contribute to around 20% to the Indian GDP while engaging more than 45% of the working population. These factors as well as the socialist economic nature of the country necessitate India to protect the interests of its farmers, particularly small farm holders with less than two hectares of land holding which accounts for around 86% of all farmers. The vulnerability of the sector to various risks such as natural disasters, adverse weather conditions, and fluctuating crop yields necessitates proper implementation and widespread penetration of protective measures such as agricultural insurance.

At a time when India is expected to encounter El Niño, providing agricultural insurance coverage to farmers and addressing their unique challenges is indispensable to ensure that farmers don’t bear the heat of the situation. El Niño can cause inadequate rain in the major cropping season of Kharif and affect farmers badly as, we know, rains are the major source of irrigation contributing around 51% of country’s net sown area. Offering insurance cover is crucial not only to ensure that farmers stay strong and motivated to go to fields but also to facilitate India accomplish the goals of the ongoing “Amrit Kaal”.

Understanding El Niño and its impact

El Niño, a climate phenomenon characterised by abnormal warming of the Pacific Ocean, has significant consequences for global weather patterns. It often disrupts rainfall patterns, leading to droughts in some areas and excessive rainfall in others. Smallholder farmers, who have no means except rain-fed irrigation, are particularly vulnerable to the adverse effects of El Niño. El Niño.

During El Niño events, smallholder farmers may not only face reduced water availability for irrigation but also encounter increased incidence of pests and diseases, and decreased crop productivity. Furthermore, regions where rainfall patterns are unpredictable, the impact of El Niño can be severe, leading to droughts. An exaggerated loss along with meagre income can lead to farmers getting into traps of traditional money lenders with extreme interest rates. We are well aware of the farmer suicides caused by financial distressfinancial distress; 5,318 farmers committed suicide in 2021. This shows the criticality of having agri-insurance plans for every farmer in the country.

What’s agricultural insurance

Agricultural insurance is a specialised form of insurance that focuses on protecting farmers against specific risks associated with their farming activities or natural calamities. Unlike general insurance, which covers a wide range of risks, agricultural insurance is tailored to address the specific needs of farmers. It provides coverage for risks such as crop loss due to natural disasters, adverse weather conditions, pests, diseases, and fluctuating crop yields.

Importance of agricultural insurance

Agricultural insurance plays a crucial role in managing risks and building resilience in the agricultural sector. By providing financial protection against losses caused by unforeseen events, such as droughts and crop failures, agricultural insurance helps smallholder farmers recover from setbacks and continue their farming activities. Here’s how agricultural insurance can specifically mitigate the impact of El Niño on smallholder farmers:

Risk Transfer: Agricultural insurance transfers the risk of crop losses and damage from farmers to insurance companies. In the event of El Niño-induced drought or crop failure, farmers can file insurance claims to receive compensation for their losses. This financial support helps farmers recover and reinvest in their agricultural activities, reducing the economic impact of El Niño.

Financial Stability: El Niño events often lead to income fluctuations and economic instability for smallholder farmers. Agricultural insurance provides a safety net by ensuring a stable income stream for farmers, even in the face of climatic uncertainties. This stability enables farmers to meet their financial obligations, such as repaying loans and investing in future farming seasons.

Investment in Resilience: Agricultural insurance encourages farmers to adopt climate-smart practices and invest in resilience-building measures. With the knowledge that their losses are partially covered by insurance, farmers are more likely to adopt drought-resistant crop varieties, implement water-saving irrigation techniques, and engage in soil conservation practices. These actions enhance their ability to withstand the impact of El Niño and build long-term resilience.

Creditworthiness: Agricultural insurance can enhance the creditworthiness of smallholder farmers. When farmers have insurance coverage, lenders perceive them as less risky borrowers. This increased creditworthiness enables farmers to access loans and other financial services, which can be crucial during post-El Niño recovery periods. Farmers can use these funds to purchase inputs, rehabilitate their farms, and invest in alternative income-generating activities.

Capacity Building and Knowledge Transfer: Agricultural insurance programs often include capacity-building components that provide training and technical support to farmers. This support helps farmers understand climate risks, improve their risk management skills, and adopt sustainable farming practices. By equipping farmers with knowledge and skills, agricultural insurance programs contribute to long-term resilience and adaptation to El Niño and other climate-related challenges.

Agricultural insurance in India

Considering the significance of agri-insurance and in order to safeguard farmers against yield losses, the government has aggressively worked on this aspect through notable insurance schemes such as Pradhan Mantri Fasal Bima Yojana (PMFBY) which provides protection for food crops, oilseeds and annual horticultural/commercial crops notified by state governments. Apart from this, Weather-Based Crop Insurance Scheme (WBCIS), Coconut Palm Insurance Scheme (CPIS) and Unified Package Insurance Scheme (UPIS) are other schemes through which agri-insurance is being promoted in India.

Undoubtedly, the adoption of agricultural insurance is growing in the country by the day, with more small farmers recognizing its benefits. However, the overall adoption is not satisfactory. Efforts to promote awareness and increase penetration among smallholder farmers are essential to maximize the benefits of agricultural insurance in India.

What needs to be done

To maximize the benefits of agricultural insurance and effectively mitigate the impact of El Niño, it is crucial to leverage technological advancements and available resources. The Weather-Based Crop Insurance Scheme (WBCIS), which integrates remote sensing technology and advisories from organisations like the Indian Meteorological Department (IMD), can provide localised information and facilitate farmers make informed decisions. They can hence optimise the timing of their agricultural operations based on weather forecasts, adjust cropping patterns, and take appropriate measures to protect their crops.

Most importantly, governments and insurance providers must prioritise farmer education and awareness programs to ensure smallholders understand the benefits and procedures associated with agricultural insurance.


Agricultural insurance can play a vital role in safeguarding smallholder farmers against the impact of El Niño and other climate-related risks. By providing financial protection, encouraging climate-smart practices, and leveraging technology, agricultural insurance can help mitigate the adverse effects of El Niño events on farmers’ livelihoods. Governments, insurance providers, and farmers must collaborate to enhance awareness, accessibility, and utilisation of agricultural insurance schemes, ensuring the resilience and sustainability of smallholder farming communities.

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Content editor at MetBeat Weather. She graduated in English from Calicut University, and holds a Diploma in Electronics and Communication from Thiruvananthapuram Press Club and master of communication and journalism (MCJ) from Bharatiyar University with four years of experience in print and online media.

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