Government Calls Off Merger of Three Ailing Public Sector General Insurers

Cabinet approves a capital infusion of Rs 12,450 crore in three general insurance companies.

Mumbai: On Wednesday, the Union government said that the merger of three ailing public sector general insurance companies has been shelved and the focus will be on making them profitable instead.

The Cabinet also approved a capital infusion of Rs 12,450 crore into the three firms — Oriental Insurance Company, National Insurance Company, and United India Insurance Company. This sum includes the Rs 2,500 crore, which was already infused in February. A release by Press Information Bureau (PIB) read, “…given the current scenario, the process of a merger has been ceased so far and instead the focus shall be on their solvency and profitable growth, after capital infusion”,

Of the Rs 12,450 crore, the government will release Rs 3,475 crore immediately and the remaining Rs 6,475 crore will be infused later. In this year’s budget, the government had set aside Rs 6,950 crore for a re-capitalisation of the three entities as all the three were struggling on the solvency ratio front.

Furthermore, the Cabinet approved raising the authorised capital of National Insurance Company to Rs 7,500 crore and that of United India Insurance to Rs 5,000 crore to facilitate the infusion.

“The capital infusion will enable the three public sector general insurers to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improved risk management”, said the PIB release.

An executive of one of the insurers said that “In these times, the merger process would have been difficult.”

Experts said that the aim was to augment capital by listing the merged entity, which otherwise would have brought the government equity down. In the current backdrop where the firms are not in good shape, the government would have netted lesser than expected if it would have gone ahead with the merger.

In the 2018-19 Budget, the government had proposed the merger and subsequent listing on the bourses. In January, the boards of all the three firms had approved this plan. Last year, the three firms had appointed Ernst & Young (EY) to prepare the roadmap. It had recommended the completion of the merger by December 2020 or within 18 months starting July. However, the merger was put on the back burner because of the pandemic.

As of the third quarter of 2019-20, National Insurance had a solvency ratio of 1.01, against the regulatory requirement of 1.5. Solvency ratio is a key indicator of financial health. Its combined ratio — a measure of profitability for non-life insurers — stood at 173%. If the ratio is below 100, it indicates that the firm is making underwriting profits.

Oriental had a solvency ratio of 1.54 and reported a combined ratio of 132%. United reported a solvency ratio of 0.94, much below the regulatory requirement, with a combined ratio of 127.62%.

By arrangement with Business Standard.

If Crop Insurance Continues to be Viable, Will Centre’s Plan for Smoothing Out Other Wrinkles Work?

The other two major problems with PMFBY have been non-payment or delayed payment of premium subsidy by state governments and the tedious process of conducting crop cutting experiments.

This is the second in a two-part series about the changes made by the government to the Pradhan Mantri Fasal Bima Yojana. Read the first part here.

It was the Motor Vehicles Act of 1988 that first made it mandatory in India for all vehicles to have  valid third-party insurance coverage.

As per a recent amendment to the Act, driving an un-insured vehicle can attract a penalty of Rs 2,000 or imprisonment of up to three months or both. According to a General Insurance Council (GIC) report of 2016, only about 8.26 crore vehicles had a valid third-party insurance policy while the number of registered automobiles was about 19 crore. It is estimated that about 60% of two-wheelers on Indian roads are uninsured.

This, in a nutshell, is the challenge that an optional crop insurance scheme will face and it will have to do a lot better than motor vehicle insurance. It has to attract a sufficiently large number of farmers so that actuarial premiums remain in the range of 10-12%. Higher premiums will increase government subsidy and both the Centre and states will find it too burdensome if average premiums (for all crops taken together) are much higher than this range.

Nevertheless, if the PMFBY is a viable proposition for insurance companies even after becoming optional, various other decisions taken by the Cabinet on February 19, 2020, will substantially improve its performance by paying the claims much faster.

But there is a big ‘if’.

In the past, two major reasons for a delay in settlement of claims were: non-payment or delayed payment of premium subsidy by state governments and a tedious process of conducting crop cutting experiments. The government has decided to address both these issues in an exemplary manner.

It has been decided that if a state government does not pay premium subsidy for kharif and rabi by March 31 and September 30 respectively, it will not be allowed to operate the scheme in the next season. The Madhya Pradesh government has not paid a premium subsidy of Rs 1694 crore for kharif 2018 and Rs 500 crore for rabi 2018-19. Since the farmers insurance claims were lower than gross premium paid to insurance companies for kharif 2018, the MP government has not bothered to pay its share of subsidy for kharif 2018.

Also read: Ground Report: Congress Is Not Fulfilling Promises Made to Farmers in MP

At the same time, the Madhya Pradesh government wants that insurance companies should pay the claims arising out of unseasonal and late rains in kharif 2019. For this, the government has paid Rs 509.60 crore as advance for premium subsidy of kharif 2019.

The Cabinet decision of February 19, 2020 addresses this problem and it has been decided that the Centre will not allow insurance for a subsequent crop season if a state has not paid its share of premium subsidy for previous season. It is expected that this decision will ensure payment of premium to companies in time which would enable them to pay the farmers’ claims expeditiously.

The second set of decisions of Cabinet relate to crop cutting experiments (CCEs). The government has decided to reduce the number of CCEs by using scientific parameters of weather and remote sensing satellite imagery. CCEs will be required only in areas where there are deviations from normal. Smart sampling will also reduce the number of CCEs by focusing on areas where loss in productivity is predicted.

It has also been decided that if states do not provide CCE data to insurance companies by cut-off date, the claims will be settled by using remote sensing and weather technology. In case of disputes between states and insurance companies regarding yield, the centre was already using the RST and market arrival data. The states will now have to gear up to complete CCEs within the time prescribed in guidelines of crop insurance.

If successful, India will be the first country in the world to marry technology with CCEs to assess loss of productivity. The world is watching India with interest.

Farmers plant saplings in a rice field on the outskirts of Srinagar June 10, 2015. Photo: Reuters/Danish Ismail

The third major challenge addressed by the government decision is the appropriateness of certain crops in various regions. So far, the government was paying premium subsidy even if insurance companies found a crop so risky that they quoted premiums above 30%.

For example, the premium was 49.8% for groundnut in Rajkot, Gujarat in kharif 2018. The Centre has now decided that its premium subsidy will be restricted to only those crops which get premium of only 30% in un-irrigated areas and 25% in irrigated areas. If states still want to insure such crops, they will have to bear much higher premium subsidy than they were paying so far.

The Centre has done well to recognise that agriculture in such unirrigated areas requires interventions other than crop insurance.

For example, Bundelkhand in Uttar Pradesh and Madhya Pradesh, and Marathwada in Maharashtra need larger investment in irrigation which can reduce the risk to crops. One hopes that this will nudge the state governments to modify their policies e.g. setting up sugar units in Marathwada or growing paddy in water stressed areas in Tamil Nadu.

They will also do well to persuade farmers of these areas to go in for less water intensive crops in such areas. Investment in development of drought and flood tolerant varieties will also help agriculture in these areas.

Also read: Exclusive: Centre’s Crop Insurance Scheme Fails the Drought Test, 40% Claims Unpaid

In another innovative decision, the Cabinet has introduced insurance coverage for single peril e.g. hailstorm. So far, Punjab did not participate in the flagship crop insurance scheme due to a high irrigation ratio and lower risk to crops. However, hail and pests continue to threaten productivity of crops in Punjab. The state can now design single peril insurance policy.

The above changes will however help only if insurance companies and state governments are able to persuade farmers to take insurance for their crops. The experience of motor vehicle insurance as well as cattle insurance does not inspire much confidence. In 2012, the population of cattle and buffaloes was 29.96 crore but the total number of insured animals in 2016-17 was a paltry 7.44 lakh.

The only silver lining for crop insurance is in Maharashtra where in 2018-19, 1.28 crore non-loanee farmers insure their crops. It will require a lot of effort of state governments, banks and insurance companies to persuade farmers, both loanee and non-loanee, to insure their crops to shield themselves from vagaries of nature.

No one is hit harder by climate change than a farmer. Next few months towards kharif 2020 will show whether these changes will make crop insurance attractive enough to farmers.

Siraj Hussain is Visiting Senior Fellow at ICRIER. He has served as Union Agriculture Secretary.

By Making Crop Insurance Optional for Farmers, Has the Centre Effectively Ended the Scheme? 

Making crop insurance mandatory for loanee farmers provided an attractive deal for insurance companies. Without this, will the business still be viable?

This is the first in a two-part series about the changes made to the Pradhan Mantri Fasal Bima Yojana. Read the second part here.

On February 19, 2020, the Union Cabinet approved major modifications to the two crop insurance schemes, the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Restructured Weather Based Crop Insurance Scheme (RWBCIS).

While the former provides insurance on the basis of guaranteed crop yield, the latter provides coverage on the basis of weather parameters, irrespective of the yield of crop.

The two schemes were launched in 2016 and there were major modifications in guidelines in 2018. The implementation of the overall project has attracted criticism from farmers, some state governments and the media for delay in settlement of claims and inadequate pay outs in the event of losses.

The most important decision taken by Cabinet is to make the scheme optional.

Thus, at the time of availing crop loan from bank or cooperative, a farmer (henceforth referred to as ‘loanee farmer’) will be able to decide if he wants to take crop insurance. So far, insurance premium was deducted from his crop loan even if he didn’t want the insurance. There are several other positive changes in the scheme but this one decision alone will decide the future of crop insurance in India.

Also read: BJP Manifesto: Voluntary Enrolment Under PMFBY Could Kill the Programme

It was a long-standing demand of farmer organisations and activists that crop insurance should not be compulsory for loanee farmers.

Compulsory insurance was important, though, because it provided insurance companies an idea about the number of farmers and the premium they will be able to collect. Now that it has become optional, before submitting their bids for premium rates, insurance companies will have to devise alternative methodologies to estimate the number of farmers who will take insurance for their crops. If they want to continue in this business, they will have to aggressively reach out to farmers and explain to them the benefits of crop insurance.

This will not be easy as farmers in less risky districts (e.g. irrigated areas) may not opt for crop insurance. Similarly, in the event of a normal monsoon, farmers may not go for insurance either.

The real impact of this decision will be known soon, through the response of insurance companies in tenders in various states. In the last four years, after the launch of the scheme in 2016, the number of non-loanee farmers has been going up. In 2018-19, 2.11 crore non-loanee farmers insured their crop while the number of loanee farmers was 3.57 crore. But, out of 2.11 crore non-loanee farmers, 1.29 crore farmers were in Maharashtra alone.

West Bengal, Tamil Nadu, Karnataka and Jharkhand were other states where non-loanee farmers took crop insurance. In most other states, the scheme predominantly provided insurance coverage to loanee farmers only. Here, it must be noted that the state governments notified the crops which could be insured.

Sturdy crops, where risk was not perceived to be very high, like sugarcane, were generally not covered by the state governments under crop insurance.

Also read: Exclusive: Centre’s Crop Insurance Scheme Fails the Drought Test, 40% Claims Unpaid

Tenders of Uttar Pradesh, Haryana and Jammu and Kashmir to select insurance companies for 2020-21 have already been issued by state governments. After the Cabinet decision to make the scheme optional, the J&K tender was canceled on February 20.

Insurance companies retain only about 25% of premium in their books. For the rest, they take ‘reinsurance’, a form of insurance for insurers. The terms and conditions of reinsurance may also undergo a change due to this decision.

In all likelihood, insurance companies will quote a much higher premium due to chances of heavy reduction in the number of farmers and the premium, at least in kharif 2020. Due to this decision of the Union government, there may well be substantial decrease in area coverage under crop insurance in 2020-21.

If the insurance companies assess that there will be a substantial decline in the number of farmers who will insure their crops, they will quote higher (actuarial) rates of premium and the premium subsidy will substantially increase, as premium paid by farmers is fixed at 2% for kharif, 1.5% for rabi and 5% for annual commercial and horticultural crops.

The difference between premium quoted by companies and what the farmer pays is borne by the Centre and state governments in the ratio of 50:50.

A farmer carries firewood during the dry season in Nicaragua, one of the Central American countries affected by a recent drought. Photo: Flickr

If insurance companies do not quote in tenders or give exorbitant rates, the states may decide not to go for crop insurance at all. In this event, farmers will have to be provided relief under the State Disaster Relief Fund (SDRF). For agriculture, horticulture and annual plantation crops, compensation to small and marginal farmers (called input subsidy) is Rs 6,800 per hectare (of sown area) in non-irrigated areas and Rs 13,500 per hectare in irrigated areas.

In the case of farmers owning more than 2 hectares of land, the assistance is limited to only 2 hectares. Under crop insurance, the sum insured is based on the scale of finance for the district and it is many times more than the compensation for which farmers would be eligible under SDRF.

For example, in kharif 2018, the scale of finance in Rajkot district of Gujarat was Rs 39,000 per hectare for castor, Rs 58,000 per hectare for irrigated cotton and Rs 42,000 per hectare for groundnut.

So, in the absence of crop insurance, the farmers will get a much smaller amount of compensation under current norms of SDRF.

Implementation of crop insurance has substantially improved over the last four years and some decisions of Cabinet will further improve the scheme. But all this is subject to insurance companies finding it a viable business.

Siraj Hussian was Union Agriculture Secretary. Presently, he is Visiting Senior Fellow, ICRIER

How Would Mental Health Insurance in India Work?

Care will need to be taken to ensure the underwriting criteria are not perceived to be predatory or biased.

India is a steadily developing low-to-middle income nation, and it is ill-equipped to handle its growing mental health demands. The 2015 National Mental Health Survey sampled over 34,000 individuals across 12 Indian states and found that the lifetime prevalence of any mental disorder was 13.7%.

This suggests that about 170 million individuals have experienced mental illnesses at some point in their lives. This survey also found that common mental health conditions like depression, anxiety disorders and substance-use disorders contribute up to 10% of the total disease burden (among those surveyed).

Against this background, the Mental Healthcare Act 2017 mandated that “every insurer shall make provision for medical insurance for treatment of mental illness on the same basis as is available for treatment of physical illness.”

A circular from the Insurance Regulatory and Development Authority of India in August 2018 directed all insurers to comply with these provisions with immediate effect. What the body didn’t specify was how agencies were to put the directive into practice and by when. Having already discussed concerns associated with insurance coverage for mental illnesses, we seek to raise further issues from a practical point of view.

Product design

Perhaps the most important thing would be to determine treatments covered under mental health insurance(MHI). A literal translation of “same basis” as mentioned in the Act may lead to only instances of hospitalisation or inpatient care being covered.

However, this covers only a small fraction of individuals seeking help (anecdotally, psychiatrists peg  the hospitalisations rate at 1-2% of all cases of mental illness). So not insuring outpatient pharmaceutical therapy and psychotherapy sessions potentially risks excluding 98% of individuals experiencing mental health issues.

Also read: With Inadequate Health Infrastructure, Can Ayushman Bharat Really Work?

Given the nature of mental disorders, covering outpatient treatments through empanelment of appropriate mental health services would add immense value to end customers, and is likely to make the product more marketable as well. However, these products tend to be more expensive than those covering only inpatient treatments because of the increased risk to the insurer and potential for increased anti-selection (or the increased tendency of high-risk individuals to purchase insurance).

Moreover, insurers will also need to agree on a common disease definition and classification system, based either on the DSM 5 or the ICD 10 frameworks. Inconsistent disease definition or underwriting criteria may lead to an increased risk of anti-selection against the differing insurer. Any policy exclusions will need to be identified. A decision will also need to be taken on how the disorders that allow for self-admission/self-hospitalisation of the patient will be covered.

Pricing

Since this is the first time an MHI product is being launched in India, relevant and credible data is going to be hard to get. Typically, such data is needed to estimate morbidity probabilities (the likelihood of falling ill), co-morbidities (the simultaneous presence of two or more medical conditions), to determine the impact of relevant rating factors (such as age and sex that affect a person’s likelihood of falling ill) and for the cost and duration of various treatments.

When launching a new product, it is common practice to take the help of reinsurance companies to provide similar data from other geographies, especially since MHI already exists in some countries. However, care will need to be taken to allow for different policyholder demographics, socio-economic factors, regulations and definitions – the impact of which may be difficult to assess.

Also read: Mental Health Insurance Cover in India Is a Welcome, but Unplanned, Move

The most recent mental health prevalence estimates for a nationally representative sample are available from the 2015 National Mental Health Survey by NIMHANS. It estimated the nationwide morbidity prevalence at 10.6%, and also identified the potential impact of various rating factors – especially location, age and gender.

The morbidity prevalence has varied over the various surveys conducted in the recent past, ranging from 3.2% in Pune (2003) to 15.8% in Puducherry (2003). If these survey statistics are to be used for pricing, they will need to be adjusted to account for the impact of underwriting policyholders, different potential policyholder demographics, as well as the possibility of adverse/anti-selection.

It is possible that given the uncertainties of data, a potential margin is built into initial products. This will obviously be lowered as the company’s experience increases and the market becomes increasingly competitive.

Underwriting

Underwriting involves determining a premium along-with appropriate terms and conditions for the insurance cover. For example, a life insurance policy could be underwritten to a professional stuntman at a much higher rate than what would be normally charged.

This is another area where the reinsurer could offer significant support to insurance companies. The underwriting process could include detailed questionnaires, family medical history and personality tests. Lifestyle underwriting could be particularly important as various habits have been linked to a lower rate of mental illnesses.

Care will need to be taken to ensure the underwriting criteria are not perceived to be predatory or biased. For example, migrants and widows may harbour higher risk of suffering from mental illness, but charging them a higher premium could be perceived as being discriminatory. Perhaps the most important task for insurers would be to come up with underwriting criteria and processes that minimise the chances of anti-selection.

In general, clinicians use a multimodal approach to assess mental illness (including psychometric testing, detailed structured clinical interviews, a mental status examination, and verification of data from a third party, like a family member, etc.). Thus, although cases of malingering are possible, the veracity of information provided in case of a claim can still be determined with authenticity.

These, and many more, are practicalities that only scratch the surface of the implementation of a policy that has the potential of creating a paradigm shift in how mental health is perceived in India.

Hansika Kapoor is a practicing clinical psychologist and research author, department of psychology, at Monk Prayogshala, Mumbai. Surbhit Ahuja is an actuarial analyst.

To Prevent Fraud, Insurance Companies to Pre-Authorise 47% Procedures Under New Scheme

While saying pre-authorisation is an important step, health observers argue that it cannot be the only safeguard.

New Delhi: Historically, one of the design apprehensions of the insurance model of health delivery has been the issue of the ‘moral hazard’. With the protection of insurance and the benefit of not having to pay for healthcare directly, tools like insurance can increase healthcare consumption.

This is not necessarily a bad thing, if there is active interest in health. But it becomes a ‘hazard’ when the element of abuse creeps in. This can come from healthcare providers, such as hospitals, putting patients through unnecessary or even harmful procedures because they want to get to the insurance money.

India is embarking on covering 500 million people with state-sponsored health insurance. At this massive scale, the potential for huge distortions is real. The question is whether patients will still be the biggest beneficiaries, at the end of the process.

According to model tender documents for the new Ayushman Bharat-National Health Protection Mission (AB-NHPM), the government has proposed that insurance companies will vet all applications for medical procedures under the scheme. They will then pre-approve ones that seem fit. If they reject a procedure, it will then be forwarded to state authorities who will have to assess those cases. Approvals or rejections must happen within six hours.

“This is envisioned as a gatekeeping mechanism for abuse and misuse of the insurance scheme,” said Indu Bhushan, CEO of the AB-NHPM.

“Pre-authorisation is important because there is a lot of incentive for healthcare providers to indulge in the moral hazard. But it is only one step and cannot be relied on entirely,” says Sakthivel Selvaraj, director of health economics, financing and policy at the Public Health Foundation of India.

Out of the 1,350 procedures across 23 areas for which the government has fixed packages and rates, 47% of them will have to undergo a pre-authorisation procedure.

In some fields, all procedures will need pre-authorisation. This includes all procedures in the fields of cardiology (38), cardio-thoracic surgery (71), ophthalmology (42), interventional neuroradiology (12), plastic and reconstructive surgery (9), oral and maxillofacial surgery (9), paediatric medical management (100), neo-natal (10), paediatric cancer (12), ‘medical packages’ (70), oncology (112) and ‘mental disorders’ packages (17)

Some procedures will need no advance approvals at all: polytrauma (13), general surgery (253), emergency room requiring less than 12 hours stay (4).

Take cardiology for example. All the 38 listed packages also have to be pre-approved. These are some of the areas which will be looked into during pre-authorisation:

“Specific Pre and Post-op Investigations such as ECHO, ECG, pre/ post-op X-ray, label/ carton of stents used, pre and post-op blood tests (USG, clotting time, prothrombin time, international normalized ratio, Hb, Serum Creatinine), angioplasty stills showing stents & post stent flow, CAG report showing blocks (pre) and balloon and stills showing flow (post) etc. will need to be submitted/ uploaded for pre-authorization/ claims settlement purposes. The costs for such investigations will form part of the approved package cost.”

Can pre-authorisation help prevent some fraud?

A valid fear of health-watchers borne out by evidence from insurance architecture globally is that health insurance at this large scale (100 million families or 500 million people) can cause distortions from the supply and the demand side. When suppliers such as hospitals begin to induce demand, to cash in on insurance money, this can lead to them prescribing unnecessary procedures. Some of these can be actively harmful.

One flaw of the erstwhile national health insurance scheme, the Rashtriya Swasthya Bima Yojna (RSBY), is that it did not have a pre-authorisation component (or rather it mandated this screening only for those procedures which were not on a green-lighted list).

Some states like Maharashtra run their health insurance schemes with pre-authorisation required for all procedures. A 2011 report sponsored by the Planning Commission said that other state schemes such as the Rajiv Aarogyashri, Vajpayee Aarogyashri, Kalignar scheme and Yeshasvini scheme all have pre-authorisation.

The 2011 report noted how pre-authorisation can help to control coasts from soaring:

“The closed ended benefit packages and pre authorization seem to be useful tools introduced by health insurance schemes in terms of containing costs of healthcare provision by the government.”

According to the new tender document, the information collected by pre-authorisation can be a tool which can be indicative of ‘fraud triggers’. So apart from pre-authorisation, the tender also prescribed audits of the procedures which have been approved.

Disciplinary action can also be taken against hospitals based on the audits of these approvals:

“De-empanelment process can be initiated by Insurance Company/SHA after conducting proper disciplinary proceedings against empanelled hospitals on misrepresentation of claims, fraudulent billing, wrongful beneficiary identification, overcharging, unnecessary procedures, false/misdiagnosis, referral misuse and other frauds that impact delivery of care to eligible beneficiaries.”

There are six steps to disciplinary action and three grades of offences, resulting in penalties. The maximum penalty is de-empanellment.

The pre-authorisation will be carried out by clinicians hired by the insurance company. In the case of a trust model, these approvers can also be pulled from the public sector and it has led to efficient and integrated systems in states like Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra.

What other gatekeepers are needed?

While agreeing that pre-authorisation is required at some level, Rob Yates, senior fellow at the Royal Institute of International Affairs, Chatham House, says, “In this process, some people who need treatments will be denied them and some people who don’t need the services requested will be given them.”

Many say that whether or not India is proceeding with insurance for private healthcare, the roots of public healthcare will still need to be strengthened.

“By far the best way to strengthen the gatekeeper function in India would be to strengthen the primary care system and ensure that people are registered with family doctors who can refer their patients for hospital care without there being any financial incentive for them to over or under supply services,” says Yates.

Indranil Mukhopadhyay at Jindal University says that while pre-authorisation is essential, it cannot be the exclusive mechanism on which the scheme puts its weight on. “There ought to be a compulsory referral from the public sector to the private sector. That way the public sector is also strengthened and there is a filtering to prevent unnecessary and unscrupulous procedures. Many things have to work in tandem.”

He also points out that this entire project is being implemented without any conversation on regulating the private sector, where 500 million people may now attempt to access care: “The Clinical Establishments Act needs to be taken up seriously as it can fix issues in the private sector.”

Is Climate Change Killing the Indian Farmer?

We have an agrarian crisis today because we have failed to think through what kind of agriculture we need.

We have an agrarian crisis today because we have failed to think through what kind of agriculture we need.

Credit: Jeevan/pixabay

Credit: Jeevan/pixabay

Nandini Majumdar is the author of Banaras: Walks Through India’s Sacred City, as well as children’s books. She also works with NIRMAN, a non-profit organisation for education and the arts.

The starkest manifestation of India’s ‘agrarian crisis’ is suicides by farmers that have taken place in increasing numbers – 8,000 in 2015, a 42% increase from the year before, and according to data reported so far from only five states, around 7,000 in 2016. Commentators have focused on every issue from farm productivity to loan waivers to governmental promises in analysing the crisis.

Despite so much having been said – and perhaps partly because of it – something as extreme as taking one’s life has, at one level, come to seem like a familiar happening. For most of us who live in cities, the lives and deaths of farmers are, although tragic, events happening elsewhere to others.

At the risk of adding to the high level of exchange, but in the hope of making that exchange more meaningful, we need to still ask: how do different parts of the discussion fit together? Can we make the different analyses of the subject relate to each other more revealingly?

Two recent empirical studies give us ways of doing that.

The first study, conducted by a Doctoral candidate in Agricultural and Resource Economics at the University of California at Berkeley, draws a positive correlation between rising temperatures and farmers’ suicides in India.

Comparing data on suicides, crop yields and cumulative exposure to temperature and rainfall across India, Tamma A. Carleton finds that for temperatures above 20º C, a 1º C increase on a single day causes 70 suicides on average during growing season. Temperatures during the non-growing season have no identifiable impact on suicide rates. Additionally, with rising temperatures, crop yields fall during growing seasons, but react minimally during non-growing seasons. This suggests that rising temperatures increase suicide rate through an agricultural channel of lowered crop yields. The study concludes that warming over the last 30 years has caused 59,300 suicides. This accounts for 6.8% of the total upward trend in India’s average suicide rate over the past three decades.

The second study, conducted at the University of Florida at Gainesville, has found that rising temperatures lower the yields of wheat, rice, maize and soybean globally, with the effect of decrease varying geographically. Using four different analytical methods, Senthold Asseng, Professor of Agricultural and Biological Engineering, and colleagues conclude that farming adaptation strategies that are specific to crop and region will be needed to ensure global food security.

According to the National Crime Record Bureau, more than three lakh farmers have committed suicide over the past 21 years in India. What significance do Carleton’s and Asseng’s findings hold for this crisis and the larger debate about the state of India’s agriculture and farmers?

An incomplete picture

Academics and activists in India have severely criticised Carleton’s study. T. Jayaraman and Kamal Kumar Murari of the Tata Institute of Social Sciences and Madhura Swaminathan of the Indian Statistical Institute have said Carleton’s assumptions, use of data and analysis are flawed. Specifically, they say, she has included urban suicides in a study of agricultural suicides, left out cotton and other cash crops associated with suicides, analysed only kharif season crops, leaving out the Rabi season, and considered anything above 20º C extreme, in contradiction of what is known about temperature dependence of crop production.

For G.V. Ramanjaneyulu, director of the Centre for Sustainable Agriculture, Hyderabad, and Devinder Sharma, an activist and writer working on issues of global warming, Carleton’s study is problematic in other fundamental ways. While acknowledging that there are many non-climatic drivers of suicide in India, Carleton says that these are not the focus of her present study. She uses a regression analysis to control for regional trends and isolate climate from other drivers of suicide. However, according to Ramanjaneyulu and Sharma, this isolation of climate from other drivers presents a distorted picture, even while the statistical methods and final figures may be accurate.

According to Ramanjaneyulu and Sharma, a number of factors have driven the larger crisis of farmers’ suicides in India, with the primary reason behind it being persisting income insecurity, not rising temperatures. These factors include an excess of monoculture, decreasing soil moisture, a shift from low water to high water crops coupled with lower rainfall, fragmented land holdings and a complete failure of insurance schemes.

In July this year, the Comptroller and Auditor General of India as well as the Centre for Science and Environment, an NGO, reported that government insurance schemes – the National Agriculture Insurance Scheme (NAIS), the Modified NAIS, the Weather Based Crop Insurance Scheme and the Pradhan Mantri Fasal Bima Yojana (PMFBY) – had primarily benefitted the insurance companies rather than the farmers, with the companies making a cumulative Rs 10,000 crore in profit.

Ramanjaneyulu explains that the PMFBY has been designed with bankers and not farmers in mind. Loan waiver schemes similarly mostly benefit the landowners and not the actual cultivators. Moreover, only 20% of farmers get access to institutional credit and therefore benefit from loan waivers. The majority resorts to borrowing from private moneylenders at exorbitant rates, which increases indebtedness.

Carleton warns that without tools that alleviate the impacts of climate on income, such as crop insurance and investments in adaptation, warming will be accompanied by a rising number of lives lost to self-harm. While this may be true, for Ramanjaneyulu and Sharma, insurance schemes and loan waivers function as temporary fixes even when they do work well, rather than permanent solutions to low income and indebtedness. Such schemes must be accompanied by longer-term measures to permanently pull farmers out of that cycle.

Variations in weather – warming as well as drought and floods – add to the risk of farming. But farming has fundamentally become a severe risk, to the point of farmers committing suicide, because successive governments have made it completely economically unviable, through not putting into place a proper pricing mechanism that responds to increases in the costs of cultivation and living. While costs of production have increased by 15-20% and the cost of living by 10-15%, the prices of crops have risen by less than 5%. The salaries of government employees have increased over the past 45 years in keeping with the rise in cost of living, but farmers are starving. The average monthly income of a farmer in 17 states in India today is only about Rs 1,700 rupees.

It is the market to which policymakers and economists, who have assured incomes, have left farmers’ incomes, but it is the market that continues to fail farmers. The Narendra Modi government at the Centre has failed to implement its promise, made before the 2014 general elections, of providing 50% profit over cost of production to farmers, who have instead got negative returns on much of their produce. As Ramanjaneyulu notes, when consumer prices go up, the government is quick to intervene, but it does nothing for the producers when prices fall. The logic behind not raising the minimum support prices of crops has been food inflation. But in effect this means that farmers continue to pay the price of inflation and subsidise the nation’s food. Focusing on increasing yield while allowing markets to set prices is part of the flawed policy that focuses on production over farmers’ welfare and mainly benefits input providers.

Successive governments have failed to provide India’s farmers with adequate incomes because of their lack of vision and long-term planning. In the absence of this vision and planning, insurance schemes and loan waivers are little more than populist measures to procure votes.

A destructive vision

What Carleton’s and Asseng’s studies do is alert us to the need to take agricultural adaptation to rising temperatures seriously and to the Modi government’s double standards, in its pledges towards climate change on the one hand and its actions on the other, which are in line with an aggressive, unsustainable model of development.

At the COP 21 summit ahead of the drafting of the Paris Agreement, Modi said India would enlarge its forests to absorb 2.5 billion tonnes of carbon dioxide. On returning to India, however, he directed the environment ministry to loosen its regulations so that coal mines were exempted from public hearings. In his recent joint announcement with French president Emmanuel Macron, Modi said India would go “above and beyond” the Paris Agreement to fight climate change. But since he came to power in 2014, his actions have favoured corporations whose interests go against climate change goals. He has cleared industrial projects in greater numbers and with greater speed than has been done ever before, as well as increased the validity periods of industrial licenses.

His government, backed by economists, market analysts and bankers, continues to bailout the corporates and industries that are driving India towards this unsustainable future, while the issue of waiving farmers’ loans is typically met with debates about morality and credit discipline. The managers and bankers who have assured incomes and who never need to protest for their welfare are a part of the group that argues that corporate bailouts are a capitalist necessity on the one hand and that farmers’ incomes should be left to the market on the other. The double standards are clear here, for when it comes to bailouts, farmers do not seem to be a part of the same capitalist system as the corporates to whom most of the non-performing assets belong.

A postcolonial failure

This industry- and urbanisation-based model of development is taking India towards a future that is wholly unsustainable and in which rural India seems to have no real identity and play no real part.

As Nagraj Adve, a Delhi-based activist and writer working on issues related to global warming, writes, our identities and collective futures are fundamentally ecologically embedded. Rather than positing rural India as separate from urban India and farmers as different from the rest of ‘us’, India’s natural environment, villages and farms must be treated as inseparable from its human-made environments and nourished as the bedrock of the country’s future. Rather than focusing on cities that are ecologically destructive and assuming people from villages will move to them, the government needs to make agriculture the pivot of growth towards a sustainable future for the whole country.

Importantly, it is exactly this flawed idea of development that does not adequately incorporate the need for agricultural adaption to climate change. A report by the Centre for Science and Environment states that in 2015, one or the other manifestation of climate change damaged 18.23 million hectares of crops. According to Adve, we need policy that works on the assumption that increasing and deepening impacts of climate change are the new normal. In order to be truly effective, it will have to be policy that recognises that ecological embedment must be the backbone of ‘development.’

Further, it is vital that farmers’ suicides and protests be understood in this larger context. To not do so would be to underscore the inferiority bestowed on them by dominant narratives and to reduce them to a category and faceless figures, as empirical studies such as Carleton’s threaten to do. One of the drawbacks of statistical analyses is that they can create a kind of fog around the complexities that comprise the complete picture and also around the ultimate that is suicide. Rather, as Sharma writes, farmers’ suicides must be understood as identity assertion – a form of resistance to the model of development being followed by the Indian state. To not recognise the complex humanness of the protests and lives being lost is to fuel the crisis, no matter how smart our temporary fixes are.

In other words, farmers’ income security and being in tune with the climate must be a part of the same outlook towards and plan for India’s agriculture and development. India cannot truly progress unless its farmers are healthy and prosperous, its farms productive, its villages and cities sustainable – all of which are interdependent and can only be achieved through systems working together.

Put another way, while it is useful to ‘isolate’ different parts of the issue and for specialists to address the larger issue through their own areas of focus, it can become ultimately limiting. At the next level, we need specialists and planners in agriculture to work with those in climate change as well as with those in design and architecture and other fields. An empirical study that isolates the effect of climate on suicides or crop yields must be understood alongside a sociological or ethnographic one.

As Ramanjaneyulu puts it, we take the technology from the US, Europe and Australia, but not the policy and structures that surround the technology and ensure its effectiveness. He says, “It is easy to blame farmers and to blame climate change. But why does Telangana have more of a crisis than California? That kind of analysis doesn’t exist.”

Indeed, this shortsightedness is not limited to agriculture. We have an agrarian crisis today because we have failed to think through what kind of agriculture we need, just as we have other crises because we have failed to think through what kinds of schools, cities and offices, systems and spaces, we need. In not just agriculture but also in education, urban infrastructure, healthcare and every other fundamental area, on the technological and political level as well as on the level of the individual and community, we borrow from and imitate those who seem to have succeeded – without intelligently inventing or adapting in ways appropriate to us.

To not understand the importance of an integrated approach towards development appropriate to us is to continue to fail as a postcolonial nation.

LIC Thinks PIL Against Its Investments in Tobacco and ITC Is Frivolous

The public interest litigation seeks the divestment of 32% shares held by public sector insurance companies in the tobacco major ITC.

The public interest litigation seeks the divestment of 32% shares held by public sector insurance companies in the tobacco major ITC.

The government of India, through five state-run insurance companies and Specified Undertaking of Unit Trust of India, owns a 32% stake in ITC. Credit: Reuters

The government of India, through five state-run insurance companies and Specified Undertaking of Unit Trust of India, owns a 32% stake in ITC. Credit: Reuters

New Delhi: Kicking off a public interest litigation (PIL) filed against Life Insurance Corporation’s (LIC) investments in tobacco majors such as Indian Tobacco Company Ltd (ITC), LIC told the Bombay high court on Friday that the petition was “frivolous,” an “abuse of the process of law” and “ought not to be entertained”.

In April 2017, a PIL was filed in the Bombay high court against the shareholding of public sector insurance companies in tobacco companies like ITC. The petitioners have moved to court to ask five of these companies to divest a shareholding amount of around Rs 76,505 crore from three tobacco companies. They are also seeking court directions to the government on formulating a policy regarding investments by public sector companies in tobacco companies.

The five insurance companies (LIC, New India Assurance Co. Ltd, General Insurance Company of India, Oriental Insurance Company Ltd and National Insurance Company Limited), along with Specified Undertaking of Unit Trust of India (SUUTI) account for 32% stake in ITC alone. The three tobacco companies made respondents in this PIL are ITC, Vazir Sultan Tobacco Industries Ltd and Dharampal Satyapal Group.

LIC says it invests in ITC due to its good governance and track record

LIC says they have only made “approved investments” to “the extent permitted by law”. This was after it spoke about what statutory provisions and guidelines LIC is governed by, including the LIC Act, the Insurance Act, the Insurance Regulatory and Development Authority (IRDA) Act and the Securities and Exchange Board of India (SEBI) Act.

In February this year, SUUTI divested 2% of its stake in ITC. However, this 2% was soon picked up by LIC, which brought its overall shareholding in ITC to 16.32% – IRDA only allows insurers to hold upto 15% stake in a company. LIC told MoneyControl that this should be considered a strategic and exceptional move and they would follow investment norms “in all other cases.”

The petitioners drew attention in their submission to LIC’s moto: yogakshemam vahamyaha (your welfare is our responsibility). To this, LIC said twice that they are “committed towards welfare of its policy holders, investors and public at large,” in that order. The corporate social responsibility policy of LIC, however, says that it promotes de-addiction programmes and one of its goals is to promote preventive health care.

About ITC, LIC speaks in positive terms saying they look at companies with “good governance and good track record, ITC being one such company.” LIC also says that ITC Ltd is a well-regarded share and an outperforming stock which is profit-making.

On its investments in the secondary market, LIC says it follows a conservative strategy, in regard to millions of policy holders it protects. Their aim and primary obligation is to see that returns are maximised, with minimum risk. None of this is “contrary to its aims and objectives, corporate social responsibility policy or the LIC Act,” they told the court. 

They also drew attention to the fact that they are under direct control and supervision of the central government’s laws and rules, and hence cannot be against the policies of the government, as the petitioners allege. At present, investments in tobacco are not prohibited in Indian law, either for public sector companies or for private companies. Public sector companies, like LIC, are allowed to invest in the secondary market. Indian laws such as Cigarettes and Other Tobacco Products Act (COTPA) only regulate the production, sale, distribution and consumption of tobacco. However, this PIL is asking for the court to direct the government formulate a policy on investments in tobacco companies.

Petitioners find public sector investment in tobacco unethical 

There is an “inherent, undeniable and irreconcilable contradiction between the nature and object of life insurance companies and the tobacco industry,” say the petitioners. However in India, some of the biggest investments over time have been made by public sector insurance companies, an irony that has driven the petitioners to push for this limited aim in their petition, to get these five companies to divest their 32% holding in ITC, besides their investments in other tobacco companies.

They argue that the government’s investments in tobacco make its own expenditure on anti-tobacco activities and health services for tobacco diseases futile. They also argue that the government’s shareholding in tobacco companies make the companies immune to any policy disincentive.

The petitioners say this behavior by government entities, violates Article 21 of the Indian Constitution, which guarantees the right to life, as well as Article 47, which directs states to take steps to prohibit the use of intoxicants and to improve health. The government has been taking steps in this direction, for example, through the National Tobacco Control Program (NTCP) and the Framework Convention on Tobacco Control (FCTC).

India is state party to the World Health Organization’s FCTC. The petitioners say that public sector investment in tobacco serves to “de-horse the spirit and intent of the FCTC.”

Article 5.3 of the FCTC says: “In setting and implementing their public health policies with respect to tobacco control, Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry in accordance with national law.”

Article 7.2 of the FCTC says: “Parties that do not have a State-owned tobacco industry should not invest in the tobacco industry and related ventures. Parties with a State-owned tobacco industry should ensure that any investment in the tobacco industry does not prevent them from fully implementing the WHO Framework Convention on Tobacco Control.”

 A 2014 study commissioned by the government on tobacco, titled Economic Burden of Tobacco Related Diseases in India, said the estimated economic costs attributable to diseases from tobacco use in India in 2011 was 1.16% of the GDP. This was 12% more than the combined health expenditures of the state and central government in that year.

There are seven petitioners in this case. The main petitioner is Sumitra Hooda Pednekar, widow of Maharashtra’s former home and labour minister, Satish Pednekar. Satish Pednekar died of throat cancer due to his tobacco addiction. The others include Dr Pankaj Chaturvedi who is a cancer surgeon at Tata Memorial Hospital, R. Venkataramanan who is the managing trustee of Tata Trusts, Ashish Deshmukh who is a MLA in Maharashtra and Dr Prakash C. Gupta, who is the director of Healis-Sekhsaria Institute of Public Health.