Crop Insurance and Residue Management: A Case Study in Punjab and HaryanaBerber Kramer (B.Kramer@cgiar.org)

IFPRI Research team: Miguel Robles (M.Robles@cgiar.org) Francisco Ceballos (F.Ceballos@cgiar.org)

New Delhi, December 21 2016

Motivation

• Burning paddy straws creates a large burden every year. How to increase adoption of residue management?

• Behavioral change often takes more than knowledge

• Incentives can be very powerful (e.g. conditional cash transfers)

• Most successful crop insurance schemes have been subsidized

• Can we reduce burning by conditioning subsidies for (picture-based) insurance coverage on not burning residues?

• Farmers are exposed to less risk, without reducing yields: Interesting for insurance companies and farmers themselves.

• More sustainable practices pose a lower burden on the environment: Interesting for the public (and hence government).

• Preview of our findings

• Farmers with conditional PBI are less likely to burn their paddy straw, but lack of knowledge and machinery remain major constraints

IFPRI’s Picture Based Crop Insurance

• States: Punjab & Haryana

• 6 districts

• 50 villages

• 750 farmers

• Wheatcrop(winter/rabi)

Active fires September-November

• Not only irritation in the eyes, also asthma (76.3%) and other respiratory problems

• Burning reduces milk quality (77.8%) and milk production (59.7%)

Nearly 75% of the sample is planning to burn Kharif residue.

• We observed burning among 89.4% of them

We also observe burning among 51.7% of the other farmers

Less than 5% was planning to use zero-till machine or happy seeder

Farmers recognize cost savings but rarely recognize reduction in risk

Farmers believe that CA lowers their yields, even in presence of extreme heat and heavy winds (risk of lodging)

Mindset, lack of knowledge & machinery appear major constraints to CA adoption

Findings at Baseline

• Despite its potential benefits, farmers are slow to adopt CA

1. They prefer to keep farming in their traditional ways

2. They do not have the machinery to start adopting CA

3. They do not recognize the benefits of CA

• How to encourage farmers to adopt CA?

• Analogy to Conditional Cash Transfers (CCTs)

• Conditional Picture-Based Insurance

• Mechanism:

• Training on CA, encouraging farmer to ‘try it out’ (knowledge, link farmers with happy seeder owners)

• Picture-based insurance coverage conditional vs. unconditional on not burning the residue

Conditional Insurance

Very high burning rates, but lower among farmers with picture-based insurance conditional on not burning.

Availability of machinery

Supply Demand

• Increasing demand for residue management technologies: Supply of these technologies needs to be in place.

• But suppliers will want to be guaranteed of sufficient demand: Increase supply and demand at the same time.

Bundle with agro-advisories

Pictures, data, sensorsExperts

/Agronomists

- Weather stations

- Satellite images…

Agro-advise

• Lack of knowledge on the benefits of CA and how to practice it are very prevalent

• Agro-advisories can provide them with more intense guidance on how to practice this.

THANK YOUQuestions: B.Kramer@cgiar.org