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National Agricultural Insurance Scheme: Assurance to Farmers’ Risks

The National Agricultural Insurance Scheme (NAIS/Rashtriya Krishi Bima Yojana) is a crop insurance scheme sponsored by the Indian government. It was launched on 22nd June 1999 to ensure risk management in agriculture.

In the past, the government has introduced some innovative schemes on crop insurance which failed to deliver the expected results due to various reasons such as unawareness of farmers, low policy implications, and the unsatisfied performance of implementing agencies. The NAIS was designed to overcome these shortcomings.

Farmers face pests, floods, disease, drought, and a plethora of other natural disasters. The weather can be considered as their greatest advantage and disadvantage as well. So, crop insurance acts as a risk management tool for farmers in the present agricultural world.

In this article, you will learn more about how the implementation of the National Agricultural Insurance Scheme has benefited the farmers.

National Agricultural Insurance Scheme: Salient Features

The National Agricultural Insurance Scheme (NAIS) was introduced to strengthen agriculture by providing coverage for the risks that farmers face, be it environmental or otherwise. This scheme covers certain crops and specific risks that farmers deal with. Let us look into the details of the crops, risks, regions, and more covered by the NAIS.

Crops covered

The crops covered under the National Agricultural Insurance Scheme are:

  • Food crops(Millets, Cereals, and Pulses)
  • Oilseeds
  • Sugar cane, potato, ginger, cotton, onion, chilies, turmeric, cumin, coriander, jute, banana, tapioca, and pineapple, etc. (Annual Horticultural /annual commercial crops)

The crops which are to be covered next year will be listed out before the closing of the preceding year.

States and areas covered

The scheme can be implemented by all States and Union Territories. The states or Union Territories who decide to opt for the scheme must take up all the crops listed for coverage in a given year.

Exit clause: The states/ Union Territories must continue for a minimum of three years after opting for the scheme before they can exit.

Farmers covered

The scheme provides coverage for all farmers, including tenant farmers and sharecroppers, growing the crops covered under the scheme.

The following groups of farmers are covered under the NAIS scheme:

  • On a compulsory basis: All farmers availing Seasonal Agricultural Operations(SAO) loans from private financial institutions and growing notified crops (Loanee farmers).
  • Voluntarily: Other farmers who grow notified crops and opt for the scheme (Non-Loanee farmers).

Risks covered and exclusions

Comprehensive risk insurance is provided for losses that occur due to non-preventable risk, such as:

  • Lightning and fire
  • Storm, cyclone, hailstorm, tempest, typhoon, tornado, hurricane, etc.
  • Inundation, flood, and landslide
  • Drought, dry spells
  • Pests/Diseases

Losses that occur due to malicious damage, war, nuclear risks, and other preventable risks are excluded from coverage.

Sum insured/ limit of coverage

The Sum Insured(SI) of the National Agricultural Insurance Scheme will be extended to the maximum value of the crop insured by the insured farmers. Nevertheless, a farmer is allowed to insure his crop beyond the value of the maximum yield by 150% of the average yield by paying premiums at commercial rates.

The SI would at least be equal to the amount of crop loan taken by the loanee farmers. Moreover, the insurance charges might be added to the Scale of Finance for obtaining the loan. The crop loan disbursement procedures are bound to the RBI/NABARD guidelines.

Premium rates



Premium rates

1. Kharif

Bajara & Oilseeds

3.5% of sum insured or estimated rate whichever is lesser


Other Kharif crops

2.5% of sum insured or estimated rate whichever is lesser

2. Rabi      


1.5% of sum insured or estimated rate whichever is lesser


Other Rabi crops

2% of sum insured or estimated rate whichever is lesser

3. Kharif+Rabi 

Annual Horticultural/annual commercial crops

Estimated rate

The premium rates can be applied at the Region/District/State level by choice of the state government/Union Territories.

Premium subsidy

Marginal and small farmers are entitled to a subsidy of 50% of the premium being charged. This is shared equally between the state government and central government. The subsidy on premium has eventually been phased out, and it now stands at 10% for marginal and small farmers.

Growth of National Agricultural Insurance Scheme

In the starting, only 9 states/Union Territories participated in the National Agricultural Insurance Scheme, covering only 5.8 Lakh farmers for Rs.5 Crore premium against claims of Rs.7.8 Crore. But in 2005, a total of 26 states started implementing this scheme. Thus, starting from 1999 to 2008-2009, the NAIS covered 1345 Lakh farmers for Rs.4427 crore premium against claims of Rs.15230.4 crore.

The percentage of farmers who benefited from the National Agricultural Insurance Scheme in the Rabi season between 1999 and 2009 ranges from 10.34% to 43.58%. It is an indication that a good number of farmers have been benefited under NAIS. In 2002-2003 the percentage of farmers who benefited under NAIS reached 43.58%, which stood as the highest percentage.


Farmers covered 

Farmers benefited 

Percentage of benefited farmers













































The co-operative banks and commercial banks played a crucial role in implementing the NAIS and distributing the indemnity amount to the affected farmers.

The amount of indemnity is calculated as,

(Shortfall in yield / Threshold yield ) * Sum insured for the farmers.

The shortfall in yield = Threshold yield – Actual yield

Since 1972, the government has introduced various crop insurance schemes, but they all failed in ensuring the farmers against the risk they face. The National Agricultural Insurance Scheme, introduced in 1999, aims to better assist the farmers with their crop-related problems.

With this scheme, several farmers found themselves in a more secure place than before, as their crops were insured against natural calamities. While NIAS is by no means a perfect scheme with the lack of coverage for many risks, it certainly gave farmers the assurance other schemes could not.

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