PepsiCo to roll out weather insurance for farmers in 10 states2 min read . Updated: 25 Jul 2008, 01:28 PM IST
PepsiCo to roll out weather insurance for farmers in 10 states
Khanna (Punjab): Following the success of trial runs in Punjab, Maharasthra and Karnataka, PepsiCo International is planning to roll out a weather insurance scheme for potato growers in 10 Indian states covering an area of 14,000 hectares.
Partnering with ICICI Lombard, PepsiCo introduced weather-based insurance for farmers in three states last year primarily for growers who supply potatoes for the company’s potato chips business. The crop in Punjab and Karnataka was severely hit by weather vagaries last season, and the company hopes this experience would prompt more farmers to join the insurance scheme this season.
In Punjab, only 145 out of 282 potato farmers under contract farming with PepsiCo opted for weather insurance compared to almost 100% in both Maharashtra and Karnataka. A total of 2,000 acres in Karnataka, 1,800 acres in Maharasthra and 900 acres of potato crop in Punjab was insured.
Frost impacted the potato crop in Punjab, with farmers such as Baljit Singh of village Dharamgarh in Fatehgarh Sahib suffering a loss of almost 50%. However he had insured only 10 of his 40 acres. On the other hand, Harnam Singh of village Rajewala in Fatehgarh Sahib had insured his entire farm of 11 acres. Both resolve to insure their crops again next season. This year, Punjab farmers have obtained a compensation of Rs33 lakh while Karnataka farmers were awarded Rs45 lakh.
On the other hand, Maharashtra which was free from inclement weather last year did not see any major grant of compensation, though the situation may be reversed this year due to the near drought conditions in Vidharba.
"As an incentive, we cover more than 50% of the premium costs by way of higher purchase price", says Nischint Bhatia, executive vice-president (agro) of PepsiCo International. This year the company offered 15 paise per kg as incentive to every farmer who insured his crop, over and above the Rs6-7 a kg offered as purchase price. Rather than adopting the policy of sharing premium as followed by many state governments, Pepsi offers a higher purchase price to farmers insuring their crops.
Unlike wheat and rice, potato, is a high-risk-high-return crop, which is heavily dependent on weather. Like tomatoes, it is particularly vulnerable to late blight, a disease that acquired notoreity for causing the Irish potato famine in the 1850s.
Apart from insurance, farmers also receive SMS alerts on weather conditions. Says Anuj Kumbhat, director, Weather Risk Management Services Pvt Ltd, "A weather forecast SMS is delivered to farmers every 72 hours, which also helps farmers to plan for possible weather changes".
Though farmers consider the Rs1600-per-acre of premium as high, this is discounted by Rajiv Wakhle, director (operations), Weather Risk Management Services. "A substantial part of the premium is repaid to the farmer by way of higher returns, and hence the premium is within every farmers’ reach", he asserts.
This year, the insurance scheme will be extended to Madhya Pradesh, West Bengal, Jharkand, Rajasthan, Uttar Pradesh, Gujarat and Bihar as well. Punjab, by virtue of being the potato seed growing capital of India is the target for major expansion by PepsiCo next year.