In South Asia, livelihoods are intricately intertwined with agricultural production, and thus highly dependent on weather. For millennia, the yearly monsoon rains have been the lifeblood of agriculture, but climate change is making this annual boon increasingly unpredictable both in timing and intensity, exposing farmers’ livelihoods to increased production risks.
There is considerable interest within the international development community in mitigating these risks through insurance. While insurance has been around for a very long time, many of its more traditional forms have suffered from low demand and asymmetric information between insured and insurer, giving rise to adverse selection and moral hazard.
The agricultural research community has responded to these challenges by identifying and developing research-based innovations for agricultural insurance, such as index-based insurance programs that can minimize the severity of adverse selection and moral hazard; the use of cutting edge remote sensing and information technologies; and the bundling of insurance with novel “climate-smart” agricultural technologies and practices (CSA) that are more resilient to adverse weather conditions than traditional technologies and practices, thus serving an important risk management function in their own right.
In order to better understand how CGIAR research can further contribute to the development, implementation, and evaluation of agricultural insurance programs, IFPRI organized a regional dialogue in Dhaka, Bangladesh on December 17. The event was mounted in partnership with the CGIAR research programs on Policies, Institutions and Markets (PIM) and Climate Change, Agriculture, and Food Security (CCAFS), as well as the Cereal Systems Initiative for South Asia (CSISA).
Policy makers, practitioners, and researchers from Bangladesh, India, and Nepal convened to share their experiences with implementing agricultural insurance across the region, and to learn about the latest agricultural research on this subject. The chief guest, Wais Kabir, executive director of the Krishi Gobeshona Foundation, and keynote speaker, Saleemul Huq, director of the International Center for Climate Change and Development(ICCCAD), helped to lay the foundation for the day’s discussion.
Huq’s keynote address highlighted the role of agricultural insurance as an instrument for meeting the key targets in the Paris climate agreement—not only by offering compensation for crop losses and other economic damage, but also by providing a mechanism to improve adaptation, with subsequent benefits from reduced agricultural sector emissions. The workshop presented evidence and case studies that vividly illustrated how research can help improve insurance products and programs to help meet compensation, adaptation, and emissions targets.
One of the main challenges in implementing the largest agricultural insurance program in South Asia—India’s Pradhan Mantri Fasal Bima Yojana (PMFBY)—is loss assessment: To verify losses, PMFBY aims to measure average yields at the village level through intensive crop-cutting exercises. This is a daunting task, requiring crop samples to be collected from three million fields within the short period before harvest. Herein lies an important role for the agricultural research community and the CGIAR more specifically. Agricultural research has helped advance the use of satellite imagery and other remote sensing techniques for crop loss assessment, and case studies are showing that it is possible to use such methods to detect prevented or delayed sowing, which could ultimately reduce the number of crop samples required for village-level yield assessments.
While promising, remote sensing is hardly a panacea. First, the resolution of open-access or affordable satellite imagery is still too coarse to detect plot-level losses. Second, the notion of satellites orbiting the earth and collecting images from space is an abstract concept to many farmers, and much evidence has shown that insurance products must be presented with simplicity and transparency to generate sufficient interest among potential buyers. Third, data processing and evaluation of remotely sensed images is often a major challenge. Unmanned aerial vehicles (UAVs) offer higher resolution imagery than satellites, but are expensive to operate and may face various regulatory hurdles in different contexts.
There are other solutions that can complement remote sensing techniques and address some of these challenges. The IFPRI-led picture-based crop insurance (PBI) project, for example, demonstrates that it is possible to engage farmers directly in taking a stream of smartphone pictures to document crop losses. Going forward, researchers from CGIAR and other agricultural research institutions will have an important role to play in evaluating and validating different interventions.
The agricultural research community can also play an important role by positioning insurance as one instrument in a larger portfolio of risk management tools. Smallholder farmers can also shield their livelihoods from risk through savings, credit, and informal insurance networks, and by adopting CSA technologies. Examples of the latter include conservation agriculture (a suite of sustainable agricultural and land management practices) and stress-tolerant cultivars such as drought-tolerant maize or flood-tolerant rice.
CGIAR researchers, working with counterparts from national agricultural research systems, have developed many improved seed varieties for various staple crops that can reduce farmers’ exposure to weather-related production risk and increase yield stability. But these stress-tolerant varieties can protect crops only up to a point, leaving production exposed in the event of severe droughts or floods. When sold in tandem with a complementary insurance product, however, the bundle provides a near comprehensive risk management solution, as demonstrated by IFPRI-led research in Odisha, India. Under this approach, weather index insurance can be designed to pay out only under more extreme weather conditions causing catastrophic losses, while CSA technologies shield livelihoods from more moderate weather shocks and accompanying income losses. This can also help lower premiums, improving the demand for insurance.
A final, important issue that arose during the dialogue is that the countries of South Asia vary in many aspects: In topography and the risks farmers face, and in the policy and regulatory environments where insurance markets operate. In India, for instance, the government is very active in promoting agricultural insurance under PMFBY through large subsidies, while in Bangladesh and Nepal, insurance is not a prominent feature of agricultural development strategies or policies. Such differences raise important questions about how to best organize insurance markets and innovation activities country by country. These questions remain unanswered, but may prove to be an important area for IFPRI’s policy research in the coming years.
Food safety is, inevitably, a vital component of food security. However, the compliance with food safety measures (FSM) along the value chain remains elusive in most of the developing countries. The emergence of new modern market chains and increasing integration with the global economy has been putting pressure on the governments for better compliance with FSM along the food value chain. In fact, governments in these countries are now seriously looking for ways and means to improve the status of food safety in these countries.
The status of compliance with FSM in South Asia, in general, is not satisfactory and particularly in Nepal it is precarious and even worse. Nepal often has to incur heavy losses when consignments for exports are rejected due to lack of compliance with FSM. It appeared that the efforts taken by the governments in the past have been largely inadequate. The government’s control and command approach to ensure food safety has not worked satisfactorily due to lack of physical, human and institutional capital for monitoring the compliance with FSM across the entire value chain. Globally, the demand-pull systems have worked well in improving the quality and food safety attributes of the product. Nepal too needs a paradigm shift from relying solely on supply-side food safety and develop demand-pull systems for it.
To understand the status of adoption of FSM and its implications, International Food Policy Research Institute (IFPRI), undertook a comprehensive study on compliance with FSM in Nepal’s milk production. We chose milk as it is one of the most important food item — for rich and poor, young (most importantly children) and old. It is also found to be highly sensitive and carries vector of all possible microbes and extraneous particles in it. We focussed our attention at farm level, as better compliance at production level goes a long way to minimise the chances of contamination at successive levels. The issues such as animal welfare, prevalence of drug residues and antibiotics resistance can be effectively addressed at the farm level.
We investigated the status, estimated the cost, identified the drivers and assessed the impact of compliance with FSM in milk production in Nepal. The study was comprehensive and data were collected from geographically and institutionally diverse regions of Nepal. Our results show that the status of farm level compliance is not very encouraging. On an average only 64% of the recommended measures are adopted by the dairy farmers, though the Government of Nepal released the “code of practices for dairy industry” way back in 2002, in which good dairy practices were developed for safety. The intensity of adoption of FSM exhibits significant variations. The dominance of informal channels in Nepal’s milk market further complicates the compliance and consumers, processors and cooperatives often complain about unhygienic milk production at the farm level.
In comparison to the international standards, Nepal’s mean total bacterial count (TBC) was seen to be nine times higher on farm and 104 times higher in plant, directing an urgent need of improving quality of milk production. It seems farmers are not very enthusiastic to fully comply with FSM since it involves incremental costs and the markets in Nepal often do not reward for food safety. On an average, a dairy farmer in Nepal has to incur an additional expenditure of Rs 2 per litre of milk production. The moot question remains to be answered whether the consumers are willing to compensate the producers for enhanced cost of food safety? Several studies elsewhere in the world illustrate that consumers are willing to pay a premium for safer food products.
Several policy actions are recommended based on comprehensive empirical analysis undertaken by IFPRI. Massive awareness needs to be created among the producers especially related to animal health and hygienic maintenance of the surrounding environment. Farmers should especially be sensitized to discard milk from seriously diseased and infected animals, or even from animals receiving medication.
Periodic monitoring and inspection is critical to ensure adherence to “dairy code practices”. The access to information and frequency of inspection for conformity with safety and quality standards are playing critical role in enhancing the compliance with FSM in Nepal. Farms having information about FSM have shown an 11 percent higher adoption. Similarly, the farms which have been inspected for conformity with safety and quality standards have increased their adoption of FSM by 11 percent.
These findings suggest strengthening of extension delivery and monitoring mechanisms in the country. The government should invest adequately to build physical, institutional and human infrastructure on priority in order to build a robust system to ensure compliance with FSM along the food value chain. Further, the integration with formal channels enhances the adoption of FSM by 8 percent. We need to promote and expand the inclusive formal milk markets to ensure better compliance with FSM. Finally, a pricing strategy based on the quality of milk production should be vigorously pursued to incentivise the famers for higher adoption of FSM. Government of Nepal should develop and prioritize short, medium and long-term action plans for improving compliance with food safety measures to access the global markets and reaping the benefits of expanding trade opportunities in agro-products.
Anjani Kumar is research fellow with the International Food Policy Research Institute. This article was originally published in The Himalayan Times
Nutritional deficiency is a major concern in achieving sustainable food and nutrition security, especially in the South Asian nations. Nutritional deficiency, also known as “hidden hunger” is very common in these countries where people’s diet is largely dominated by starchy staples. The macro nutrients (protein, carbohydrates and fat) and micro nutrients (vitamins and minerals) are essential for our metabolism, growth,
and physical and mental well-being. The major source of these nutrients is our diet and hence the quality of diet largely determines the intake of these nutrients. Dietary diversity is one of the indicators which can assess the dietary quality and also the extent to which our nutritional needs are met. A recent study conducted by IFPRI tries to explore the dietary diversity and the food expenditure patterns for households in Nepal using data from the Nepal Living Standards Survey (NLSS).
The findings of the study suggests that many sociodemographic and economic factors determine the dietary diversity and quality of diet of the people in Nepal. Historically, Nepal has been known as an impoverished country with poor nutrition indicators. However, in recent years it has shown the fastest rate of reduction in child stunting, in the world. Lately, there has been many positive changes such as reduction in the share of food expenditure devoted to staples, which has dropped by 32 percent between 1995 and 2011. Though still the largest share of food expenditure is on cereals yet there has been a significant increase in the expenditure on fruits, vegetables, milk and milk products.
Research shows that dietary diversity was seen more in the urban areas because of the better access to markets in comparison to their rural counterparts. The diets of small and marginal farmers were more cereal-dominated. Ethnicity also influenced the choice of food items and the Brahmins had the most diversified diet compared to the other unprivileged ethnic groups.
The study revealed that factors like poverty, educational status, ethnicity and access to basic facilities, all have a bearing on the kind of diet one consumes. The households receiving greater remittances, having higher income, better education and increased access to facilities would have more diversified diet and vice versa.
This implies that efforts are needed to adopt a multisectoral approach in order to deal with the nutritional security. Measures like social cash transfers could improve the situation for better. Initiatives to improve literacy levels and increase access to basic facilities need to be further scaled up. Special programs to improve nutritional security among the unprivileged ethnic groups must be implemented. Further fragmentation of land needs to be stopped and simple measures such as kitchen gardening need to be encouraged. A comprehensive strategy, including all the plausible factors that impact dietary diversity, needs to be put in place in order to deal with the dreadful hidden hunger.
Australian Centre for International Agricultural Research (ACIAR) and International Food Policy Research Institute (IFPRI) organized a two day, Regional Dialogue on Agricultural Mechanization in South Asia on July 20-21, 2017 in New Delhi, India. The focus of the regional dialogue was to work towards the four key issues related to agricultural mechanization and farmers.
Adoption and Impact: Machines are critical to the sustainable intensification of agriculture. Machines not only help increase land and labor productivity and allow intensification of agriculture, but are also essential to adoption of conservation agriculture (CA). Adoption of CA equipment is uneven even after 25 years of promotion. The adoption rates are especially low in the Eastern Gangetic Plains (EGP). What can eastern India learn from north-western India? What are the barriers to wider adoption and use of CA equipment? What is the impact of these machines on crop yields, crop economics and crop resilience? What kind of public policies, financing arrangements and business innovations can speed up mechanization?
Custom Hiring Centers: Ninety percent of farmers in South Asia access machines through informal rental markets that emerged spontaneously. Uncompetitive machine rental markets have become yet another source of rent extraction from poorer farmers. How should public finances (subsidies, incentives and credit) be deployed to ensure equitable access to machine services for all? In recent years, private companies, governments, farmer organizations and startups are also entering the rapidly growing machine rental market by setting up custom hiring centers (CHCs). Can CHCs compete with the machine owning individual farmers? What is the comparative advantage of the formal sector in machine rental markets, hitherto dominated by enterprising farmers? Can they be more efficient than the informal service providers and more effective in promoting new machines for sustainable farming? What business models of CHCs are likely to thrive in different parts of South Asia? What is the role of public policies in promoting CHCs?
Effect of Mechanization on Women and Agricultural Laborers: There are more agricultural laborers than cultivators in South Asia. How does farm mechanization affect laborers? Women perform a large share of the back-breaking work in South Asian agriculture. IFPRI data on women empowerment in agriculture index (WEAI) shows that women farmers and farm laborers enjoy much less leisure than their male counterparts. On one hand, machines reduce drudgery and free-up more time for women, but on the other hand, they can also take way income earning opportunities for women farm laborers. How does mechanization affect women? Are the effects different for women farmers and farm laborers? Researchers and grassroots organization working closely with women in farming present empirical evidence and share experience in this session.
Role of Public Policies in Promoting Mechanization: While a large share of the machines capital in South Asian agriculture has been financed largely by private investments, public policies on credit, capital subsidies, tariffs and trade for machines have a huge influence on mechanization of agriculture. Why are machine rental rates lower in Bangladesh than West Bengal or Nepal? Are tariffs and trade restrictions for infant industry protection, import substitution or revenue generation anti-poor? Do heavy capital subsidies hurt, not help, widespread adoption of sustainable technologies like solar pumps, drip irrigation and conservation agriculture? Researchers and policy makers from Bangladesh, India and Nepal will exchange notes in this session to improve existing public policies. Why agriculture is less mechanized in West Bengal than Bihar even when wage rates, crop yields and cropping intensity are higher there? What can Nepal learn from Bangladesh?