From Adoption to Impact: A Comprehensive Analysis of Crop Insurance in India’s Sugarcane Sector

Abstract

Agriculture is a risky enterprise due to its vulnerability to unpredictable factors. To overcome the risks, farmers are adopting risk mitigation strategies like crop diversification, integrated farming system, short duration crops, etc. In the modern era, crop insurance plays as a major tool of risk management. The inherent risks and uncertainty in farming highlight the importance of understanding of farmers' risk perceptions and management strategies, as well as the potential role of crop insurance in promoting stability and resilience. This study uses the data from the farmer’s survey and examined the factors responsible for the adoption of crop insurance among sugarcane farmers and its impact on farm income. The findings revealed the complex interplay of socio-economic factors affecting insurance decisions. Education, farm size, risk aversion, income and previous crop loss experience emerge as significant determinants of insurance adoption. The study indicates a positive impact of crop insurance on farm income, with insured farmers (Rs. 39,673/ha) than their non-insured farmers. However, the research also uncovers a concerning trend of declining insurance participation in Tamil Nadu, with insured sugarcane area dropping from 27.18 per cent in 2018–2019 to 1.25 per cent in 2022–2023. This sharp decline underscores the urgent need for policy interventions to address the barriers in adoption. Improvement of extension services and inclusion of the tenant farmers in the programme would increase the adoption level of crop insurance among the sugarcane farmers.