The working group on risk management in
(b) Threshold Yield (Guaranteed Yield)
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| (b) Threshold Yield (Guaranteed Yield): Presently Guaranteed Yield, based on which indemnities are calculated, is the moving average yield of the preceding three years for rice and wheat, and five years for other crops, multiplied by the Level of Indemnity. The concept does not provide for adequate protection to farmers, especially in areas / crops with consecutive adverse seasonal conditions, pulling down the average yield. The Joint Group proposed the consideration of the best 5, out of the preceding 7 years. The Working Group however, was of the considered opinion that an area-yield estimate is intended to reflect, what farmers in the area, can normally be expected to produce Hence, the inclusion of a few best years, from recent years of production records into an averaging time series methodology, is not likely be a good indicator of expected production in the future. It therefore, recommends a longer time series of 10 years in fixing Guaranteed Yield. This would reduce yearly coverage fluctuations, reduce the potential for adverse selection (i.e., farmers may adversely select against the insurance program by participating when coverage is high or not insuring when coverage is low, and avoid decline in farmers satisfaction relating to inadequate coverage. In due course, de-trending of the yield data (considering the annual growth rates in productivity) and statistical smoothening, could be introduced. Download 0.68 Mb. Share with your friends:
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