Chapter Five Insurance Participation and Input Usage

Chapter Five Insurance Participation and Input Usage Empirical Evidence at Micro Level 5.1. Introduction In this chapter we have analyzed the effect of crop insurance on the three crops under study such as Aman Paddy, Boro Paddy and Potato. With this end in view required panel data have been collected by sample survey directly from the field with the help of suitable questionnaire. The panel data have been collected for different farm-sizes as follows. (i) Marginal farms: farms with land size less than one acre; (ii) Small farms: farms with land size in between one and two acres; (iii) Medium farms: farms with land size in between two and four acres; (iv) Semi-Medium farms: farms with land size in between four and ten acre; and (v) Large farms: farms with land size more than ten acres. The number of observations for each farm-size for the panel of five years (2006-2010) is three hundred and fifty five (355). Thus for five farm-size classes the total number of observations for the panel of five year is 1775. We have collected panel data on (i) Area under production (in acres); (ii) Output (in quintal) and (iii) Yield (quintal per acre) and cost of five important factors of production such as (i) Seed cost (in rupees); (ii) Labour cost (in rupees) ; (iii) Irrigation cost (in rupees); 183

(iv) Fertilizers cost (in rupees) and (v) Pesticides cost (in rupees). We have considered per acre cost (in rupees) of all factors of production. It has been already pointed out in chapter three that cost of production for all years (2006-2010) for all inputs has been considered at the input prices of the year 2006. This chapter is organized as follows. In section 5.2 the descriptive statistics on the cultivation of Aman Paddy, Boro Paddy and Potato have been discussed. Section 5.3 has presented the test of mean difference of insurance participation between different crops for farms of different sizes and the test of mean difference of insurance participation between different farm-size for different crops. We have discussed the panel regression result of Aman Paddy in section 5.4. The regression (panel) results of use of inputs for Aman Paddy on insurance participation have been discussed in the section 5.5. In section 5.6 we have presented the panel regression results of Boro Paddy. The regression results of use of inputs for Boro Paddy are discussed in section 5.7. We have discussed the panel regression result of Potato in section 5.8. The regression (panel) results of use of inputs for Potato on insurance participation have been discussed in the section 5.9. In section 5.10 the conclusion of this chapter is presented. 5.2. Descriptive Statistics of the Survey Data The primary survey of our study was carried out in the agricultural sector for three important crops such as Aman Paddy, Boro Paddy and important commercial crop Potato. The Aman Paddy is cultivated in rainy season and both Boro Paddy and Potato are cultivated in winter season. We have selected only loanee farms who have taken crop loan from different financial institutions to cultivate the specific crop and come under the umbrella of crop insurance. Now the different information for different farm-size such as area of land, total production and yield per acre and also five important inputs cost such as labour cost, seed cost, irrigation cost, fertilizers cost, pesticides cost and education level directly collected from the field survey. The farm-size differs on the basis of holding of land. In this section, we shall consider the descriptive statistics of survey data in the district of Hooghly. 184

5.2.1. Descriptive Statistics of Aman Paddy The overall descriptions are important about farms who cultivate Aman Paddy under the crop insurance umbrella in the district of Hooghly. Refer to table-5.2.1. The average land size hold by the Marginal, Small, Medium, Semi-Medium and Large farms are 0.71 acre, 1.61 acre, 3.4 acre, 8.82 acre and 14.29 acre respectively. The average production of Aman Paddy is found to be highest for large farms (258.96 quintal) and lowest for Marginal farms (16.84 quintal). But the variability of production of Aman Paddy (CV=22.18%) is found to be highest for Marginal farms and lowest for Medium size farms (CV=11.44%). In this respect we have pointed out some intuitive logic such as after taking crop loan the marginal farms either use their total loan for production or use some part of money for family expenditure. Besides we may expect that the marginal farms also supply agricultural labour and may try to complete their own cultivation as early as possible. As average production of marginal farms is very low, they are unable to fullfill their own household demand and unable to create marketable surplus. In this respect they may give less effort and neglect their own cultivation and give some special intension on how they can earn extra large income by working as an agricultural labour on the field of other farms. Besides, they may use traditional production technique and ordinary seeds for cultivation. The average yield of the Marginal farms is found to be highest (23.85 quintal per acre) and lowest for large farms (18.11 quintal per acre). Actually the marginal farms cultivate by using own labour and they are economically very weak. They may obtain the required cash of money to meet the expense of cultivation by taking crop loan or credit from the different financial institutions and it requires them to be insured. We may think that they take some precautionary steps to cultivate carefully and to increase the production of their land. Therefore the variability of yield is lowest for marginal farms (CV=5.63%) and highest for large farms (9.58%). Our empirical findings also support the famous hypothesis of inverse relationship between farms size and productivity. Refer to table-5.2.1. It is being seen that the variability of output (CV=10.40%) is lowest but variability of yield (9.58%) is highest for the large farms. Since most of the large farms are economically strong and obtain large amount crop loan from the banks. This is indicative of the 185

fact that more area of cultivable land of large farms comes under crop insurance scheme. They use modern technique and HYV technology in the production process. On an average the large farm is found to produce 258.96 quintal. The variability of production is comparatively lower. The yield rate is low but the variability of yield is also very high. Table-5.2.1. Descriptive Statistics on the Cultivation of Aman Paddy in the District of Hooghly Farm-Size Descriptive Statistic Area (Acre) Output (Quintal) Yield (Q/A) Seed Cost of Inputs per Acre Labour Irrigation Fertiliser Pesticide Education (Years) Large Semi- Medium Small Marginal Mean 14.29 258.96 18.11 358.17 6325.60 768.86 1036.30 561.69 10 Median 14.40 256.66 18.17 357.40 6395.39 812.52 1046.20 557.97 10 Maximum 17.81 344.77 21.94 413.11 7418.40 1296.84 1381.79 1015.06 14 Minimum 10.19 184.90 12.99 300.67 5160.73 212.55 726.97 427.54 5 C.V. 10.40 12.46 9.58 7.08 8.47 39.90 13.79 13.06 31.21 Mean 8.82 180.71 20.49 353.76 6247.79 759.41 1023.55 554.78 10 Median 8.88 181.32 20.26 353.00 6316.73 802.53 1033.33 551.11 10 Maximum 10.10 246.94 25.23 408.03 7327.15 1280.89 1364.79 1002.57 12 Minimum 4.00 117.70 15.56 296.97 5097.25 209.94 718.03 422.28 5 C.V. 9.83 13.02 8.59 8.75 9.57 46.03 15.12 14.75 32.24 Mean 3.54 78.52 22.19 349.21 6167.46 749.64 1010.39 547.65 10 Median 3.53 78.67 22.30 348.47 6235.51 792.21 1020.05 544.02 10 Maximum 4.00 98.02 25.77 402.78 7232.94 1264.42 1347.25 989.68 11 Minimum 2.00 55.19 18.31 293.15 5031.71 207.24 708.80 416.85 5 C.V. 8.80 11.44 6.66 15.35 16.43 52.22 21.13 18.15 32.35 Mean 1.61 38.33 23.79 345.63 6104.20 741.95 1000.03 542.03 10 Median 1.61 38.57 23.94 344.89 6171.55 784.08 1009.58 538.44 10 Maximum 2.00 91.68 26.33 398.65 7158.76 1251.45 1333.43 979.53 15 Minimum 1.00 22.09 18.67 290.15 4980.10 205.11 701.53 412.58 2 C.V. 18.03 19.32 5.67 15.55 17.47 56.22 23.29 19.56 32.10 Mean 0.71 16.84 23.85 340.26 6009.32 730.42 984.48 533.61 10 Median 0.72 17.25 24.05 339.53 6075.62 771.89 993.89 530.07 10 Maximum 0.93 23.53 27.30 392.45 7047.48 1232.00 1312.70 964.31 15 Minimum 0.06 1.39 19.40 285.64 4902.69 201.92 690.62 406.16 1 C.V. 21.35 22.18 5.63 16.39 18.21 57.06 24.07 20.17 30.28 Author s own calculation based on primary data for the period 2006-2010 186

We explain the descriptive statistics of cost of inputs per acre for different farm-size. Refer to table-5.2.1. There is no significant difference between average yield and variability of yield of both small and marginal farms. This is due to the fact that the production technique and economic condition both are not much different. There is much more consistency in both area and production in the case of medium farms. The medium farms cultivate their land and harvest the crop themselves by their own labour or by hired labour or by a combination of the two. They may be encouraged to use HYV seeds and sophisticated production technique due to availability of sufficient crop loan and protection from crop insurance. Overall the economic condition of medium farms is better compared to both marginal and small farms. There is less difference of fluctuations of area under cultivation, production and yield rate of Aman Paddy, between semi-medium and large farms. Since both types of farms follow relatively similar production procedure of Aman Paddy. Both types of farms also get much more amount of loan for the cultivation of Aman Paddy. They cultivate and harvest agricultural land by hiring all inputs; as a result cost of production is also very high relatively to that of other farm-size. Refer to table-5.2.1. We have explained the descriptive statistics of inputs cost of production per acre for Aman Paddy. All the agricultural activities of large farms are done by hired labour. Therefore the cost of production per acre of all factors is higher compared to that of other farmsize. As cultivation of Aman Paddy of large farms is done by wage labour, they (labours) may apply either excess inputs or fewer inputs simple misuse of inputs. They have advantage of getting of large amount of crop loan from different financial institutions and can easily manage the cost of production. The fluctuation of costs of different inputs is very low for large farms. On the other hand, the average inputs cost per acre of land is lowest for marginal farms and there is less consistency in the cost of inputs per acre. For the marginal farms, size of the cultivated land is very small. The agriculture activities are done by themselves and as they are economically weak, they also try to use traditional seeds and non-chemical fertilizers. As a result the cost of labour, seed, fertilizers, pesticides and even irrigation cost per acre is low. 187

The average cost of inputs per acre for marginal, small and medium farms are not much more different. The agricultural activities are done by themselves and also sometimes by wage labour. Similarly variability of inputs cost per acre for marginal, small and medium farms are more or less same. The fluctuation of inputs cost per acre such as seed cost, labour cost, fertilizer cost and pesticides cost both for semi-medium and large farms is not significantly different. Only the fluctuation of irrigation cost for large farms is higher than semi-medium farms, as large farms depend not only on the monsoon but also on artificial irrigation facilities such as deep tubewell, shallow, heavy deep tubewell etc. Average education level for all farm-size is same that is tenth standard; generally overall number of highly educated farms is very small. However, the variability of education level of marginal (CV=30.28%) and large (CV=31.21%) farms is not significantly different. On the other hand there is no difference on the variability (average CV=32%) of education among small, medium and semi-medium farms. 5.2.2. Descriptive Statistics of Boro Paddy Refer to table-5.2.2. We observe that the average area of land holding by different farm-size is supported by our classification of farm-size on the basis of land size. Such as average area of land for marginal farms is less than one acre (0.70 acre) and for large farms is more than ten acre (15.45 acre). Besides, the maximum and minimum of land holding size is also in support of our classification of farm-size on the basis of area of cultivable land hold by five farm-sizes. On the other hand, another important point is visualized that the mean value and medium value of land size of both small (mean=median=1.59) and medium (mean=median=3.48) farms are equal. So we remark that there is normal distribution of farm-size of both small and medium farms. The variability of area of marginal farms is highest (CV=21.03%) and followed by small (CV=17.76%), large (CV=10.25), semi-medium (CV=9.68%) and medium (CV=8.67%) farms. Since for medium farms the area of land varies from two to four acre and major section of the farms lies in the groups of small and medium farms. 188

Table-5.2.2. Descriptive Statistics on the Cultivation of Boro Paddy in the District of Hooghly Farm-Size Descriptive Statistic Area (Acre) Output (Quintal) Yield (Q/A) Seed Cost of Inputs per Acre Labour Irrigation Fertiliser Pesticide Education (Years) Large Semi- Medium Small Marginal Mean 15.45 358.34 22.13 472.77 6080.66 1563.20 1775.46 955.00 10 Median 17.10 359.97 24.66 474.91 6082.96 1565.85 1778.04 957.88 10 Maximum 18.55 509.20 27.45 525.00 6750.96 2675.80 1900.23 1110.00 12 Minimum 12.35 207.48 16.80 420.54 5410.35 450.60 1650.68 800.00 5 C.V. 10.25 12.28 9.43 6.98 8.34 39.30 13.59 12.87 30.74 Mean 7.95 184.69 23.23 466.95 6079.74 1523.37 1687.35 888.85 10 Median 8.75 225.35 25.76 469.10 6082.40 1556.01 1689.93 891.72 10 Maximum 9.95 286.74 28.82 518.54 7217.25 2261.68 1844.32 987.54 12 Minimum 4.00 70.56 17.64 415.37 5343.80 445.06 1630.38 790.16 5 C.V. 9.68 12.83 8.46 8.62 9.42 45.34 14.89 14.53 31.75 Mean 3.48 81.70 23.45 460.95 5928.64 1574.12 1571.07 931.13 10 Median 3.48 90.35 25.99 463.09 5931.29 1526.77 1563.65 934.00 10 Maximum 3.94 114.64 29.10 511.88 6582.19 2208.91 1852.72 1082.25 11 Minimum 1.97 35.08 17.81 410.03 5275.09 439.34 1509.41 780.00 3 C.V. 8.67 11.27 6.56 15.12 16.18 51.44 20.82 17.87 31.86 Mean 1.59 37.62 23.67 475.22 5694.53 1658.49 1413.31 921.58 10 Median 1.59 41.56 26.21 458.36 5697.19 1655.14 1415.90 924.45 10 Maximum 1.97 57.86 29.37 506.63 6514.68 2582.15 1583.72 1071.15 15 Minimum 0.99 17.71 17.98 405.82 5220.99 434.83 1292.91 772.00 2 C.V. 17.76 19.03 5.59 15.31 17.21 55.38 22.94 19.26 31.62 Mean 0.70 16.61 23.90 485.22 5482.62 1708.49 1350.00 839.15 10 Median 0.71 18.74 26.43 468.36 5485.28 1711.14 1309.830 825.49 10 Maximum 0.92 27.16 29.65 526.63 6514.68 2582.15 1455.02 1081.75 15 Minimum 0.06 1.07 18.14 425.82 5220.99 434.83 1112.91 672.56 1 C.V. 21.03 21.85 5.54 16.14 17.93 56.21 23.71 19.87 29.83 Author s own calculation based on primary data for the period 2006-2010 The average output of large farms is highest (358.34 quintal) due to large farm-size. On the other side as the farm-size of small farms is low, average output is also very low (16.61 quintal). We have shown that as the farm-size increases, the average production also increases that is we may expect that there exists direct relation between average production and farm-size. The variability of output of the marginal farms is higher than the other farm-size, it is near about twenty two 189

percent (CV=21.85) and also the variability of production of the small farms is comparatively high, near about nineteen percent (CV=19.03%). The yield rate is highest (23.90 quintal per acre) for the marginal farms and lowest (22.13 quintal per acre) for the large farms. But the fluctuation of yield rate is highest (CV=9.43%) for large farms and lowest for marginal farms (CV=5.54%). Though the yield rate of marginal farms is higher than other farm-size but the yield rate of marginal, small, medium and semi-medium size varies within twenty three quintal per acre (near about twenty three quintal per acre). We observed that the maximum quantity of yield of marginal, small and medium farms is more or less the same and also the minimum quantity of yield of these three farm-sizes is also more or less same. The variability of yield rate of both marginal and small farms is near about five and half percent and for medium farms it changes marginally and it becomes just near about six and half percent (CV=6.56%). In this regard we may point-out some basic reasons that the marginal and small farms depend largely on the agriculture and they cultivate and even harvest the crop carefully and try to complete all agricultural activities by themselves as early as possible because they sometimes work as an agricultural labour on the field of other farms. From table-5.2.2; another important point is found that the maximum education level of both marginal and small farms is higher (college standard) compared to the other farm-size. As average production is very low, they are unable to maintain the total family expenses and they may attempt to learn higher education by which they try to engage to other non-agricultural activities or agro-based industries. The average production of the marginal farms is lowest as the farm-size is small (less than one acre) but both the seed cost and irrigation cost per acre are highest. This means that the marginal farms also use HYV seeds for cultivation and spend more money on HYV seeds because they try to increase the yield rate of the cultivable land. There are different types of irrigation facilities available in the district of Hooghly such as river, cannel, heavy deep tubewell, mini tubewell, shallow, etc. Where the cannel facilities are not available the farms totally depends on the artificial irrigation facilities consequently the cost of irrigation increases. The marginal farms are economically very weak and they are unable to set-up an artificial irrigation facilities (shallow, 190

mini-deep tubewell etc.) by own expenditure as a result they purchase water for irrigation from other farm-size. Therefore both the average irrigation cost as well the variability of irrigation cost (CV= 56.21%) per acre is highest for marginal farms. The seed cost per acre is lowest for medium farms (Rs.460.95/-). Though the average seed cost per acre is highest for marginal farms and lowest for medium farms, but it is generally observed that the quantity of seeds required for per acre of cultivable land more or less the same only the price per kilogram of HYV seeds varies on the basis of the quality. As a result the cost of seeds per acre of land varies for all farm-size from near about four hundred eighty five to four hundred sixty one respectively. All the agricultural activities of large farms are done by the hired labour that is from the preparation of seeds field to harvesting of the crop. Consequently more number of labours is required. Therefore the cost of labour per acre for the large farms is higher than other farm-size. Similarly for the semi-medium farms, we see that all the agricultural activities done by hiring labour so the cost of labour per acre of land of semi-medium farms more or less the same to the large farms. On the same point of view we may state that the variability of labour cost of large farms (CV=8.34%) as well as semi-medium farms (CV=9.42%) is relatively low. On the other side the cost of labour per acre of land for marginal farms is lowest which marginal increase for small and medium farms. The agricultural work of marginal farms are done by themselves and for the small and medium farms may be done by either own or by hiring few labours. Therefore, the variability of cost of labour per acre is higher for marginal farms (CV=17.93%) and marginally decreases for both small (CV=17.21%) and medium size farms (CV=16.18%). Generally the average irrigation cost of both the large and semi-medium farms is lower than other farm-size. Those two farm-sizes are economically stronger than other farm-size. They are able to set-up own artificial irrigation facility to secure the supply of water (heavy deep-tubewell, mini tubewell, shallow etc.) and for this purpose they have capability to collect large amount of credit or crop loan from different financial institutions. The education level of large and semimedium farms is better than other farm-size, so they always try to get the benefit of the crop 191

loan. Therefore on the basis of the above point of view, we may argue that the variability of the cost of irrigation for both large (CV=39.30) and semi-medium (CV=45.34%) farms are also lower. Another important point is that as the farm-size become lower and lower, the average cost of irrigation per acre increases and also the variability of irrigation cost per acre increases. Similar we observed from table-5.2.2, that the average cost of fertilizer is highest for large farms and lowest for marginal farms. The variability of fertilizer cost for large farms is lowest and highest for marginal farms. Also with the increases of the farm-size the average cost of fertilizer increases and also the variability of cost of fertilizer per acre decreases. We also observe that the pesticides cost per acre of land is higher for large farms and lowest for the marginal farms. In this regard we have already discussed some logic on the above paragraphs. It is also observed that the variability of the cost of pesticides per acre is also highest for marginal farms and lowest for large farms. There is no much different in the variability of pesticides cost of per acre among the marginal, small and medium farms in case of winter paddy, Boro Paddy. 5.2.3. Descriptive Statistics of Potato We know that potato is an important commercial crop and winter crop to the farms of Hooghly district. The farms of this district always try to use large portion of their cultivable land for Potato production compared to the other winter crops such as mustard seed, wheat etc. Generally, the farms use HYV seeds and HYV technology for the cultivation of Potato in a large scale. As a result the cost of production of Potato per acre of land is very high compare to the other winter crops. The large amount of cash money is required to complete the cultivation of Potato. In that situation they approach to the different financial institutions and take the crop loan to get the required cash money. That means they come under the crop insurance net. They take various risky steps to obtain high production. As they are insured they expect indemnity from insurer, the State and Central government after short of yield by any natural calamities. According to the information of the Agriculture Insurance company of India Limited (AICIL) 192

the large number of farms of different farm-size were affected by natural calamities such as pest, different types of dieses, fog, inferior quality of HYV seeds, shortage of irrigation facilities etc in the years of 2006-07, 2007-08,2008-09, and 2009-10 in the district of Hooghly. Table-5.2.3. Descriptive Statistics on the Cultivation of Potato in the District of Hooghly Farm-Size Descriptive Statistic Area (Acre) Output (Quintal) Yield (Q/A) Seed Cost of Inputs per Acre Labour Irrigation Fertilizer Pesticide Education (Years) Large Semi- Medium Small Marginal Mean 15.39 1254.84 78.55 2775.60 6226.67 1230.85 6050.70 1200.65 10 Median 16.25 1256.04 80.56 2777.09 6228.12 1233.73 6053.46 1202.64 10 Maximum 19.57 1753.76 89.60 3120.30 7344.22 2130.90 6540.70 1405.60 15 Minimum 11.20 755.92 67.50 2430.90 5109.12 330.80 5560.70 995.70 5 C.V. 10.30 12.34 9.48 7.01 8.39 39.50 13.66 12.93 30.90 Mean 8.05 587.83 79.34 2748.98 6150.08 1037.96 1031.00 705.30 10 Median 7.12 589.03 81.34 2750.46 6151.53 1040.84 1033.75 707.29 10 Maximum 9.98 902.97 90.50 3184.95 7253.88 1268.08 1351.15 992.55 12 Minimum 4.00 272.70 68.18 2294.00 5046.28 207.84 710.85 418.06 5 C.V. 9.73 12.89 8.51 8.66 9.47 45.57 14.97 14.60 31.91 Mean 2.97 247.15 79.49 2344.49 5980.00 1028.47 1017.74 696.23 10 Median 3.05 248.35 81.50 2345.98 59072.45 1031.35 1020.50 698.23 10 Maximum 3.96 359.04 90.68 2698.75 7160.61 1251.77 1333.77 979.79 10 Minimum 1.98 135.25 68.31 2275.22 4981.39 205.16 701.71 412.68 5 C.V. 8.71 11.32 6.59 15.20 16.26 51.70 20.92 17.96 32.02 Mean 1.60 124.39 79.57 2740.95 5608.74 1221.00 1007.30 689.09 10 Median 1.59 125.59 81.58 2742.44 5610.18 1223.88 1010.06 691.08 10 Maximum 1.98 179.71 90.76 3094.66 7087.17 1238.94 1320.09 969.74 15 Minimum 1.01 69.06 68.38 2187.25 4930.30 203.06 694.51 408.45 2 C.V. 17.85 19.12 5.61 15.39 17.30 55.66 23.06 19.36 31.78 Mean 0.76 45.64 79.65 2635.66 5215.34 1227.79 991.64 678.38 7 Median 0.73 46.84 81.66 2637.14 5229.78 1230.67 994.40 680.37 10 Maximum 0.96 87.22 90.85 2788.53 6977.01 1250.68 1299.57 954.66 10 Minimum 0.06 4.07 68.45 2282.78 4853.67 199.90 683.72 402.10 1 C.V. 21.14 21.96 5.57 16.23 18.03 56.49 23.83 19.97 29.98 Author s own calculation based on primary data for the period 2006-2010 Refer to table-5.2.3. The average of area of cultivable land of different farm-size supports our classification of farm-size on the basis of our collected primary data. The fluctuation of area of 193

cultivable land of Potato of marginal farms is higher than other farm-size. Generally, the farm of the marginal size is economically poor. Therefore, after taking crop loan if they are affected by natural calamities in any year they are unable to pay the crop loan to the respective financial institution on that year. Therefore, there is no capability of marginal farms to take the crop loan in the next year. Similarly, the average output (1254.84 quintal)of the large farms is highest as farm-size is larger than other farm-size and lowest for marginal farms (45.64 quintal) as farm-size is very small (less than one acre). The variability of output of marginal farms (CV=21.96%) is highest and lowest for medium farms (CV=11.32%). Though, the average output of large farms is more than twice than the average production of semi-medium farms but the variability of production of both farm-sizes is more than twelve percent. Since both farm-sizes may economically may be stronger than other farm-size farms. One important matter is that as all types of farm-size use HYV seeds and fertilizers, the yield rate for all farm-size is more or less same that is near about eighty quintal per acre but the variability of yield increases with the increase in farm-size. Even the variability of yield increases with the increase in farm-size, but the fluctuation of yield of both marginal and small farms is more or less the same near about six percent. Generally there is no basic difference between the characteristics of the marginal and small farms. The variability of yield is highest for large farms and lowest for Marginal farms. Since the cultivation of large farms is done totally by hiring labour. As they get large amount of crop loan from the different financial institutions sometimes they may use a large portion of their crop loan for non-agricultural activities and show the little interest for the cultivation of Potato. The cost of seeds per acre is more or less the same for all types of farm-size as all farms use HYV seeds for the cultivation of Potato. But the variability of seeds cost decreases with the increase in farm-size and it varies due to the variation of market price of different qualities of HYV seeds. It is highest for the marginal farms as the farm-size is small they get insufficient cash money through the crop loan from different financial institutions. Besides they also fear how they can repay the crop loan if individual crop is damaged by pests, dieses etc. However, 194

they actually receive crop loan at the last moment of cultivation of potato. In that time demand of the HYV seeds increases and market price also fluctuates highly (increases). They try to purchase HYV seeds at low price from the market but it is impossible. Therefore the variation of cost of seeds is highly fluctuating. The same condition may also happen in case of both small and medium farms. Therefore, we may also point out that due to the above reasons the variability of both fertilizer cost and pesticides cost per acre is higher for marginal, small and even medium farms than large and semi-medium farm size. The average labour cost is highest for large farms. Since all activities of agriculture that related to the cultivation of Potato of large farms are done by hiring labour. Such as cutting Potato seeds, breeding the seeds, cultivating, maintained and harvesting as well as storage are all managed by hiring labour. The large farms always employ a certain number of labours and this number marginally changes in every year but the cost of labour fluctuates due to increase in the wage rate of labour every year by the government. The irrigation cost of the Potato cultivation is also more or less the same for the large, marginal and small farms but the variation of the irrigation cost of marginal, small and medium farms is comparatively higher than other two farm-sizes. The marginal, small and medium farms are economically the same, they take water facility either from the different government organized river pump, heavy deep tubewell or mini tubewell or from different private organized heavy deep tubewell or mini tubewell. Therefore the cost of irrigation per acre continuously increases due to fluctuation of market price of diesel, electricity etc. The fertilizer cost and pesticide cost are higher for large farms due to the large-farm-size and also agriculture activities are completed by hire labour. On the other hand fluctuation of both fertilizer and pesticide costs is lower than other farm-size. The large farms are economically strong and their education level is relatively better than other farm-size. So they purchase and store different types of fertilizers and pesticides as early as possible. Generally it is observed that most of the large farms purchases both fertilizers and pesticides before getting crop loan from different financial institutions. Hence they may not face the problem of the shortage of fertilizers 195

and pesticides or also high price fluctuation of the market. Similar facts may also be observed in case of the semi-medium farms. 5.2.4. Descriptive Statistics on Insurance Participation The insurance participation is a key factor in case of crop insurance system. It increase with increase in the insured acre and there is a positive and significant trend in interest of the farms about the crop insurance scheme. The insurance participation for crop of a farm is defined by the ratio between insured acres to total acre. The marginal, small and medium farms are economically poor. They always demand sufficient amount of cash money at the moment of cultivation and try to collect such amount of money either from non-institutional sources or from the institutional sources. But if they collect money from non-institutional sources, there is no chance of receiving indemnity after crop damage. On the other hand if they collect such amount of required cash money from institutional sources, they receive indemnity after crop damage because they are included under the crop insurance net. We may think that all farm-size always give some special interest on the institutional loan that is on the crop loan. In this section we will analyze the descriptive statistics on insurance participation of different farm-size on the basis of our collected primary data directly from field survey for the period 2006-2010. We have collected seven important informations about the insured farms for three important insured crops such as Aman Paddy, Boro Paddy and Potato. The seven important informations are total area of production, total insured area, total production, seed cost per acre, labour cost per acre, irrigation cost per acre, fertilizer cost per acre and pesticides cost per acre of a particular crop for a insured farm. Refer to table-5.2.4. The average insurance participation is highest for marginal farms in case of all three crops such as Aman Paddy, Boro Paddy and Potato and it is followed by small farms. The insurance participation of Aman Paddy in average is seventy three percent (73%), for Boro is ninety one percent (91%) and for Potato it s increased and becomes ninety five percent (95%) in case of marginal farms. On other respect the average insurance participation of small farms is highest for Boro Paddy (89%) and followed by Potato (86%) and Aman Paddy (71%). Since 196

both marginal and small are economically very weak economically. They always try to enter into the cop insurance schemes and try to get the benefit of crop insurance. The large and semimedium farms are economically may be stronger; they always try to get extra benefit after taking crop loan through the crop insurance. Besides the numbers of large and semi-medium size farms are very little compared to marginal, small and medium farms for all crops. Therefore the average insurance participation of both large and semi-medium farms is approximately same for all the study crops. Table-5.2.4. Descriptive Statistics on Insurance Participation in Agriculture in the District of Hooghly Farm-Size Descriptive Statistic Large Semi-Medium Medium Small Marginal Crop Aman Paddy Boro Paddy Mean 0.63 0.64 0.67 0.71 0.73 Median 0.63 0.61 0.65 0.69 0.73 Maximum 0.73 0.67 0.72 0.80 0.90 Minimum 0.51 0.46 0.50 0.55 0.59 Standard Deviation 0.03 0.14 0.19 0.31 0.50 Coefficient of Variation 4.61 21.12 28.58 44.28 69.05 Mean 0.66 0.68 0.78 0.89 0.91 Median 0.67 0.64 0.75 0.89 0.92 Maximum 0.77 0.71 0.84 1.00 1.00 Minimum 0.53 0.49 0.58 0.71 0.68 Standard Deviation 0.04 0.13 0.22 0.36 0.64 Coefficient of Variation 5.65 19.70 28.13 40.50 70.01 Potato Mean 0.68 0.69 0.79 0.86 0.95 Median 0.68 0.66 0.77 0.83 0.96 Maximum 0.79 0.73 0.85 0.96 1.00 Minimum 0.55 0.50 0.59 0.66 0.77 Standard Deviation 0.08 0.13 0.20 0.37 0.68 Coefficient of Variation 12.10 19.36 24.63 42.97 71.34 Author s own calculation based on primary data for the period 2006-2010 197

Such the insurance participation for Potato is sixty eight percent (68%) and sixty nine percent (69%) in case of large and semi-medium farms respectively. We have shown that the insurance participation for both winter crops such as Boro Paddy and Potato is higher than rainy season crop, Aman Paddy in favor of all five types of farm-size. Because both Boro paddy and Potato more risky crops and also production cost is higher. The average insurance participation for all types of farm-size (large= 68%, semi-medium= 69%, medium=79%, small= 71% and marginal= 95%) is greater than both Boro Paddy and Aman paddy. The Potato is an important commercial crop to the farms of the district of Hooghly and the cost of production per acre is very high than other crops. The farms of Potato producing face different types of high risk those already have been discussed in our previous section. From table-5.2.4, it is observed that the variability that is the fluctuation of insurance participation in case of Potato is higher than other crops (such as Aman Paddy and Boro Paddy). We have mentioned some crucial point such as if a marginal or a small or a medium size farm is affected by any type of natural calamities in a year and unable to repay the crop loan on that year, therefore there is no chance to get the crop loan in the next year. This type of fact is highly affected by market price. In case of Potato, the market price of the current year at the time of harvesting or the storage price of the current year highly affect the cultivation plan of all types of farms in the next year. Refer to table-5.2.4. There exist normal type of distribution both for Aman Paddy and Potato to the large farms in case of insurance participation. Also for small farms, there exists normal type of distribution to the insurance participation for Boro Paddy. We observed that both for the marginal and small farms the maximum insurance participation is hundred percent both for Boro Paddy and Potato. That means insurance is highly acceptable to the marginal and small farms. 5.3. Test of Mean Difference of Insurance Participation We know that the insurance participation is a fundamental factor in the crop insurance system. The insurance participation influences the different farm-size of three crops on the basis of 198

different criterions. It influences the production decision and inputs use decision of a farm for a particular crop. We have presented a brief description about the descriptive statistics related to the different farm-size of different crops in the previous section. Therefore, we want to test whether there is any significant difference in the mean of insurance participation between different crops for farms of different sizes and difference in the mean of insurance participation between different farm-size for different crops. 5.3.1. Farm-Size-Specific Mean Difference of Insurance Participation between Different Crops So far we have considered only the descriptive features of different farm-size on the basis of our collected primary data during 2006 to 2010 in the district of Hooghly, West Bengal. In this section let us examine whether there is any significant difference in the mean of insurance participation between different crops for farms of different sizes. We have carried out t test (Fisher s t test ) for testing the significance in the difference in the mean of insurance participation between different crops for farms of different sizes. Refer to the table-5.3.1. Overall picture of mean difference of insurance participation between different crops shows that there exists significant difference in the insurance participation between Boro and Aman Paddy and also that between Potato and Aman Paddy for farms of different sizes. We note that the inter-crop differences in the insurance participation for farms of different size are seen to be statistically significant at one percent (1%) level. We also observe that the mean difference of insurance participation between Boro Paddy and Potato among the different farm-size is not statistically significant. This may be due to the fact that insurance participation for Boro Paddy is closely similar to that for Potato for farms of different sizes. Further since both Boro Paddy and Potato are very risky crops and involve high cost for their cultivation, it is expected that farms of different sizes will be inclined to be protected under the umbrella of the crop insurance scheme. In this situation the insurance participation is likely to be higher for both crops for all farms irrespective of the sizes. 199

Table-5.3.1.Test of Mean Difference # of Insurance Participation between Different Crops Farm-Size Large Semi-Medium Medium Small Marginal Between Crops Mean difference of Insurance Participation Standard Error t-statistic Boro and Aman 0.035 0.003 13.986* Potato and Boro 0.015 0.012 1.297 Potato and Aman 0.050 0.008 5.886* Boro and Aman 0.036 0.008 4.291* Potato and Boro 0.015 0.024 0.632 Potato and Aman 0.051 0.017 2.997* Boro and Aman 0.105 0.005 21.742* Potato and Boro 0.016 0.056 0.287 Potato and Aman 0.121 0.028 4.291* Boro and Aman 0.184 0.049 3.778* Potato and Boro 0.005 0.004 1.343 Potato and Aman 0.189 0.018 10.324* Boro and Aman 0.186 0.015 12.431* Potato and Boro 0.038 0.112 0.337 Potato and Aman 0.224 0.024 9.512* Source: Author s own computation based on primary data collected during the period 2006-2010 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance #Mean differences have been tested on the basis of the test statistic x x t = SE. x 1 2 n1 n2 ( x ) 1 2 t. + 2 5.3.2. Crop-Specific Mean Difference of Insurance Participation between Different Farms We are going to test the mean difference of insurance participation between different farm-size for all crops. Refer to table-5.3.2. There is no significant difference in insurance participation between large and semi-medium farm for all the three crops. Because of the basic natures such as the economic condition as well as production pattern of large and semi-medium farm are more or less same. In the previous section of analysis about descriptive statistics on the cultivation of three crops, we don t observe that there is significant difference between yield rate and pattern of cost structure. Further, the mean difference of insurance participation by Large and Medium farms, Large and Small farms, and Large and Marginal farms for Aman Paddy, Boro Paddy and Potato are seen to be statistically significant at five percent level. The mean difference of insurance participation between semi-medium and medium farms is seen to be statistically significant at one percent level for Boro Paddy and Potato. 200

Table-5.3.2.Test of Mean Difference # of Insurance Participation between Different Farms Between Farms Mean Difference for the Crop Aman Paddy Boro Paddy Potato Large and Semi-Medium 0.015 0.016 0.016 Standard Error 0.016 0.018 0.013 t-statistic 0.937 0.886 1.206 Large and Medium 0.048 0.118 0.120 Standard Error 0.024 0.040 0.039 t-statistic 2.056** 2.996* 3.074* Large and Small 0.082 0.215 0.204 Standard Error 0.018 0.042 0.056 t-statistic 4.589* 5.067* 3.649* Large and Marginal 0.103 0.136 0.158 Standard Error 0.016 0.017 0.019 t-statistic 6.574* 7.881* 8.142* Semi-Medium and Medium 0.033 0.103 0.103 Standard Error 0.027 0.039 0.029 t-statistic 1.234 2.645* 3.628* Semi-Medium and Small 0.067 0.215 0.204 Standard Error 0.011 0.026 0.043 t-statistic 5.843* 8.329* 4.711* Semi-Medium and Marginal 0.088 0.239 0.262 Standard Error 0.019 0.074 0.085 t-statistic 4.556* 3.219* 3.082 Medium and Small 0.033 0.112 0.101 Standard Error 0.030 0.054 0.051 t-statistic 1.097 2.065 1.987** Medium and Marginal 0.055 0.136 0.158 Standard Error 0.027 0.062 0.080 t-statistic 2.074** 2.217** 1.982** Small and Marginal 0.022 0.024 0.057 Standard Error 0.019 0.023 0.027 t-statistic 1.128 1.042 2.138** Source: Author s own computation based on primary data collected during the period 2006-2010 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance x1 x2 #Mean differences have been tested on the basis of the test statistict = tn + n 2 SE. x x. ( ) 1 2 1 2 201

Refer to table-5.3.2. The mean difference of insurance participation by Medium and Marginal farms for Aman Paddy, Boro Paddy and Potato are seen to be statistically significant at five percent level. Further, in the case of Potato the significant difference is noticed between medium and small farms at five percent (5%) level of significance. On the other hand, there exists significant difference only for Potato at five (5%) percent level of significant between small and marginal farms. 5.4. Panel Regression Result of Aman Paddy The insurance participation is a key factor of the crop insurance. It affects the decision about cultivation related issues of a farmer. At the same time education level of a farmer is also an important factor and it stimulates the farms whether they would come under crop insurance system or not. The Aman Paddy is a rainy season crop and consequently its production cost and risk are at the least level. In that situation we want to analyze how the insurance participation and education level of a farmer affect the production and the production related different matters of a crop. 5.4.1. Impact of Insurance Participation on Area under Cultivation of Aman Paddy Refer to table-5.4.1. Considering the case of restricted model where all coefficients are constant across times and individuals, we observe that the relation between insurance participation and total area under cultivation, and the relation between total area under cultivation and time are negative but significant. Since Aman paddy is cultivated in the rainy season by all farms total area under cultivation remains unchanged. The area of cultivable land for Aman Paddy remains constant over time in all farms of different sizes. The growth rate of the Aman land is lowest and equal to 3.34%. Let us consider the unrestricted model. If we put zero for different farm-size which means that all dummies such as DMD, DSMD, DSML and DMRG are equal to zero, the restricted model is equal to unrestricted model and the intercept term (6.830) will be dummy coefficient of large farms. 202