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

Table-5.4.1. Regression Results of Area under Cultivation of Aman Paddy on Insurance Participation Dependent Variable: LOG(AMANLAND); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 0.879 0.178 4.946* Constant 6.830 0.070 98.107* LOG(INSPART) -7.473 0.506-14.783* DMD -0.525 0.092-5.705* LOG(EDUCATION) -0.029 0.073-0.397 DSMD -2.657 0.942-2.820* TIME -0.034 0.018-1.912*** DSML -3.400 0.935-3.637* R-squared: 0.77 Adjusted R-squared: 0.77 F-statistic: 2982.91* Durbin-Watson statistic: 0.981 DMRG -3.702 0.955-3.877* LOG(INSPART) 0.385 0.269 1.430 LOG(EDUCATION) 0.012 0.026 0.448 TIME 0.001 0.006 0.176 DMD*LOG(INSPART) 0.453 0.329 1.376 DSMD*LOG(INSPART) 0.568 0.326 1.741*** DSML*LOG(INSPART) 0.674 0.314 2.147** DMRG*LOG(INSPART) 0.904 0.331 2.732* DMD*LOG(EDUCATION) -0.028 0.064-0.440 DSMD*LOG(EDUCATION) 0.011 0.037 0.304 DSML*LOG(EDUCATION) 0.025 0.065 0.379 DMRG*LOG(EDUCATION) -0.048 0.077-0.622 DMD*TIME 0.003 0.009 0.327 DSMD*TIME 0.004 0.008 0.478 DSML*TIME 0.006 0.003 1.922*** DMRG*TIME 0.008 0.002 3.743* Diagnostic Statistic R-squared: 0.98 Adjusted R-squared: 0.98 F-statistic: 4100. 09* Durbin-Watson statistic: 2.151 F- statistic (19,1755) for testing the Restrictions: 21.449* 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 The growth rate of area under cultivation of Aman Paddy will be decreased (0.10005%). Both the insurance effect (0.385) and education effect (0.012) are positive and insignificant. That means that due to crop insurance and certain education of large farms, the insured area under 203

cultivation may be increased but this effect is not significant as total area under cultivation of Aman Paddy for all types of farms always remains unchanged. We may expect that the moral hazards problem arises for large farms. Table-5.4.1A. Inter-Farm-Size Effects on Area under Cultivation of Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate (%) Large Farm 6.830 0.385 0.012 0.001 0.104 Medium Farm 6.305 0.838-0.017 0.004 0.402 Semi-Medium Farm 4.173 0.953 0.023 0.005 0.495 Small Farm 3.429 1.059 0.036 0.007 0.670 Marginal Farm 3.128 1.289-0.036 0.009 0.934 Source: Author s own computation based on former table-5.4.1. We consider the case of medium farms. In that situation for the medium farms dummy is equal to one that is DMD = 1 if the farm-size belongs to medium farm, zero otherwise. In that situation the intercept term becomes 6.305 and positive and also significant. The slope coefficient with respect to insurance participation will become 0.838; this is the insurance effect and it is insignificant. The trend line of both medium farms and large farms is upward rising but the trend line of medium farms is steeper than large farms which imply that the trend line of medium farms cuts the large farms from below. The effect of insurance participation is stronger for medium farms. The slope coefficient with respect to education is negative (-0.016) that means the effect of education on the area under cultivable land of Aman Paddy is negative and insignificant. The time effect on the area under cultivation of Aman Paddy is positive (0.004) and also insignificant. Let us consider the case of semi-medium farms. Both the intercept term (4.173) and the slope coefficient (0.953) with respect to insurance participation are positive and significant. The trend line of area under cultivation of Aman Paddy on insurance participation is steeper for semimedium farms than the trend line of area under cultivation of Aman Paddy on insurance participation for large farms. The effect of education is also positive and significant that is the farms in the group of semi-medium farms always try to get the benefit of crop insurance. On the other hand time effect on the area under cultivation of Aman Paddy on insurance participation is positive but insignificant. That means the insured area under semi-medium farms may remain 204

unchanged over time. Thus, we observe that the overall trend of time effect on both large farms and semi-medium farms are the same. The growth rate of area under cultivation of Aman Paddy is 0.495 percent and higher than that of large farms and medium farms but it is insignificant. The intercept term (3.429) of small farms is also lower than that of the large farms, medium farms, and semi-medium farm and the result is significant. On the other hand, the slope coefficient with respect to insurance participation (1.059) is positive and significant for small farms. Therefore, it is stated that over time insurance participation of both large farms and small farms increases but after the intersection of the trend line of insurance participation the number of insured farms and insured area have increased at a higher rate than that of the large farms, since most of the farms belong to small farms group. The effect of education (0.37) is positive but insignificant. Due to some education, the small farms are interested to take crop loan but the technique of the utilization of the crop loan is not proper. We observe that the time effect (0.007) is positive and significant. That is, over time number of insured farms or insured area under small farms increase as most of the small farms are economically very weak. Therefore, the growth rate of area under cultivation of Aman Paddy on insurance participation is (0.702) positive and significant and also higher than that of other farm-sizes. At the time of our collection of primary data we observe that in the district of Hooghly under study, a large section of the farms belongs to marginal farms and small farms. The intercept term of marginal farms is (3.128) positive and lower than other farm-size. The slope coefficient of marginal farms with respect to insurance participation (1.289) is positive and significant and also large compared to the other farm-size. From the stand point of insurance participation the effect of crop insurance on the marginal farms is stronger than that on other farms. The effect of education (-0.036) is negative and not significant. The time effect (0.009) is positive and significant for marginal farms. The growth rate of area of marginal farms (0.904) is positive and significant and also higher than that of other farm-sizes. The inter-farm-size effect on yield rate of Aman Paddy is presented in the table-5.4.1a. 205

Thus over all insurance effect on area under cultivation of Aman paddy of different farm-size is easily cleared by the vertical bar diagram in figure-5.4.1. This implies that the effect of insurance participation on area under cultivation of Aman Paddy varies inversely with farm-size. 5.4.2. Impact of Insurance Participation on Total Production of Aman Paddy Refer to table-5.4.2. In the restricted model, we observe that (all coefficients constant across times and individuals) there exists an indirect and significant relation with respect to the total production of Aman Paddy and insurance participation and also with time. The education level affects insurance participation indirectly and insignificantly in case of total production of Aman Paddy. The growth rate of production is 5.022 percent but insignificant. In this respect we point out that the farms basically may use ordinary seed and traditional production technique. Consider the case of the un-restricted model. If we put all dummies equal to zero (that is DMD=0, DSMD=0, DSML=0, and DMRG=0), the model will become un-restricted. The regression equation will also become the regression equation of large farms. The intercept term is positive and significant and also higher than that of other farm-sizes. The slope coefficient (0.459) with respect to insurance participation is positive and lower than that of other farm-sizes. The effect of education of large farms on total production of Aman Paddy is positive but not significant. However, the time effect (-0.045) of insurance participation on total production of Aman Paddy is negative and also insignificant. Therefore, the growth rate of total output is negative (-4.017%). The intercept term (5.396) of the medium farm of total production of Aman Paddy on insurance participation is positive and lower than the intercept term (5.838) of large farms. The slope coefficient (0.453) is positive and not significant. The effect of insurance participation on the total production is clear from the vertical bar diagram of insurance effect on total output of Aman Paddy in figure-5.4.1. On the other hand, both education effect (-0.006) and time effect (-0.043) of insurance participation on total production of Aman Paddy are negative and insignificant. The growth rate (-4.208) of total production is also negative and insignificant. 206

Table-5.4.2. Regression Results of Total Production of Aman Paddy on Insurance Participation Dependent Variable: LOG(TPRODUCT); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Error t-statistic Explanatory Variables Coefficient Coefficient Error t-statistic Constant 4.042 0.164 24.704* Constant 5.838 0.073 79.891* LOG(INSPART) -6.616 0.465-14.222* DMD -0.442 0.097-4.583* LOG(EDUCATION) -0.024 0.068-0.356 DSMD -1.565 0.099-15.828* TIME -0.049 0.016-2.995* DSML -2.274 0.098-23.176* DMRG -2.918 0.100-29.114* LOG(INSPART) 0.459 0.298 1.539 LOG(EDUCATION) 0.016 0.027 0.597 TIME -0.041 0.007-6.302* DMD*LOG(INSPART) -0.006 0.377-0.016 DSMD*LOG(INSPART) 0.586 0.134 4.365* DSML*LOG(INSPART) 0.707 0.071 9.891* DMRG*LOG(INSPART) 0.971 0.093 10.384* DMD*LOG(EDUCATION) -0.022 0.083-0.271 DSMD*LOG(EDUCATION) 0.000 0.049-0.009 DSML*LOG(EDUCATION) 0.038 0.033 1.135 DMRG*LOG(EDUCATION) -0.047 0.036-1.323 DMD*TIME -0.002 0.044-0.046 DSMD*TIME 0.057 0.009 6.041* DSML*TIME 0.059 0.019 3.071* DMRG*TIME 0.064 0.014 4.684* Diagnostic Statistic R-squared: 0.87 Adjusted R-squared: 0.87 F-statistic: 5882.716* Durbin-Watson statistic: 1.080 R-squared: 0.97 Adjusted R-squared: 0.97 F-statistic: 3107.516* Durbin-Watson statistic: 2.013 F-statistic (19,1755) for testing the Restrictions: 11.165 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 207

The intercept term (4.273) of semi-medium farms is lower than large farms and medium farms but significant. On the other respect, the slope coefficient of semi-medium farms with respect to insurance participation is (1.045) positive and significant and also higher than those of large farms and medium farms. The education effect (0.016) of insurance participation on total production is positive and insignificant. The time effect of insurance participation on total production is positive and significant. The growth rate of total production (1.525%) is also positive and significant. Table-5.4.2A. Inter-Farm-Size Effects on Total Output of Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate (%) Large Farm 5.838 0.459 0.016-0.045-4.371 Medium Farm 5.396 0.453-0.006-0.043-4.256 Semi-Medium Farm 4.273 1.045 0.016 0.015 1.525 Small Farm 3.564 1.166 0.054 0.018 1.808 Marginal Farm 2.920 1.429-0.031 0.023 2.300 Source: Author s own computation based on former table-5.4.2. The intercept term of small farms is (3.564) positive and significant and lower than the intercept of large farms, medium farms and semi-medium farms. The slope coefficient with respect to insurance participation is (1.166) positive and significant at one percent (1%) level of significance. The insurance effect on total output is grater for small farms than those of large farms, medium farms and semi-medium farms. The insurance effect on total output of Aman Paddy for small farms is clearly understood from the bar diagram of the figure-5.4.1. There exists insignificant and positive education effect (0.054) on insurance participation of total output of Aman Paddy for small farms but the time effect (0.018) on insurance participation is positive and significant. Therefore, we may say that the crop insurance appears to have positive effect on small farms. The growth rate of the total production (1.816%) for small farms is significant and higher than those of large farms, medium farms and semi-medium farms. The inter-farm-size-effects on output is presented in the table-5.4.2a. 208

Insurance Effect 1.400 1.200 1.000 0.800 0.600 0.400 0.200 0.000 Insurance Effect on Area under Cultivation of Aman Paddy 0.385 0.838 0.953 1.059 1.289 Insurance Effect Insurance Effect on Total Output of Aman Paddy 1.600 1.400 1.200 1.000 0.800 0.600 0.400 0.200 0.000 0.459 0.453 1.045 1.166 1.429 Large Medium Semi-Medium Small Marginal Large Medium Semi-Medium Small Marginal Farm-Size Farm-Size Insurance Effect on Yield Rate of Aman Paddy 0.200 0.100 0.074 0.092 0.107 0.141 Insurance Effect 0.000-0.100-0.200-0.300 Large Medium Semi-Medium Small Marginal -0.400-0.500-0.385 Farm-Size Figure -5.4.1 209

We give stress on analysis of the effect of marginal farms on the total production of Aman Paddy. The physical value of the intercept term is (2.920) positive and significant at one percent (1%) level of significance. We notice that the numerical value of the intercept term decreases with farm-size. The physical value of the slope coefficient is also higher than the value of the slope coefficient of the other farm-size. Thus insurance participation of marginal farms is being found to increase at a greater rate and it positively affects the production. In our Sate (West Bengal), the number of marginal farms is higher than that of other farms and they are also economically poor and more interested about crop loan as well as crop insurance. The effect of crop insurance is easily understood from the bar diagram of the figure-5.4.1. The educational effect on total output of Aman Paddy for marginal farms is negative and insignificant. Most of marginal farms may be either illiterate or their education level is very poor. Besides they are economically very weak. Therefore, they show interest on crop loan or crop insurance only to bear the cost of production. Over all time effect (0.023) on total output is positive and significant. The growth rate of output of Aman Paddy is (2.33%) highest, positive and significant. 5.4.3. Impact of Insurance Participation on Yield Rate of Aman Paddy Refer to table-5.4.3. First we consider restricted model (all coefficients constant across times and individuals). In this case intercept value is positive and significant. The insurance effect (0.894) is positive and significant at one percent level. The time is negatively correlated with the yield rate which is significant. The growth rate (1.488%) is negative and significant. The constant value will give the value of intercept term of large farms. The insurance effect (0.074) is positively but insignificantly related with yield rate of Aman Paddy. The educational effect is positive and not significant. So we think that due to certain level of education, the large farms come under crop insurance that is they take more crop loan from insurer but they also use crop loan for non-agricultural activities. The time coefficient is negatively and insignificantly related with yield rate. The growth rate (-5.430) of yield rate is negative. The insurance effect on the yield rate of Aman Paddy is easily under stood from the figure-5.4.1. 210

Table-5.4.3. Regression Results of Yield Rate of Aman Paddy on Insurance Participation Dependent Variable: LOG(Yield); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 3.163 0.020 159.611* Constant 3.028 0.025 119.299* LOG(INSPART) 0.894 0.056 15.861* DMD 0.062 0.344 0.181 LOG(EDUCATION) 0.006 0.008 0.692 DSMD 0.073 0.029 2.468* TIME -0.015 0.002-7.573* DSML 0.107 0.034 3.148* DMRG 0.132 0.028 4.702* LOG(INSPART) 0.074 0.098 0.752 LOG(EDUCATION) 0.008 0.010 0.857 TIME -0.043 0.002-18.624* DMD*LOG(INSPART) -0.459 0.131-3.505* DSMD*LOG(INSPART) 0.018 0.010 1.772*** DSML*LOG(INSPART) 0.033 0.013 2.566* DMRG*LOG(INSPART) 0.067 0.021 3.248* DMD*LOG(EDUCATION) 0.003 0.033 0.080 DSMD*LOG(EDUCATION) -0.015 0.069-0.222 DSML*LOG(EDUCATION) 0.009 0.013 0.686 DMRG*LOG(EDUCATION) -0.002 0.037-0.048 DMD*TIME -0.005 0.001-3.722* DSMD*TIME 0.053 0.013 3.982* DSML*TIME 0.054 0.020 2.648* DMRG*TIME 0.056 0.018 3.107* R-squared: 0.56 Adjusted R-squared: 0.56 F-statistic: 1125.127* Durbin-Watson stat: 1.252 Diagnostic Statistic R-squared: 0.78 Adjusted R-squared: 0.77 F-statistic: 322.598* Durbin-Watson stat: 2.523 F- statistic (19,1755) for testing the Restrictions: 23.755* 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 The intercept term (3.090) of medium farm is positive and significant and lower than that of the large farm. On the other hand, the insurance participation (-0.385) is negatively and significantly related to yield rate. The insurance effect on yield rate of Aman Paddy is easily understood from 211

the figure-5.4.1. The educational effect is positive (0.011) and insignificantly interrelated with yield rate but higher than that of the large farm. On the other hand, like large farm, the time coefficient of medium farm is negatively and insignificantly connected with yield rate. The growth rate (-4.639%) of Aman paddy is also negative and this rate is significant. That means, the insured medium farm is unable to utilize crop loan in proper way. Table-5.4.3A. Inter-Farm-Size Effects on Yield Rate of Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 3.028 0.074 0.008-0.056-5.430 Medium Farm 3.090-0.385 0.011-0.048-4.639 Semi-Medium Farm 3.101 0.092-0.007 0.010 1.026 Small Farm 3.135 0.107 0.017 0.011 1.131 Marginal Farm 3.160 0.141 0.006 0.013 1.354 Source: Author s own computation based on former table-5.4.3. Refer to table-5.4.3. The intercept term of the semi-medium farm is (3.101) positive and also significant but higher than that of the large farm. On the other hand, slope coefficient is positive and significant (0.092). It is higher than that of the large farm. The insurance effect on yield rate of Aman Paddy is clearly under-stood from the bar diagram of figure-5.4.1. We observe that the educational effect on yield rate is positive but insignificant compared to the large farm. On the other side time effect (0.010) is positively and significantly for semi-medium farm than that of the large farm. Therefore, the growth rate (1.026%) of yield rate is significantly increased for medium farms with respect to large farm. Refer to table-5.4.3. The intercept term of small farm is positive and significance. The insurance effect (the value of insurance effect) is (0.107) positive and significance at one percent level. The insurance effect on yield rate of Aman Paddy for small farms is quietly better than large farms, medium farms and semi-medium farms. The insurance effect on yield rate is clearly understood from the bar diagram of figure-5.4.1. The educational effect and time effect are positively related to yield rate of Aman Paddy. But the time effect is significant and educational effect is insignificant. The education level cannot influence the yield rate as an average education level is class tenth standard and they take crop loan only to fulfill the required demand of cash money for 212

cultivation and it may be used for other purpose. The growth rate (1.131%) of yield rate is higher than that of the large farm. The insurance effect on yield rate of marginal farm is higher than those of the other farm sizes. It is clearly understood from the bar diagram of the figure-5.4.1. The average output and area under cultivation is lowest in standard for marginal farms. On the other respect, they are also economically weak, as a result they try to cultivate their own land carefully. Therefore yield rate of the marginal farms is in the highest level and the insurance effect is also the highest. The education effect of marginal farms (0.006) on yield rate is the modest of all levels. On the other side, the time effect is significant and quite better than other farm-sizes. The growth rate (1.354%) of yield is also highest for marginal farms (refer to table-5.4.3a) than those of other farm sizes. 5.5. Impact of Insurance Participation on Use of Inputs for Aman Paddy We consider five factors of production such as labour, seed, irrigation, fertilizer and pesticides cost. The measurement unit of cost of every factor is rupee. Refer to tables 5.5.1 and 5.5.2. In the restricted model, both the insurance participation and time are positively and significantly related with the cost of labour and seed inputs. On the other hand, both the growth rate of labour cost (6.72%) and seed cost (5.654%) are positive and significance at the one (1%) percent level. In the un-restricted model, both the cost of labour and seed inputs are positively related to the insurance participation for large farm. But the relation between the cost of seed and the insurance participation is insignificant. Both the insurance participation and the time coefficients are negatively and significantly connected with the cost of labour for medium, semi-medium, small and marginal farms. On the other hand, in the case of the seed cost, these relations are positive and significant. Refer to table- 5.5.1 and table-5.5.2. It is observed that for the cost of both labour and seed, all the differential 213

intercept and differential slope coefficients are statistically significant in favour of medium, semi-medium, small and marginal farms. This implies that both the panel regression functions of the cost of labour and seed inputs of medium, semi-medium, small and marginal farms are different from that of the large farm. Refer to table-5.5.1a. Both the insurance effect and the rate of growth of labour cost are highest for large farm and lowest for marginal farm. These vary directly with farm-size. This is clearly understood from the figure-5.5.1. We may point out that the average labour cost (per acre of land) is highest for both large and semi-medium farms. It is lowest for both marginal and small farms (refer to table-5.2.1). The marginal and small farms are economically poor. They always try to complete their cultivation without any hired labour. From table-5.5.2a we find that the insurance effect on the seed cost is highest for the marginal farm followed by the small farm. It is lowest for the medium farm and followed by the large farm. This difference arises due to the difference in the average seed costs and in the economic condition of different farm-size. It may arise due to difference in the choice of the quality of the seeds by the different farms. The insurance effect on the seed cost of the different farm-size is clearly understood from the figure-5.5.2. On the other hand, the rate of growth of cost of the seed varies indirectly with the farm-size. In that situation we may point out that both the marginal and small farms are also using HYV seeds. In the same way we explain the regression result of use of irrigation cost for Aman Paddy on insurance participation. The coefficient of insurance participation and coefficient of time are positively as well as significantly related with the irrigation cost in the restricted model. But the education level is insignificant and negatively related with the irrigation cost. The growth rate of irrigation cost is 4.917% and this rate is higher than the growth rate of irrigation cost of different farm-size in the un-restricted model. 214

Table-5.5.1. Regression Results of Use of Labour Input for Aman Paddy on Insurance Participation Dependent Variable: LOG(LABOURCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 8.807 0.021 425.427* Constant 8.695 0.030 291.244* LOG(INSPART) 0.927 0.059 15.758* DMD -0.048 0.023-2.143** LOG(EDUCATION) -0.005 0.009-0.587 DSMD -0.802 0.396-2.026** TIME 0.065 0.002 31.232* DSML -0.977 0.249-3.924* DMRG -2.113 0.041-51.616* LOG(INSPART) 0.724 0.115 6.267* LOG(EDUCATION) -0.021 0.011-1.846*** TIME 0.024 0.003 8.939* DMD*LOG(INSPART) -0.206 0.154-1.335 DSMD*LOG(INSPART) -0.313 0.140-2.236* DSML*LOG(INSPART) -0.408 0.152-2.686* DMRG*LOG(INSPART) -0.539 0.142-3.801* DMD*LOG(EDUCATION) 0.019 0.056 0.334 DSMD*LOG(EDUCATION) 0.021 0.017 1.190 DSML*LOG(EDUCATION) 0.029 0.026 1.146 DMRG*LOG(EDUCATION) 0.016 0.016 1.015 DMD*TIME -0.010 0.003-3.204* DSMD*TIME -0.015 0.004-3.863* DSML*TIME -0.016 0.002-6.884* DMRG*TIME -0.020 0.004-5.108* R-squared: 0.62 Adjusted R-squared: 0.62 F-statistic: 1419.851 Durbin-Watson stat: 0.998 Diagnostic Statistic R-squared: 0.80 Adjusted R-squared: 0.79 F-statistic: 359.746 Durbin-Watson stat: 2.289 F- statistic (19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @LABOURCOST for the period 2006-2010 has been calculated at the market wage rate of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 215

Table-5.5.1A. Inter-Farm-Size Effects on Use of Labour Input for Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 8.695 0.724-0.021 0.024 2.432 Medium Farm 8.647 0.518-0.002 0.014 1.390 Semi-Medium Farm 7.893 0.411 0.000 0.009 0.928 Small Farm 7.718 0.316 0.009 0.008 0.766 Marginal Farm 6.581 0.184-0.004 0.004 0.448 Source: Author s own computation based on former table-5.5.1. Insurance Effect on Use of Labour 0.800 0.700 0.724 Insurance Effect 0.600 0.500 0.400 0.300 0.200 0.518 0.411 0.316 0.184 0.100 0.000 Large Medium Semi-Medium Small Marginal Farm-Size Figure-5.5.1 216

Table-5.5.2. Regression Results of Use of Seed Input for Aman Paddy on Insurance Participation Dependent Variable: LOG(SEEDCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 5.972 0.020 294.590* Constant 5.845 0.027 217.148* LOG(INSPART) 0.851 0.058 14.771* DMD -0.544 0.264-2.059* LOG(EDUCATION) -0.010 0.008-1.231 DSMD -0.829 0.364-2.277* TIME 0.055 0.002 27.176* DSML -1.012 0.436-2.323* DMRG -1.921 0.964-1.994** LOG(INSPART) 0.200 0.141 1.420 LOG(EDUCATION) -0.015 0.010-1.518 TIME 0.015 0.002 6.066* DMD*LOG(INSPART) -0.069 0.139-0.495 DSMD*LOG(INSPART) 0.055 0.013 4.364* DSML*LOG(INSPART) 0.071 0.008 8.628* DMRG*LOG(INSPART) 0.123 0.028 4.412* DMD*LOG(EDUCATION) 0.010 0.041 0.235 DSMD*LOG(EDUCATION) 0.006 0.018 0.344 DSML*LOG(EDUCATION) 0.008 0.012 0.704 DMRG*LOG(EDUCATION)) 0.009 0.015 0.594 DMD*TIME 0.019 0.009 2.131** DSMD*TIME 0.021 0.005 4.661* DSML*TIME 0.025 0.003 7.297* DMRG*TIME 0.035 0.013 2.637* R-squared: 0.63 Adjusted R-squared: 0.63 F-statistic: 1537.606* Durbin-Watson statistic: 1.435 Diagnostic Statistic R-squared: 0.81 Adjusted R-squared: 0.81 F-statistic: 395.239* Durbin-Watson statistic: 2.096 F- statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @SEEDCOST for the period 2006-2010 has been calculated at the market seed price of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 217

Table-5.5.2A. Inter-Farm-Size Effects on Use of Seed Input for Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 5.845 0.200-0.015 0.015 1.481 Medium Farm 5.301 0.131-0.006 0.034 3.476 Semi-Medium Farm 5.015 0.255-0.009 0.036 3.637 Small Farm 4.833 0.271-0.007 0.040 4.062 Marginal Farm 3.924 0.323-0.007 0.050 5.146 Source: Author s own computation based on former table-5.5.2. Insurance Effect on Use of Seed Insurance Effect on Use of Irrigation Insurance Effect 0.350 0.300 0.250 0.200 0.150 0.100 0.050 0.000 0.200 0.131 0.255 0.271 0.323 Insurance Effect 1.600 1.400 1.200 1.000 0.800 0.600 0.400 0.200 0.000 1.341 1.277 0.295 0.269 0.026 Large Medium Semi-Medium Small Marginal Large Medium Semi-Medium Small Marginal Farm-Size Farm-Size Insurance Effect 0.660 0.640 0.620 0.600 0.580 0.560 0.540 0.520 Insurance Effect on Use of Fertiliser 0.579 0.572 0.596 0.616 0.648 Insurance Effect 0.580 0.570 0.560 0.550 0.540 0.530 0.520 0.510 0.500 0.490 0.480 0.470 Insurance Effect on Use of Pesticide 0.510 0.548 0.557 0.560 0.573 Large Medium Semi-Medium Small Marginal Large Medium Semi-Medium Small Marginal Farm-Size Farm-Size Figure-5.5.2 218

Refer to table-5.5.3. In the un-restricted model, in the case of the large farm both the insurance participation and time coefficient are positively and significantly related to the irrigation cost of Aman Paddy. On the other hand, both the insurance participation and the education level are negatively as well as insignificantly related to the irrigation cost of the other farms such as the medium, semi-medium, small and marginal farms. Refer to table-5.5.3a. Both the insurance effect and education effect are directly related with the farm-size. The intercept values of the small and marginal farms are statistically different from that of the large farm. These differences in the intercepts may be due to unique features of the small and marginal farms, such as differences in the economic ability, sources of irrigation facilities, or use of the types of seeds. But all the differential slope coefficients are statistically insignificant. Therefore, we come to the conclusion that the panel regression functions of the irrigation cost of medium, semi-medium, small and marginal farms are not different from the large farm. From the table-5.5.3, we find that the time coefficients of medium, semi-medium, small and marginal farms are directly and insignificantly connected with the irrigation cost. Therefore, the growth rate of irrigation cost increases with the decrease of the farm-size. The main argument is that the marginal farms, small farms and medium farms are economically weak and they also get insufficient cash as a crop loan from the financial institution due to tiny and marginal land size. In this respect they are unable to arrange heavy deep-tubewell, mini-tubewell, shallow, etc. They get the irrigation facility either from government cannel, government organized, government undertaken deep tube well, or from private organized irrigation sources etc. We also point out that every year there is an uncertainty in the regular and equal rain fall in the monsoon. Besides, the irregularities in the rain-fall force the farms to depend on artificial irrigation facilities. At the same time the farms increase the use of the HYV seeds in the cultivation. Therefore the irrigation cost of marginal, small and medium farms increases due to increase in the use of artificial irrigation sources. 219

Table-5.5.3. Regression Results of Use of Irrigation for Aman Paddy on Insurance Participation Dependent Variable: LOG(IRRIGATIONCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 6.631 0.082 80.895* Constant 6.559 0.197 33.340* LOG(INSPART) 0.486 0.233 2.086** DMD -0.029 0.260-0.110 LOG(EDUCATION) -0.009 0.034-0.267 DSMD -0.150 0.266-0.562 TIME 0.048 0.008 5.893* DSML -0.754 0.264-2.856* DMRG -2.326 1.270-1.832*** LOG(INSPART) 1.341 0.761 1.763*** LOG(EDUCATION) 0.055 0.074 0.743 TIME 0.009 0.002 4.803* DMD*LOG(INSPART) -0.063 1.015-0.062 DSMD*LOG(INSPART) -1.046 0.922-1.135 DSML*LOG(INSPART) -1.072 1.000-1.072 DMRG*LOG(INSPART) -1.315 0.935-1.407 DMD*LOG(EDUCATION) -0.007 0.103-0.064 DSMD*LOG(EDUCATION) -0.051 0.036-1.404 DSML*LOG(EDUCATION) -0.049 0.118-0.417 DMRG*LOG(EDUCATION)) -0.204 0.165-1.237 DMD*TIME 0.002 0.025 0.099 DSMD*TIME 0.005 0.033 0.155 DSML*TIME 0.006 0.040 0.159 DMRG*TIME 0.004 0.022 0.166 Diagnostic Statistic R-squared: 0.70 Adjusted R-squared: 0.70 F-statistic: 2087.709 Durbin-Watson statistic: 1.022 R-squared: 0.89 Adjusted R-squared: 0.89 F-statistic: 775.185 Durbin-Watson statistic: 2.037 F-statistic (19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @IRRIGATIONCOST for the period 2006-2010 has been calculated at the market price of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 220

From the tables 5.5.4 and 5.5.5 we observed that in the restricted regression model of the cost of fertilizer and pesticides both the insurance participation and time coefficients are positively and statistically significant. Both the growth rate of fertilizer cost (8.112%) and pesticide (6.929%) consumptions are significant at the one percent (1%) level. Table-5.5.3A. Inter-Farm-Size Effects on Use Irrigation for Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate (%) Large Farm 6.559 1.341 0.055 0.009 0.854 Medium Farm 6.530 1.277 0.048 0.011 1.105 Semi-Medium Farm 6.409 0.295 0.004 0.014 1.364 Small Farm 5.804 0.269 0.005 0.015 1.496 Marginal Farm 4.232 0.026-0.149 0.012 1.228 Source: Author s own computation based on former table-5.5.3. Refer to tables 5.5.4 and 5.5.4A. The cost of fertilizer is positively related to the insurance participation for all farm-size except the medium farm. But all the estimated coefficients of the insurance participation are individually and highly significant. On the other hand, all the differential time coefficient values of the medium, semi-medium, small and marginal farms are positively related to the cost of fertilizer. This may happen mainly due to the high fluctuation in the quantity of the fertilizer consumption by the different farm-size during the period 2006 to 2010 (refer to table-5.2.1). The panel regression function of the large farm is different from the other four farm sizes, as all the differential intercept and all the differential slope coefficients are statistically significant. From table-5.5.5 we find out that the cost of pesticide is positively and significantly related to the insurance participation of the five farm-sizes. The panel regression functions of the cost of pesticide of medium, semi-medium, small and marginal farms are different from that of large farm. 221

With reference to tables 5.5.4A and 5.5.5A we find that both the insurance effect and the time effect of the cost of fertilizer and pesticide are indirectly related to the farm-size. The insurance effect on use of fertilizer and pesticide can be easily understood from the bar diagram of the figure-5.5.2. Both the insurance effect and growth rate of fertilizer and also pesticide consumptions are higher for marginal farms followed by small farms. We may point out some intuitive logic. Both the small and marginal farms are economically poor. They are unable to bear the cost of agricultural production in cash. As a result, both small and marginal farms are more interested to get crop insurance. They are able to collect required cash from the different financial institutions and purchase different types of chemical fertilizer. Besides, they are more interested to use the HYV seeds. Crops are affected by different types of disease and the farms are forced to use pesticides. The different pesticide and fertilizer producers give different advertisements about different pesticides and fertilizers. The farms are attracted with these types of advertisement. They purchase a specific pesticide or a specific type of fertilizer on the basis of advertisement. They have no common sense about the compositions of pesticides or fertilizers. In that situation the education level is insignificant. 222

Table-5.5.4. Regression Results of Use of Fertilizer for Aman Paddy on Insurance Participation Dependent Variable: LOG(FERTILISERCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 6.961 0.026 265.898* Constant 6.856 0.051 134.443* LOG(INSPART) 1.015 0.074 13.641* DMD -0.629 0.267-2.353* LOG(EDUCATION) -0.007 0.011-0.681 DSMD -0.949 0.562-1.689*** TIME 0.078 0.003 29.889* DSML -1.046 0.547-1.912*** DMRG -2.132 1.072-1.989** LOG(INSPART) 0.579 0.197 2.935* LOG(EDUCATION) -0.012 0.019-0.633 TIME 0.037 0.046 0.811 DMD*LOG(INSPART) -0.007 0.003-2.533* DSMD*LOG(INSPART) 0.017 0.002 7.149* DSML*LOG(INSPART) 0.037 0.013 2.926* DMRG*LOG(INSPART) 0.069 0.242 0.286 DMD*LOG(EDUCATION) -0.004 0.027-0.132 DSMD*LOG(EDUCATION) 0.010 0.069 0.147 DSML*LOG(EDUCATION) 0.030 0.037 0.812 DMRG*LOG(EDUCATION)) -0.006 0.028-0.229 DMD*TIME 0.021 0.012 1.730*** DSMD*TIME 0.036 0.017 2.190** DSML*TIME 0.053 0.020 2.611* DMRG*TIME 0.056 0.007 8.596* Diagnostic Statistic R-squared: 0.66 Adjusted R-squared: 0.66 F-statistic: 1746.056* Durbin Watson statistic:: 1.246 R-squared: 0.82 Adjusted R-squared: 0.82 F-statistic: 414.065* Durbin Watson statistic: 1.987 F- statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @ FERTILISERCOST for the period 2006-2010 has been calculated at the market price of fertiliser in 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 223

Table-5.5.5. Regression Results of Use of Pesticide for Aman Paddy on Insurance Participation Dependent Variable: LOG(PESTICIDECOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coeffi cient Error t-statistic Explanatory Variables Coeffic ient Error t-statistic Constant 6.355 0.024 267.608* Constant 6.209 0.042 147.803* LOG(INSPART) 0.842 0.068 12.467* DMD -0.114 0.055-2.060** LOG(EDUCATION) -0.001 0.010-0.109 DSMD -0.399 0.196-2.037** TIME 0.067 0.002 28.261* DSML -1.103 0.564-1.955** DMRG -2.133 0.861-2.476* LOG(INSPART) 0.510 0.162 3.139* LOG(EDUCATION) -0.012 0.016-0.787 TIME 0.027 0.004 7.101* DMD*LOG(INSPART) 0.038 0.022 1.758*** DSMD*LOG(INSPART) 0.047 0.020 2.377* DSML*LOG(INSPART) 0.050 0.024 2.107** DMRG*LOG(INSPART) 0.063 0.020 3.144* DMD*LOG(EDUCATION) -0.006 0.030-0.192 DSMD*LOG(EDUCATION) 0.020 0.022 0.904 DSML*LOG(EDUCATION) 0.030 0.027 1.099 DMRG*LOG(EDUCATION)) 0.018 0.023 0.811 DMD*TIME 0.019 0.009 2.028** DSMD*TIME 0.023 0.005 4.270* DSML*TIME 0.035 0.012 2.926* DMRG*TIME 0.052 0.025 2.053** Diagnostic Statistic R-squared: 0.67 Adjusted R-squared: 0.67 F-statistic: 1828.039 Durbin-Watson statistic: 1.083 R-squared: 0.77 Adjusted R-squared: 0.76 F-statistic: 303.082 Durbin-Watson statistic: 2.438 F-statistic (19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @PESTICIDECOST for the period 2006-2010 has been calculated at the market price of pesticide in 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 224

Table-5.5.4A. Inter-Farm-Size Effects on Use of Fertilizer for Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 6.856 0.579-0.012 0.037 3.794 (%) Medium Farm 6.227 0.572-0.016 0.058 5.951 Semi-Medium Farm 5.907 0.596-0.002 0.073 7.622 Small Farm 5.811 0.616 0.018 0.090 9.391 Marginal Farm 4.724 0.648-0.018 0.093 9.795 Source: Author s own computation based on former table-5.5.4. Table-5.5.5A. Inter-Farm-Size Effects on Use of Pesticide for Aman Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 6.209 0.510-0.012 0.027 2.722 (%) Medium Farm 6.095 0.548-0.018 0.045 4.644 Semi-Medium Farm 5.810 0.557 0.008 0.050 5.112 Small Farm 5.106 0.560 0.018 0.062 6.398 Marginal Farm 4.076 0.573 0.006 0.079 8.218 Source: Author s own computation based on former table-5.5.5. 5.6. Panel Regression Result of Boro Paddy The Boro Paddy is a winter season Paddy. Its cost of production, choice of seeds and harvesting are considered to be more risky factors compared to the other Paddy. We want to analyze how the insurance participation and education level of a farm affect the area under cultivation, the production, yield rate and the cost of factors of production of the Boro Paddy. 5.6.1. Impact of Insurance Participation on Area under Cultivation of Boro Paddy Refer to table-5.6.1. We consider the case of restricted model. Both the insurance participation and the time coefficients are negatively connected to the area under cultivation of Boro Paddy. These relations are significant at one percent (1%) level. In our study district, the cultivation of 225

Boro Paddy demands highly intensive irrigation. The cultivation of Boro Paddy is possible in the Blocks which have the sufficient irrigation facility. During the study period (2006-2010) the growth rate of cultivable area (-6.387%) under the Boro Paddy is negative which is significant. This implies that the average area under Boro Paddy decreases over time. The education level is also insignificant which is negatively correlated with the total Boro land. From table-5.6.1, in the un-restricted model, the total area under cultivation of Boro Paddy is positively related to the insurance participation which is significant for the large farm. The large farms are economically strong and they easily arrange the artificial irrigation facilities. But the rate of growth of area (1.055%) is lowest for the large farm. From table-5.6.1 we find that the area under cultivation of Boro Paddy is positively and significantly related to the insurance participation of the other farm-sizes. As the Boro Paddy is a more risky Paddy, the farms try to include large section of area under crop insurance. It is also observed that all the differential intercepts and all the differential slope coefficients are statistically significant for all farm-sizes. Thus, the area functions of medium, semi-medium, small and marginal farms are different from that of the large farm. With reference to table-5.6.1a we observed that the insurance effect on the area under cultivation of Boro Paddy is in the highest level for marginal farms followed by the small farm. It varies inversely with the farm-sizes. The growth rate of area is highest for the marginal farm and varies inversely with the farm-sizes. Most of the farms belong to marginal, small and medium farms. They are economically weak and always try to come under crop insurance scheme. The overall picture of the insurance effect on the area under cultivation of Boro Paddy of different farm-sizes is clearly understood from the vertical bar diagram of the figure-5.6.1. The education effect is irrelevant to influence the area under cultivation. 226

Table-5.6.1. Regression Results of under Area of Cultivation of Boro Paddy on Insurance Participation Dependent Variable: LOG(BOROLAND); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Explanatory Variables Un-Restricted Model Explanatory Variables Constant 1.715 0.293 5.845* Constant 15.367 0.143 107.678* LOG(INSPART) -14.572 0.834-17.470* DMD -1.023 0.161-6.357* LOG(EDUCATION) -0.057 0.121-0.469 DSMD -5.181 1.648-3.143* TIME -0.066 0.029-2.259* DSML -6.631 1.636-4.053* DMRG -7.218 1.671-4.320* LOG(INSPART) 0.554 0.287 1.933*** LOG(EDUCATION) 0.017 0.028 0.605 TIME 0.010 0.007 1.594 DMD*LOG(INSPART) 0.652 0.351 1.860*** DSMD*LOG(INSPART) 0.818 0.347 2.353* DSML*LOG(INSPART) 0.970 0.334 2.902* DMRG*LOG(INSPART) 1.301 0.352 3.692* DMD*LOG(EDUCATION) -0.041 0.088-0.463 DSMD*LOG(EDUCATION) 0.016 0.039 0.411 DSML*LOG(EDUCATION) 0.036 0.048 0.748 DMRG*LOG(EDUCATION) -0.069 0.040-1.713*** DMD*TIME 0.031 0.009 3.268* DSMD*TIME 0.052 0.017 3.070* DSML*TIME 0.059 0.013 4.486* DMRG*TIME 0.078 0.023 3.386* Diagnostic Statistic R squared: 0.73 Adjusted R squared: 0.73 F statistic: 2833.761 Durbin Watson statistic: 0.967 R squared: 0.93 Adjusted R squared: 0.93 F statistic: 3895.088 Durbin Watson Statistic:1.839 F-statistic (19,1755) for testing the Restrictions: 18.305 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 227

Table-5.6.1A. Inter-Farm-Size Effects on Area of Cultivation of Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate (%) Large Farm 15.367 0.554 0.017 0.010 1.055 Medium Farm 14.344 1.206-0.024 0.041 4.190 Semi-Medium Farm 10.186 1.372 0.033 0.062 6.417 Small Farm 8.736 1.524 0.052 0.069 7.144 Marginal Farm 8.149 1.855-0.052 0.088 9.235 Source: Author s own computation based on former table-5.6.1. 5.6.2. Impact of Insurance Participation on Total Production of Boro Paddy With reference to table-5.6.2, in the restricted model we have shown that the coefficients of insurance participation and time are significantly correlated with the total output of Boro Paddy. But relation between the insurance participation and time with the total output of Boro Paddy is negative. In general we may expect that the problem of moral hazard will arise. The growth rate of total output (-9.153%) is negative and insignificant. Refer to table-5.6.2. We consider the un-restricted model. The total output of Boro Paddy is positively and insignificantly related to the insurance participation for large farm. But the time coefficient is significant which is indirectly related to the total output of Boro Paddy. As the time effect is negative, the rate of growth of output (-3.265%) of large farms is also negative. The basic logic is that in the case of large farms the production is done by hiring labour. They take the crop loan and consequently the number of the insured large farms increases in the administrative paper of the insurer. But they do not cultivate Boro Paddy in the insured land. They hand over the insured land to the share cropper. They use the crop loan for non-agricultural activities from which they earn extra income. The insurance participation is positively and insignificantly related to the total output of the Boro Paddy of the medium farm. The medium farms are economically weak but after taking crop loan for production purpose, they may use it to maintain different family expenditures, education expenditure, rate of interest payment or debt payment of the old loan, marriage expenditure etc. On the other hand, the insurance participation of semi-medium, small and marginal farms is positively related to the total output. It is also observed that all the differential intercept 228

coefficient are statistically significant of the different farm-sizes. Therefore, we may point out that the total production functions of medium, semi-medium, small and marginal farms are different from that of large farm. Table-5.6.2. Regression Results of Total Output of Boro Paddy on Insurance Participation Dependent Variable: LOG(TPRODUCT); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coeffi- t-statistic Explanatory Variables Coeffi- t-statistic Constant 7.882 0.270 29.196* Constant 11.385 0.121 94.417* LOG(INSPART) -12.902 0.768-16.808* DMD -0.637 0.103-6.194* LOG(EDUCATION) -0.047 0.112-0.421 DSMD -2.253 0.105-21.394* TIME -0.096 0.027-3.539* DSML -3.274 0.105-31.326* DMRG -4.200 0.107-39.352* LOG(INSPART) 0.661 0.494 1.337 LOG(EDUCATION) 0.024 0.029 0.806 TIME -0.033 0.007-4.737* DMD*LOG(INSPART) -0.009 0.401-0.021 DSMD*LOG(INSPART) 0.844 0.143 5.900* DSML*LOG(INSPART) 1.018 0.076 13.369* DMRG*LOG(INSPART) 1.397 0.100 14.035* DMD*LOG(EDUCATION) -0.032 0.041-0.791 DSMD*LOG(EDUCATION) -0.001 0.029-0.023 DSML*LOG(EDUCATION) 0.054 0.408 0.133 DMRG*LOG(EDUCATION)) -0.068 0.218-0.310 DMD*TIME 0.052 0.022 2.382* DSMD*TIME 0.081 0.034 2.365* DSML*TIME 0.085 0.020 4.286* DMRG*TIME 0.092 0.010 9.262* R squared: 0.83 Adjusted R squared: 0.83 F statistic: 5588.581 Durbin Watson statistic: 1.064 Diagnostic Statistic R squared: 0.92 Adjusted R squared: 0.92 F statistic: 2952.140 Durbin Watson Statistic: 1.721 F-statistic (19,1755) for testing the Restrictions: 18.305 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 229

From table-5.6.2a we find that both the insurance effect and time effect on the total output vary inversely with the farm size. The insurance effect on total output of Boro Paddy is easily under stood from the bar diagram of the figure-5.6.1. The rate of growth of total output of Boro Paddy also varies inversely with the farm-sizes. Both the insurance effect and the rate of growth of total production are highest for the marginal farm followed by the small farm. Table-5.6.2A. Inter-Farm-Size Effects on Total Output of Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 5.838 0.459 0.024-0.033-3.265 Medium Farm 10.748 0.652-0.009 0.019 1.889 Semi-Medium Farm 9.132 1.504 0.023 0.048 4.948 Small Farm 8.111 1.678 0.078 0.052 5.369 Marginal Farm 7.184 2.058-0.044 0.059 6.103 Source: Author s own computation based on former table-5.6.2. 5.6.3. Impact of Insurance Participation on Yield Rate of Boro Paddy Refer to table-5.6.3. In the restricted model the insurance participation is positively and the time coefficient is negatively related to the yield rate of Boro Paddy. Both the insurance participation and time coefficients are significant and the level of significance is at one percent. On the other hand the growth rate (-2.858%) of yield is negative and significant. From table-5.6.3 we find that in the case of the large farm the insurance participation is positively but insignificantly related to yield rate of Boro Paddy. The average yield rate of large farms is in the lowest level. The time coefficient is negatively but significantly connected with the yield rate. As a result the growth rate of the yield rate (-4.274%) is negative and also significant. Refer to table-5.6.3. The yield rate is positively related to the insurance participation for semimedium, small and marginal farms and it is negatively connected to the insurance participation for medium farm. The intercept values of the five farm-sizes are statistically different. These differences in the intercept may be due to differences in the variability of yield rate or in the average yield rate. Moreover, as all the differential intercepts and all the differential slope 230

coefficients are statistically significant, the panel regression functions of the yield rate of medium, semi-medium, small and marginal farms are different from that of large farm. It is observed that all the education coefficients of the five farm-sizes are statistically insignificant but all the time coefficients are statistically significant at the one percent level of significance. Table-5.6.3. Regression Results of Yield Rate of Boro Paddy on Insurance Participation Dependent Variable: LOG(YIELD); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient 231 Error t-statistic Constant 6.169 0.033 188.629* Constant 5.905 0.042 140.990* LOG(INSPART) 1.743 0.093 18.745* DMD -0.102 0.036-2.869* LOG(EDUCATION) 0.011 0.014 0.818 DSMD -0.151 0.037-4.137* TIME -0.029 0.003-8.948* DSML -1.120 0.036-30.856* DMRG -1.645 0.037-44.365* LOG(INSPART) 0.106 0.105 1.017 LOG(EDUCATION) 0.012 0.010 1.158 TIME -0.044 0.002-17.943* DMD*LOG(INSPART) -0.004 0.002-2.062** DSMD*LOG(INSPART) 0.026 0.011 2.395* DSML*LOG(INSPART) 0.048 0.014 3.469* DMRG*LOG(INSPART) 0.096 0.022 4.391* DMD*LOG(EDUCATION) 0.004 0.142 0.027 DSMD*LOG(EDUCATION) -0.022 0.024-0.927 DSML*LOG(EDUCATION) 0.013 0.179 0.073 DMRG*LOG(EDUCATION) -0.003 0.015-0.177 DMD*TIME 0.047 0.014 3.347* DSMD*TIME 0.053 0.012 4.560* DSML*TIME 0.059 0.009 6.437* DMRG*TIME 0.065 0.007 9.722* R squared: 0.53 Adjusted R squared: 0.53 F statistic: 1068.871 Durbin Watson statistic: 1.234 Diagnostic Statistic R squared: 0.74 Adjusted R squared: 0.74 F statistic: 306.468 Durbin Watson Statistic: 2.157 F-statistic (19,1755) for testing the Restrictions: 18.305 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

With reference to table-5.6.3a, we find that both the insurance effect and time effect on the yield rate are inversely related to farm-sizes. Therefore, the rate of growth yield also is inversely related to the farm-sizes. This may happen as the average yield varies inversely with the farmsizes. Table-5.6.3A. Inter-Farm-Size Effects on Yield Rate of Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 5.905 0.106 0.012-0.044-4.274 Medium Farm 5.803 0.102 0.016 0.004 0.354 Semi-Medium Farm 5.754 0.132-0.010 0.009 0.934 Small Farm 4.785 0.154 0.025 0.015 1.517 Marginal Farm 4.260 0.203 0.009 0.021 2.104 Source: Author s own computation based on former table-5.6.3. 232

Figure-5.6.1 233

5.7. Impact of Insurance Participation on Use of Inputs for Boro Paddy In the restricted model, the cost of all inputs is positively and significantly related to the insurance participation and to the time coefficients. But it is negatively and insignificantly related to the education level. The growth rate costing of all factors is statistically significant. In the un-restricted model, the insurance participation of large farm is positively associated to the cost of all the inputs. But this relation is insignificant in the case of the cost of irrigation and pesticide. From table-5.7.1, we find that both the insurance participation and time coefficient are negatively and insignificantly related to the cost of the labour for the medium, semi-medium, small and marginal farms. But the education effect is positive and insignificantly related to the cost of the labour. Refer to table-5.7.1a. The insurance effect is in the highest position for large farms. The rate of growth of labour cost is also in the highest level and significant for large farm. All agricultural activities of the large farms are done by hiring labour. The relation between the labour cost and insurance participation is that over time the number of required labour increases as the farms uses highly HYV seeds and modern technology to complete the cultivation of Boro Paddy as per scientific process. It is also observed that the rate of growth of labour cost varies directly with the farm- sizes. The panel regression function of the large farm is different from the other farmsizes. The insurance effect on the use of labour for Boro Paddy is clearly understood from the bar diagram in the figure-5.7.1. 234

Table-5.7.1. Regression Results of Use of Labour Input for Boro Paddy on Insurance Participation Dependent Variable: LOG(LABOURCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 17.174 0.034 502.768* Constant 16.955 0.049 344.197* LOG(INSPART) 1.809 0.097 18.622* DMD -0.069 0.024-2.897* LOG(EDUCATION) -0.010 0.014-0.693 DSMD -1.155 0.422-2.738* TIME 0.126 0.003 36.911* DSML -1.406 0.265-5.304* R squared: 0.58 Adjusted R squared: 0.58 F statistic: 1348.858 Durbin Watson statistic 0.984 DMRG -3.042 0.044-69.767* LOG(INSPART) 1.041 0.123 8.471* LOG(EDUCATION) -0.030 0.012-2.494* TIME 0.035 0.003 12.083* DMD*LOG(INSPART) -0.776 0.164-4.732* DSMD*LOG(INSPART) -0.587 0.149-3.938* DSML*LOG(INSPART) -0.450 0.162-2.786* DMRG*LOG(INSPART) -0.296 0.151-1.958** DMD*LOG(EDUCATION) 0.153 0.157 0.975 DSMD*LOG(EDUCATION) 0.030 0.167 0.176 DSML*LOG(EDUCATION) 0.042 0.768 0.055 DMRG*LOG(EDUCATION) 0.024 0.017 1.372 DMD*TIME -0.003 0.001-1.974** DSMD*TIME -0.007 0.001-5.139* DSML*TIME -0.011 0.003-4.448* DMRG*TIME -0.015 0.004-3.609* Diagnostic Statistic R squared: 0.76 Adjusted R squared: 0.75 F statistic: 341.758 Durbin Watson Statistic: 1.957 F-stat(19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @ LABOURCOST for the period 2006-2010 has been calculated at the market wage rate of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 235

Table-5.7.1A. Inter-Farm-Size Effects on Use of Labour Input of Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 8.695 1.041-0.030 0.035 3.519 Medium Farm 16.885 0.265 0.124 0.032 3.234 Semi-Medium Farm 15.800 0.455 0.000 0.028 2.795 Small Farm 15.549 0.591 0.013 0.023 2.358 Marginal Farm 13.913 0.746-0.006 0.020 2.008 Source: Author s own computation based on former table-5.7.1. Insurance Effect on Use of Labour for Boro Paddy 1.200 1.000 0.800 0.600 0.400 0.200 0.000 1.041 0.265 0.455 0.591 0.746 Large Medium Semi-Medium Small Marginal Insurance Effect Farm-Size Figure-5.7.1 With reference to table-5.7.2, we find that the insurance participation is negative and insignificantly related to the cost of the seed only in the case of the medium farm. It is positively and significantly related to the cost of the seed for all other farm-sizes. The seed functions of the semi-medium, small and marginal farms are different from the large farm. Refer to table-5.7.2a. The insurance effect on the cost of the seed varies inversely with the farm-size. Also the rate of growth of seed cost varies inversely with the farm-sizes. 236

Table-5.7.2. Regression Results of Use of Seed Input for Boro Paddy on Insurance Participation Dependent Variable: LOG(SEEDCOST @ ); Sample: 2006 2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 11.646 0.033 348.148* Constant 11.397 0.044 256.629* LOG(INSPART) 1.660 0.095 17.457* DMD -0.783 0.281-2.782* LOG(EDUCATION) -0.020 0.014-1.455 DSMD -1.194 0.388-3.078* TIME 0.108 0.003 32.118* DSML -1.457 0.464-3.141* R squared: 0.60 Adjusted R squared: 0.60 F statistic: 1460.726 Durbin Watson statistic 1.415 DMRG -2.766 1.026-2.695* LOG(INSPART) 0.288 0.150 1.920*** LOG(EDUCATION) -0.022 0.011-2.051** TIME 0.021 0.003 8.199* DMD*LOG(INSPART) -0.099 0.148-0.670 DSMD*LOG(INSPART) 0.079 0.013 5.898* DSML*LOG(INSPART) 0.102 0.009 11.662* DMRG*LOG(INSPART) 0.177 0.030 5.963* DMD*LOG(EDUCATION) 0.014 0.050 0.277 DSMD*LOG(EDUCATION) 0.009 0.020 0.441 DSML*LOG(EDUCATION) 0.012 0.015 0.795 DMRG*LOG(EDUCATION) 0.012 0.055 0.226 DMD*TIME 0.028 0.010 2.880* DSMD*TIME 0.030 0.013 2.400* DSML*TIME 0.036 0.007 5.438* DMRG*TIME 0.051 0.014 3.565* Diagnostic Statistic R squared: 0.77 Adjusted R squared: 0.77 F statistic: 375.477 Durbin Watson Statistic: 1.792 F-stat(19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @SEEDCOST for the period 2006-2010 has been calculated at the market seed price of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 237

Table-5.7.2A. Inter-Farm-Size Effects on Use of Seed Input of Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 11.397 0.288-0.022 0.021 2.139 Medium Farm 10.615 0.189-0.008 0.049 5.041 Semi-Medium Farm 10.203 0.367-0.013 0.051 5.277 Small Farm 9.941 0.390-0.010 0.057 5.899 Marginal Farm 8.632 0.465-0.010 0.072 7.491 Source: Author s own computation based on formertable-5.7.2 The irrigation is a vital factor for the cultivation of the Boro Paddy. The cultivation of Boro Paddy is possible in different parts of the Blocks of Hooghly district, where sufficient irrigation facility is available. In the most part of Hooghly the irrigation facility depends on the artificial irrigation facility. The rain fall has been continuously diminishing in respect of normal rain fall, as a result there is a lack of sufficient rain-harvesting irrigation facility. In that situation the irrigation of Boro Paddy mainly depends on the artificial irrigation facility. Besides due to change in climate, demand for artificial irrigation facility has been continuously increasing. Normal environmental stability is getting affected. Refer to tables 5.7.3, 5.7.4 and 5.7.5. The insurance participation of the large farm is positively related to the cost of irrigation, fertilizer and pesticide. But this relation is significant only for fertilizers. On the other hand the cost of irrigation, fertilizer and pesticide are positively related to the insurance participation for semi-medium, small and marginal farms. But the education effect is insignificantly related to the cost of irrigation, fertilizer and pesticides for all farm-sizes. It is also observed that all the differential slopes and differential intercept coefficients are statistically significant for the panel regression equations of the cost of fertilizer, irrigation and pesticide for medium, semi-medium, small and marginal farms. This implies that the panel regression functions of the cost of fertilizer, irrigation and pesticide for medium, semi-medium, small and marginal farms are different from that of the large farm. 238

Table-5.7.3. Regression Results of Use of Irrigation for Boro Paddy on Insurance Participation Dependent Variable: LOG(IRRIGATIONCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Explanatory Variables Coefficient Error Un-Restricted Model t-statistic Explanatory Variables Coefficient Error t-statistic Constant 12.931 0.135 95.603* Constant 12.789 0.325 39.402* LOG(INSPART) 0.948 0.385 2.465* DMD -2.411 0.277-8.711* LOG(EDUCATION) -0.018 0.056-0.315 DSMD -3.022 0.283-10.659* TIME 0.094 0.014 6.965* DSML -3.986 0.281-14.169* DMRG -5.348 1.352-3.955* LOG(INSPART) 0.930 0.810 1.148 LOG(EDUCATION) 0.079 0.078 1.005 TIME 0.012 0.002 6.492* DMD*LOG(INSPART) 0.084 1.081 0.078 DSMD*LOG(INSPART) 1.368 0.819 1.671*** DSML*LOG(INSPART) 1.449 0.650 2.230** DMRG*LOG(INSPART) 1.901 0.595 3.193* DMD*LOG(EDUCATION) -0.086 0.097-0.894 DSMD*LOG(EDUCATION) -0.662 0.835-0.793 DSML*LOG(EDUCATION) -0.646 0.989-0.653 DMRG*LOG(EDUCATION)) -2.585 2.113-1.223 DMD*TIME 0.036 0.013 2.816* DSMD*TIME 0.053 0.012 4.605* DSML*TIME 0.079 0.021 3.669* DMRG*TIME 0.086 0.027 3.207* R squared: 0.67 Adjusted R squared: 0.67 F statistic: 1983.324 Durbin Watson statistic: 1.007 Diagnostic Statistic R squared: 0.85 Adjusted R squared: 0.85 F statistic: 736.426 Durbin Watson Statistic: 1.741 F-statistic (19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @IRRIGATIONCOST for the period 2006-2010 has been calculated at the market price of irrigation in 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance From tables 5.7.3A, 5.7.4A and 5.7.5A we observed that both the insurance effect and the time effect of irrigation cost, fertilizer cost and pesticide cost vary inversely with the farm-sizes. The overall insurance effect on the cost of irrigation, fertilizer and pesticide for Boro Paddy is clearly understood from the bar diagram of the figure-5.7.2. The growth rate of the cost of irrigation, 239

fertilizer and pesticide also vary indirectly with the farm-sizes. On the other hand, the values of the coefficient of education of the different farm-sizes are statistically insignificant. Table-5.7.4. Regression Results of Use of Fertiliser for Boro Paddy on Insurance Participation Dependent Variable: LOG(FERTILISERCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 13.573 0.043 314.238* Constant 15.080 0.084 179.217* LOG(INSPART) 1.980 0.123 16.121* DMD -2.163 0.285-7.598* LOG(EDUCATION) -0.014 0.018-0.804 DSMD -3.265 0.598-5.456* TIME 0.153 0.004 35.323* DSML -3.596 0.582-6.175* DMRG -7.333 1.141-6.425* LOG(INSPART) 0.833 0.210 3.968* LOG(EDUCATION) -0.017 0.020-0.855 TIME 0.054 0.049 1.096 DMD*LOG(INSPART) -0.010 0.003-3.424* DSMD*LOG(INSPART) 0.025 0.003 9.663* DSML*LOG(INSPART) 0.053 0.013 3.955* DMRG*LOG(INSPART) 0.100 0.022 4.542* DMD*LOG(EDUCATION) -0.005 0.028-0.179 DSMD*LOG(EDUCATION) 0.014 0.086 0.506 DSML*LOG(EDUCATION) 0.043 0.077 1.508 DMRG*LOG(EDUCATION)) -0.009 0.094-0.309 DMD*TIME 0.030 0.007 4.261* DSMD*TIME 0.052 0.021 2.444* DSML*TIME 0.076 0.014 5.297* DMRG*TIME 0.081 0.017 4.770* R squared: 0.63 Adjusted R squared: 0.63 F statistic: 1658.753 Durbin Watson statistic: 1.228 Diagnostic Statistic R squared: 0.78 Adjusted R squared: 0.77 F statistic: 393.362 Durbin Watson Statistic: 1.699 F-statistic (19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @FERTILISERCOST for the period 2006-2010 has been calculated at the market price of fertiliser in 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 240

Table-5.7.3A. Inter-Farm-Size Effects on Use of Irrigation for Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate (%) Large Farm 12.789 0.930 0.079 0.012 1.232 Medium Farm 10.379 1.015-0.008 0.048 4.912 Semi-Medium Farm 9.768 2.298-0.583 0.066 6.790 Small Farm 8.803 2.379-0.567 0.091 9.511 Marginal Farm 7.441 2.832-2.506 0.098 10.339 Source: Author s own computation based on former table-5.7.3. Table-5.7.4A. Inter-Farm-Size Effects on Use of Fertiliser for Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 13.370 0.833-0.017 0.054 5.506 Medium Farm 12.917 0.824-0.022 0.083 8.677 Semi-Medium Farm 11.815 0.858-0.003 0.106 11.152 Small Farm 11.484 0.886 0.026 0.129 13.792 Marginal Farm 7.747 0.933-0.026 0.135 14.398 Source: Author s own computation based on former table-5.7.4 241

Table-5.7.5. Regression Results of Use of Pesticide for Boro Paddy on Insurance Participation Dependent Variable: LOG(PESTICIDECOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 12.391 0.039 316.258* Constant 12.107 0.069 174.676* LOG(INSPART) 1.641 0.111 14.734* DMD -0.165 0.059-2.784* LOG(EDUCATION) -0.002 0.016-0.129 DSMD -0.574 0.208-2.753 TIME 0.131 0.004 33.402* DSML -1.588 0.601-2.643* R squared: 0.64 Adjusted R squared: 0.64 F statistic: 1736.637 Durbin Watson statistic: 1.067 DMRG -3.070 0.917-3.347* LOG(INSPART) 0.734 0.730 1.006 LOG(EDUCATION) -0.018 0.017-1.064 TIME 0.039 0.004 9.598* DMD*LOG(INSPART) 0.055 0.023 2.377* DSMD*LOG(INSPART) 0.067 0.012 5.568* DSML*LOG(INSPART) 0.071 0.025 2.848* DMRG*LOG(INSPART) 0.090 0.022 4.095* DMD*LOG(EDUCATION) -0.008 0.034-0.242 DSMD*LOG(EDUCATION) 0.029 0.024 1.222 DSML*LOG(EDUCATION) 0.043 0.235 0.183 DMRG*LOG(EDUCATION) 0.027 0.078 0.342 DMD*TIME 0.027 0.010 2.744* DSMD*TIME 0.033 0.012 2.777* DSML*TIME 0.051 0.016 3.220* DMRG*TIME 0.075 0.007 10.178* Diagnostic Statistic R squared: 0.73 Adjusted R squared: 0.73 F statistic: 287.928 Durbin Watson Statistic: 2.085 F-statistic (19,1755) for testing the Restrictions: 18.305 Source: Author s own computation based on primary data collected during the period 2006-2010 @SEEDCOST for the period 2006-2010 has been calculated at the market seed price of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 242

Table-5.7.5A. Inter-Farm-Size Effects on Use of Pesticide for Boro Paddy Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 12.107 0.734-0.018 0.039 3.942 Medium Farm 11.943 0.789-0.026 0.065 6.752 Semi-Medium Farm 11.534 0.801 0.011 0.072 7.441 Small Farm 10.520 0.805 0.025 0.089 9.338 Marginal Farm 9.037 0.824 0.009 0.114 12.040 Source: Author s own computation based on former table-5.7.5. Figure-5.7.2 243

5.8. Panel Regression Result of Potato The Potato is highly HYV seeds and technology intensive crop. Therefore, the cost of production of Potato per acre is very high comparatively to the others winter crops. They take various risky steps to obtain higher production. The loanee farms are insured. From the insurer they receive indemnity after shortage of yield caused by any natural calamities. According to the information of the Agriculture Insurance company of India Limited (AICIL) the large number of farmers of different Blocks of Hooghly district were affected by natural calamities such as pest, different types of diseases, fog, or even inferior quality of HYV seeds, shortage of irrigation facilities etc in the years of 2006-07, 2007-08,2008-09, and 2009-10. 5.8.1. Impact of Insurance Participation on Area under Cultivation of Potato From table-5.8.1 we find that both the insurance participation (-13.077) and the time coefficient (-0.060) are negatively related to the total area under cultivation of Potato in the restricted model. These relations are statistically significant at one percent level of significance. That means, due to crop insurance, the insured area increases but the total area under cultivation diminishes. We also remark that in this case the problem of moral hazards or as well as adverse selection problems will arise. Therefore, the growth rate (-5.823%) of area under cultivation of Potato is also negative and significant. Refer to table-5.8.1. In the un-restricted model, both the insurance participation (0.443) and the time (0.001) coefficients are positively related to the cultivation of Potato. These relations are statistically insignificant. Therefore, the growth rate (1.116%) of area is also positive but insignificant. It is observed that the large farms generally misuse the crop loan to the nonagricultural activities. Thus, over time insured farms increases as well as insured area increases but the total area under cultivation of Potato does not increase. The education level is insignificant to increase the area under cultivation of Potato. 244

Table-5.8.1.Regression Results of Area under Cultivation of Potato on Insurance Participation Dependent Variable: LOG(POTATOLAND @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coeffici ent t-statistic Explanatory Variables Coeffic Error ient Error t-statistic Constant 1.539 0.222 6.925* Constant 12.635 0.115 109.998* LOG(INSPART) -13.077 0.632-20.696* DMD -0.551 0.083-6.656* LOG(EDUCATION) -0.051 0.092-0.556 DSMD -2.790 0.848-3.290* TIME -0.060 0.022-2.676* DSML -3.570 0.841-4.244* DMRG -3.887 0.859-4.523* LOG(INSPART) 0.443 0.274 1.615 LOG(EDUCATION) 0.012 0.023 0.522 TIME 0.001 0.006 0.197 DMD*LOG(INSPART) 0.050 0.021 2.374* DSMD*LOG(INSPART) 0.066 0.029 2.246* DSML*LOG(INSPART) 0.082 0.038 2.176** DMRG*LOG(INSPART) 0.098 0.046 2.131** DMD*LOG(EDUCATION) -0.030 0.380-0.078 DSMD*LOG(EDUCATION) 0.012 0.330 0.035 DSML*LOG(EDUCATION) 0.026 0.029 0.905 DMRG*LOG(EDUCATION) -0.050 0.034-1.479 DMD*TIME 0.029 0.008 3.649* DSMD*TIME 0.038 0.012 3.188* DSML*TIME 0.056 0.021 2.647* DMRG*TIME 0.070 0.017 4.123* Diagnostic Statistic R-squared: 0.58 R-squared: 0.96 Adjusted R-squared: 0.58 Adjusted R-squared: 0.96 F-statistic: 2237.180* F-statistic: 4038.592* Durbin-Watson statistic: 0.858 Durbin-Watson statistic: 1.764 F-statistic (19,1755) for testing the Restrictions: 18.305* 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 Refer to table-5.8.1. The insurance participation and time coefficients are positive as well as significantly related to the total area under cultivation of Potato for medium, semi-medium, small and marginal farms. This implies that over time more medium, semi-medium, small and marginal farms try to include large area under crop insurance scheme. It is also observed that all 245

the differential intercepts and all the differential slope coefficients are statistically significant for all farm-sizes. Thus, the LOG(POTATOLAND) functions of medium, semi-medium, small and marginal farms are different from that of the large farm. But the education level is less important to increase the area under cultivation of Potato for all farm-sizes. With reference to tables 5.8.1 and 5.8.1A we observed that the insurance effect on the area under cultivation of Potato is in the highest level for the marginal farm followed by the small farm. It varies inversely with the farm-sizes. Also the growth rate of area is highest for the marginal farm and varies inversely with the farm-sizes. As the Potato is an important risky commercial crop, they always try to come under the net of crop insurance scheme. By the crop insurance scheme they get cash money to bear the cost of production. Table-5.8.1A. Inter-Farm-Size Effects on Use of Area under Cultivation of Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 12.635 0.344 0.012 0.011 1.116 Medium Farm 12.084 0.493-0.018 0.030 3.082 Semi-Medium Farm 9.846 0.509 0.024 0.040 4.040 Small Farm 9.065 0.525 0.038 0.057 5.878 Marginal Farm 8.748 0.541-0.038 0.071 7.395 Source: Author s own computation based on former table-5.8.1. 5.8.2. Impact of Insurance Participation on Total Production of Potato Refer to table-5.8.2. Both the coefficients of insurance participation and time are significantly related to the total production of Potato. But the relations between the insurance participation and time with the total output of Potato are negative. That means though the insurance participation for Potato increases but the production decreases. In this case either the problem of moral hazards or the problem of the quality of the seeds is vital. The growth rate of total production is 246

negative (-8.24) and insignificant. The education level is insignificant to change the total production of Potato. From table-5.8.2 we observed that in the unrestricted model, both the insurance participation and the education level are positively and insignificantly related to the total production of Potato for the large farm. But the time coefficient is significant which is indirectly related to the total production of Potato of the large farm. As the time coefficient is negative the growth rate of output (-0.207) of the large farm is also negative. In case of the Potato, the credit limit of the banks is very high compared to the other crops. The large farms take the maximum amount of loan. They use the crop loan for the non-agriculture activities. Besides they also cultivate the crop casually so we may expect the problem of moral hazards will arise. With reference to table-5.8.2 we find that the total production of Potato is positively related to the insurance participation of the other farm-sizes. But this relation is significant only for small and marginal farms. Most of the farms belong to the small and marginal farms. They are also economically weak. Therefore, they are more interested to take crop insurance. On the other hand, the time coefficients are positive and significantly related to the total production of medium, semi-medium, small and marginal farms. Refer to table-5.8.2a. The insurance effect on the total production of Potato is in the highest level for marginal farm followed by the small farm. It varies inversely with the farm-sizes. Similarly the growth rate of total production is highest for the marginal farm and varies inversely with the farm-sizes. In this case the education level is insignificant to influence the total production of Potato for all farm-sizes. 247

Table-5.8.2. Regression Results of Total Production of Potato on Insurance Participation Dependent Variable: LOG(TPRODUCT @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 7.074 0.205 34.586* Constant 10.801 0.121 89.575* LOG(INSPART) -11.579 0.582-19.911* DMD -0.464 0.087-5.347* LOG(EDUCATION) -0.042 0.084-0.499 DSMD -1.643 0.089-18.466* TIME -0.086 0.021-4.192* DSML -2.388 0.088-27.039* R-squared: 0.65 Adjusted R-squared: 0.65 F-statistic: 4412.037* Durbin-Watson statistic: 0.944 DMRG -3.064 0.090-33.966* LOG(INSPART) 0.418 0.398 1.210 LOG(EDUCATION) 0.017 0.025 0.696 TIME -0.002 0.001-1.659*** DMD*LOG(INSPART) 0.063 0.339 0.185 DSMD*LOG(INSPART) 0.098 0.121 0.808 DSML*LOG(INSPART) 0.119 0.064 1.849*** DMRG*LOG(INSPART) 0.153 0.084 1.817*** DMD*LOG(EDUCATION) -0.024 0.074-0.316 DSMD*LOG(EDUCATION) 0.000 0.044-0.011 DSML*LOG(EDUCATION) 0.040 0.030 1.324 DMRG*LOG(EDUCATION) -0.049 0.032-1.543 DMD*TIME 0.031 0.004 7.535* DSMD*TIME 0.046 0.018 2.489* DSML*TIME 0.061 0.027 2.251* DMRG*TIME 0.075 0.034 2.219** Diagnostic Statistic R-squared: 0.96 Adjusted R-squared: 0.96 F-statistic: 3060.903* Durbin-Watson statistic: 1.651 F-statistic (19,1755) for testing the Restrictions: 18.305* 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 248

Table-5.8.2A. Inter-Farm-Size Effects on Total Production of Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 10.801 0.418 0.017-0.002-0.207 Medium Farm 10.336 0.481-0.006 0.029 2.956 Semi-Medium Farm 9.157 0.516 0.017 0.044 4.478 Small Farm 8.413 0.537 0.057 0.058 6.022 Marginal Farm 7.737 0.571-0.032 0.073 7.590 Source: Author s own computation based on former table-5.8.2. 5.8.3. Impact of Insurance Participation on Yield Rate of Potato Refer to the table-5.8.3. In the restricted model, it is observed that the insurance participation is directly and also significantly related to the yield rate of Potato. On the other hand, the time coefficient is negatively and significantly connected to the yield rate. Therefore the growth rate of yield is also negative (-2.566%). From table-5.8.3 we find that both the insurance participation and the time coefficient are negatively and insignificantly related to the yield rate for large farm. The education level is positively and insignificantly related to the yield rate. Therefore, the growth rate of yield is also negative (-1.308%). From the analysis of descriptive statistics, we have shown that the average yield rate is lowest for large farm. Refer to table-5.8.3. The yield rate is positively related to the insurance participation for medium, semi-medium, small and marginal farms. But this relation is insignificant only for medium farm. It is shown that the time coefficients of medium, semi-medium, small and marginal farms are positively and significantly related with the yield rate of Potato. In general, the average yield rate varies inversely with the farm-sizes. Moreover, as all the differential intercepts and all the differential slope coefficients are statistically significant, the panel regression functions of the yield rate of medium, semi-medium, small and marginal farms are different from that of the large farm. 249

With reference to table-5.8.3a we observed that the insurance effect is indirectly related to the farm-size. The growth rate of yield is highest for the semi-medium farm followed by marginal farm. On the other hand, the education effect is negative only for the semi-medium farm. Table-5.8.3. Regression Results of Yield Rate of Potato on Insurance Participation Dependent Variable: LOG(YIELD @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 5.536 0.025 223.453* Constant 5.602 0.042 133.760* LOG(INSPART) 1.564 0.070 22.205* DMD -0.065 0.030-2.168** LOG(EDUCATION) 0.010 0.010 0.969 DSMD -1.149 0.159-7.220* TIME -0.026 0.002-10.600* DSML -2.580 0.677-3.814* DMRG -3.973 1.313-3.025* LOG(INSPART) -0.025 0.088-0.280 LOG(EDUCATION) 0.009 0.009 0.999 TIME -0.003 0.002-1.547 DMD*LOG(INSPART) 0.013 0.118 0.111 DSMD*LOG(INSPART) 0.032 0.009 3.451* DSML*LOG(INSPART) 0.037 0.012 3.167* DMRG*LOG(INSPART) 0.054 0.019 2.936* DMD*LOG(EDUCATION) 0.003 0.020 0.141 DSMD*LOG(EDUCATION) -0.016 0.012-1.337 DSML*LOG(EDUCATION) 0.010 0.098 0.098 DMRG*LOG(EDUCATION)) -0.002 0.024-0.080 DMD*TIME 0.002 0.001 1.641*** DSMD*TIME 0.007 0.003 2.521* DSML*TIME 0.005 0.002 2.073** DMRG*TIME 0.005 0.001 3.995* R-squared: 0.42 Adjusted R-squared: 0.42 F-statistic: 843.845* Durbin-Watson statistic: 1.094 Diagnostic Statistic R-squared: 0.77 Adjusted R-squared: 0.76 F-statistic: 317.759* Durbin-Watson statistic: 2.069 F-statistic (19,1755) for testing the Restrictions: 18.305* 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 250

Table-5.8.3A. Inter-Farm-Size Effects on Yield Rate of Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 5.602-0.025 0.008-0.013-1.308 Medium Farm 5.537-0.012 0.011-0.001-0.123 Semi-Medium Farm 4.453 0.007-0.008 0.004 0.421 Small Farm 3.022 0.012 0.018 0.001 0.136 Marginal Farm 1.629 0.030 0.007 0.002 0.181 Source: Author s own computation based on former table-5.8.3. Figure-5.8.1 251

5.9. Impact of Insurance Participation on Use of Inputs for Potato Refer to tables 5.9.1, 5.9.2, 5.9.3, 5.9.4 and 5.9.5. In the restricted model, both the insurance participation and time coefficient are positively and significantly related to the cost of all inputs. The growth rate of labour cost is higher than those of the growth rate of other factors of production. With reference to tables 5.9.1, 5.9.2, 5.9.3, 5.9.4 and 5.9.5 we find that in the unrestricted model, both the insurance participation and time coefficient are positively and significantly related to the cost of all inputs for the large farm. On the other hand the growth rate of fertilizer cost is higher than those of the growth rate of other factors cost of production for large farm. As the average fertilizer consumption per acre is highest for the Potato compared to the other factors. Refer to table-5.9.1. Both the insurance participation and time coefficient are negatively and significantly related to the labour cost for the medium, semi-medium, small and marginal farms. On the other hand the education is positively related to the labour cost. But this relation is irrelevant. From table-5.9.1a we observed that the insurance effect on the labour cost is highest for the large farm. The growth rate of labour cost is also in the highest level and significant for large farm. All the agricultural activities of the large farm are done by the hiring labour. It is also observed that the growth rate of labour cost varies directly with the farm-sizes. The insurance effect on the use of the labour input for Potato is clearly understood from the bar diagram in the figure-5.9.1. 252

Table-5.9.1. Regression Results of Use of Labour Input for Potato on Insurance Participation Dependent Variable: LOG(LABOURCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 15.412 0.026 595.587* Constant 16.085 0.049 326.546* LOG(INSPART) 1.623 0.074 22.060* DMD -0.051 0.020-2.500* LOG(EDUCATION) -0.009 0.011-0.821 DSMD -2.842 0.356-7.975* TIME 0.113 0.003 43.726* DSML -4.026 0.224-17.971* DMRG -5.219 0.369-14.163* LOG(INSPART) 0.760 0.104 7.312* LOG(EDUCATION) -0.022 0.010-2.153** TIME 0.025 0.002 10.429* DMD*LOG(INSPART) -0.216 0.139-1.557 DSMD*LOG(INSPART) -0.328 0.126-2.609* DSML*LOG(INSPART) -0.428 0.137-3.134* DMRG*LOG(INSPART) -0.566 0.128-4.434* DMD*LOG(EDUCATION) 0.020 0.051 0.390 DSMD*LOG(EDUCATION) 0.022 0.016 1.389 DSML*LOG(EDUCATION) 0.031 0.023 1.336 DMRG*LOG(EDUCATION) 0.017 0.015 1.184 DMD*TIME -0.011 0.003-3.738* DSMD*TIME -0.016 0.003-4.507* DSML*TIME -0.017 0.002-8.031* DMRG*TIME -0.021 0.003-5.960* Diagnostic Statistic R-squared: 0.46 Adjusted R-squared: 0.46 F-statistic: 1064.888* Durbin-Watson statistic: 0.873 R-squared: 0.78 Adjusted R-squared: 0.78 F-statistic: 354.350* Durbin-Watson statistic: 1.877 F-statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @LABOURCOST for the period 2006-2010 has been calculated at the market wage rate of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 253

Table-5.9.1A. Inter-Farm-Size Effects on Use of Labour Input for Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 16.085 0.760-0.022 0.025 2.555 Medium Farm 16.035 0.544-0.002 0.014 1.460 Semi-Medium Farm 13.243 0.431 0.000 0.010 0.975 Small Farm 12.060 0.332 0.009 0.008 0.805 Marginal Farm 10.866 0.194-0.004 0.005 0.471 Source: Author s own computation based on former table-5.9.1. Insurance Effect Insurance Effect on Use of Labour for Potato 0.800 0.700 0.600 0.500 0.400 0.300 0.200 0.100 0.000 0.760 0.544 0.431 0.332 0.194 Large Medium Semi-Medium Small Marginal Farm-Size Figure-5.9.1 254

Figure-5.9.2. Regression Results of Use of Seed Input for Potato on Insurance Participation Dependent Variable: LOG(SEEDCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 10.451 0.025 412.422* Constant 10.813 0.044 243.469* LOG(INSPART) 1.490 0.072 20.680* DMD -0.571 0.238-2.402* LOG(EDUCATION) -0.018 0.010-1.724 DSMD -0.871 0.328-2.657* TIME 0.097 0.003 38.048* DSML -1.062 0.392-2.711* R-squared: 0.48 Adjusted R-squared: 0.48 F-statistic: 1153.204* Durbin-Watson statistic: 1.255 DMRG -2.017 0.867-2.326* LOG(INSPART) 0.210 0.127 1.657*** LOG(EDUCATION) -0.016 0.009-1.771*** TIME 0.015 0.002 7.077* DMD*LOG(INSPART) -0.072 0.125-0.578 DSMD*LOG(INSPART) 0.058 0.011 5.091* DSML*LOG(INSPART) 0.075 0.007 10.066* DMRG*LOG(INSPART) 0.129 0.025 5.147* DMD*LOG(EDUCATION) 0.010 0.037 0.274 DSMD*LOG(EDUCATION) 0.006 0.016 0.401 DSML*LOG(EDUCATION) 0.009 0.011 0.821 DMRG*LOG(EDUCATION) 0.009 0.013 0.693 DMD*TIME 0.020 0.008 2.486* DSMD*TIME 0.022 0.004 5.437* DSML*TIME 0.026 0.003 8.514* DMRG*TIME 0.037 0.012 3.077* Diagnostic Statistic R-squared: 0.80 Adjusted R-squared: 0.80 F-statistic: 389.310* Durbin-Watson statistic: 1.719 F-statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @SEEDCOST for the period 2006-2010 has been calculated at the market seed price of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 255

Refer to tables 5.9.2 and 5.9.3. Both the seed cost and irrigation cost are positively and significantly related to the insurance participation for semi-medium, small and marginal farms. On the other hand, both the seed cost and irrigation cost are insignificantly related to the insurance participation for the medium farm. The time coefficients are positively and significantly related to both the seed cost and irrigation cost for medium, semi-medium, small and marginal farms. It is also observed that all the differential slopes and all the differential intercept coefficients are statistically significant for the panel regression equations of the seed cost and irrigation cost for semi-medium, small and marginal farms. This implies that the panel regression functions of the seed cost and irrigation cost for semi-medium, small and marginal farms are different from that of large farm. Figure-5.9.2A. Inter-Farm-Size Effects on Use of Seed Input for Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 10.813 0.210-0.016 0.015 1.556 Medium Farm 10.242 0.138-0.006 0.036 3.652 Semi-Medium Farm 9.942 0.268-0.010 0.038 3.822 Small Farm 9.750 0.284-0.007 0.042 4.269 Marginal Farm 8.796 0.339-0.007 0.053 5.410 Source: Author s own computation based on former figure-5.9.2. From tables 5.9.2A and 5.9.3A we find that both the insurance effect and time effect of seed cost and irrigation costs vary inversely with the farm-sizes. Both the growth rate of seed cost and irrigation cost vary indirectly with the farm-sizes. Both the small and marginal farms are economically weak. They are able to take different types of risky steps after coming into the insurance group. They are able to purchase the high quality of seeds. The cost of the seeds increases due to increase in the use of the quantity of HYV seeds because the price is fixed. 256

Figure-5.9.3. Regression Results of Use of Irrigation for Potato on Insurance Participation Dependent Variable: LOG(IRRIGATIONCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 11.605 0.102 113.253* Constant 12.133 0.325 37.381* LOG(INSPART) 0.851 0.291 2.920* DMD -0.300 0.123-2.427* LOG(EDUCATION) -0.016 0.042-0.374 DSMD -1.157 0.240-4.830* TIME 0.085 0.010 8.251* DSML -1.792 0.238-7.538* R-squared: 0.53 Adjusted R-squared: 0.53 F-statistic: 1565.782* Durbin-Watson statistic: 0.894 DMRG -3.442 1.143-3.012* LOG(INSPART) 0.408 0.685 0.596 LOG(EDUCATION) 0.057 0.066 0.867 TIME 0.009 0.002 5.604* DMD*LOG(INSPART) 0.067 0.913 0.073 DSMD*LOG(INSPART) 0.198 0.103 1.927*** DSML*LOG(INSPART) 0.321 0.090 3.570* DMRG*LOG(INSPART) 0.481 0.084 5.713* DMD*LOG(EDUCATION) 0.069 0.081 0.853 DSMD*LOG(EDUCATION) -0.053 0.093-0.571 DSML*LOG(EDUCATION) -0.052 0.286-0.181 DMRG*LOG(EDUCATION) -0.214 0.958-0.223 DMD*TIME 0.026 0.012 2.167** DSMD*TIME 0.053 0.029 1.809*** DSML*TIME 0.067 0.036 1.855*** DMRG*TIME 0.039 0.023 1.710*** Diagnostic Statistic R-squared: 0.88 Adjusted R-squared: 0.88 F-statistic: 763.557* Durbin-Watson statistic: 678.184 F-statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @IRRIGATIONCOST for the period 2006-2010 has been calculated at the market price of 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 257

Potato is an important winter season crop which is also known as the commercial crop in Hooghly district. In winter season due to the following reasons the problems of the uncertain irrigation facility arises. So the cost of irrigation increases. Uncertainty of monsoon rain: every year due to uncertain regular and equal rain fall in the monsoon. Besides, irregularities in the rain-fall force the farms to take artificial irrigation facility. Shortage of the winter rain-fall: in the State of West Bengal a large section of the agricultural land depends on the rainfall of monsoon period (May to August). As a result in the dry season basically in the winter season for certain and sufficient irrigation facility, the farms depend on artificial irrigation process. Unequal distribution of rainfall: due to the unequal distribution of rain-fall it is necessary to stress on the artificial irrigation facility. Excess evaporation: due to the excess evaporation, the humidity of the land decreases and most of the rivers remain dry in the winter and summer season. Difference in the capacity of water holding of the different cultivable land. Increase in the use of land for the multi-cropping purpose in the winter season. To give the special importance on the production of the commercial crops. Increase in the HYV seeds in the cultivation of Potato. Figure-5.9.3A. Inter-Farm-Size Effects on Use of Irrigation for Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 12.133 0.408 0.055 0.009 0.854 Medium Farm 11.834 0.474 0.127 0.035 3.561 Semi-Medium Farm 10.976 0.606 0.004 0.062 6.383 Small Farm 10.341 0.729 0.006 0.076 7.845 Marginal Farm 8.691 0.889-0.156 0.048 4.892 Source: Author s own computation based on former figure-5.9.3. 258

Table-5.9.4. Regression Results of Use of Fertiliser for Potato on Insurance Participation Dependent Variable: LOG(FERTILISERCOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 12.181 0.033 372.252* Constant 12.684 0.084 150.739* LOG(INSPART) 1.777 0.093 19.098* DMD -0.660 0.241-2.745* LOG(EDUCATION) -0.013 0.014-0.953 DSMD -1.997 0.506-3.948* TIME 0.137 0.003 41.844* DSML -2.098 0.492-4.262* R-squared: 0.50 Adjusted R-squared: 0.50 F-statistic: 1309.542* Durbin-Watson statistic: 1.089 DMRG -4.239 0.965-4.394* LOG(INSPART) 0.608 0.177 3.425* LOG(EDUCATION) -0.013 0.017-0.738 TIME 0.039 0.041 0.946 DMD*LOG(INSPART) -0.007 0.002-2.955* DSMD*LOG(INSPART) 0.018 0.002 8.341* DSML*LOG(INSPART) 0.039 0.011 3.414* DMRG*LOG(INSPART) 0.073 0.022 3.337* DMD*LOG(EDUCATION) -0.004 0.024-0.154 DSMD*LOG(EDUCATION) 0.011 0.042 0.253 DSML*LOG(EDUCATION) 0.031 0.074 0.423 DMRG*LOG(EDUCATION) -0.007 0.025-0.267 DMD*TIME 0.022 0.003 8.348* DSMD*TIME 0.038 0.006 6.462* DSML*TIME 0.055 0.009 6.360* DMRG*TIME 0.059 0.005 11.572* Diagnostic Statistic R-squared: 0.81 Adjusted R-squared: 0.80 F-statistic: 407.854* Durbin-Watson statistic: 1.629 F-statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @FERTILISERCOST for the period 2006-2010 has been calculated at the market price of fertiliser in 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 259

With reference to table-5.9.4 and table-5.9.5 we observed that both the insurance participation and time coefficients are positively related to the fertilizer and pesticide cost for the medium, semi-medium, small and marginal farms. It is also observed that all the differential slope and all the differential intercept coefficients are statistically significant for the panel regression equations of fertilizer and pesticide cost for medium, semi-medium, small and marginal farms. This implies that the panel regression functions of both the fertilizer cost and pesticide cost for medium, semi-medium, small and marginal farms are different from that of large farm. The cost of fertilizer and pesticide increases due to the following important reasons. Such as: Increase in the use of cultivable land for the multi-cropping purpose in the winter season To give the special importance on the production of the commercial crops Increase in the HYV seeds in the cultivation of Potato Different types of seminar or meeting organized by the different fertilizer and pesticide companies with the help of different Co-Operative banks to the farms that finally stimulate the farms to increase the use of fertilizer and pesticide Refer to tables 5.9.4A and 5.9.5A. The insurance effects vary inversely with farm-sizes both for the fertilizer and pesticide cost. On the other hand the growth rate of fertilizer cost varies inversely with the farm-sizes but the growth rate of pesticide cost varies directly with the farmsizes. Table-5.9.4A. Inter-Farm-Size Effects on Use of Fertiliser for Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 12.684 0.608-0.012 0.037 3.794 Medium Farm 12.024 0.601-0.016 0.061 6.257 Semi-Medium Farm 10.687 0.626-0.002 0.077 8.018 Small Farm 10.586 0.646 0.019 0.094 9.883 Marginal Farm 8.445 0.681-0.019 0.098 10.309 Source: Author s own computation based on former Table-5.9.4. 260

Table-5.9.5. Regression Results of Use of Pesticide for Potato on Insurance Participation Dependent Variable: LOG(PESTICIDECOST @ ); Sample: 2006-2010; Cross-sections included: 355; Total panel (balanced) observations: 1775 Restricted Model Un-Restricted Model Explanatory Variables Coefficient Error t-statistic Explanatory Variables Coefficient Error t-statistic Constant 11.120 0.030 374.644* Constant 11.486 0.069 165.718* LOG(INSPART) 1.473 0.084 17.455* DMD -0.120 0.050-2.403* LOG(EDUCATION) -0.002 0.012-0.153 DSMD -0.419 0.176-2.377* TIME 0.118 0.003 39.568* DSML -1.158 0.508-2.281* R-squared: 0.51 Adjusted R-squared: 0.50 F-statistic: 1371.029* Durbin-Watson statistic: 0.947 DMRG -2.239 0.775-2.889* LOG(INSPART) 0.535 0.146 3.662* LOG(EDUCATION) -0.013 0.014-0.919 TIME 0.028 0.003 8.285* DMD*LOG(INSPART) 0.040 0.020 2.051** DSMD*LOG(INSPART) 0.049 0.018 2.773* DSML*LOG(INSPART) 0.052 0.021 2.458* DMRG*LOG(INSPART) 0.066 0.018 3.668* DMD*LOG(EDUCATION) -0.006 0.198-0.030 DSMD*LOG(EDUCATION) 0.021 0.020 1.055 DSML*LOG(EDUCATION) 0.031 0.983 0.032 DMRG*LOG(EDUCATION)) 0.035 0.462 0.076 DMD*TIME -0.009 0.005-1.956** DSMD*TIME -0.022 0.008-2.534* DSML*TIME -0.024 0.009-2.559* DMRG*TIME -0.027 0.002-10.824* Diagnostic Statistic R-squared: 0.75 Adjusted R-squared: 0.75 F-statistic: 298.536* Durbin-Watson statistic: 2.000 F-statistic (19,1755) for testing the Restrictions: 18.305* Source: Author s own computation based on primary data collected during the period 2006-2010 @PESTICIDECOST for the period 2006-2010 has been calculated at the market price of pesticide in 2006 * stands for significant at 1% level of significance; ** stands for significant at 5% level of significance; *** stands for significant at 10% level of significance 261

Table-5.9.5A. Inter-Farm-Size Effects on Use of Pesticide for Potato Farm-Size Intercept Insurance Effect Education Effect Time Effect Growth Rate Large Farm 11.486 0.535-0.013 0.028 2.860 Medium Farm 11.366 0.575-0.019 0.019 1.891 Semi-Medium Farm 11.068 0.585 0.008 0.007 0.672 Small Farm 10.328 0.587 0.018 0.004 0.429 Marginal Farm 9.247 0.601 0.022 0.001 0.131 Source: Author s own computation based on former table-5.9.5. Figure-5.9.2 262

5.10. Conclusion We would like to conclude that the average production is highest for large farms and lowest for marginal farms for all crops. The variation or fluctuation of production is decreased with increase in the farm-size. Another important point is that the yield rate varies inversely with the farm-size but the fluctuation of yield varies directly with the farm-size. The variability of cost of input per acre is also highest in case of marginal farms and lowest for large farms that is variation is inversely related with the farm-size. On the whole, the insurance participation of a crop is also highest for both marginal and small farms as the numbers of both types of farm-size are very large in the district of Hooghly. In general among the different crops, the average trend of insurance participation is highest for Potato in the all types of farm-size in the district of Hooghly. We have observed that the significant statistical different exist between Boro Paddy and Aman Paddy at the one percent level of significance for all types of farms. The significant difference of insurance participation between Potato and Aman Paddy also exist for different farm-size. From the analysis of test of mean difference of insurance participation between different farms, the significant difference exists between large farms with medium, small and marginal farms for all crops. Furthermore statistically significant difference exists between semi-medium and small farms for all study crops, and also the mean difference for the crops between medium and marginal is statistically significant at five percent level of significance. The insurance effect on area, insurance effect on total output and insurance effects on yield rate continuously increase with the decrease of the farm-size for Aman Paddy, Boro Paddy and Potato. The growth rate of area, growth rate of output and growth rate of yield are increased with the decrease in the farm-sizes. The overall education effect is insignificant for all types of farms for all crops under study. We have found that in the case of Aman Paddy the insurance effect and the growth rate costing of the labour input is highest for large farm and lowest for marginal farm. The insurance effect on use of labour varies inversely with farm-size. The insurance effect as well as time effect of the 263

seed cost are indirectly related with the farm-size. Similarly the growth rate of seed cost and the farm-size are negatively related. Both the insurance effect and education effect are directly related with the farm-size for irrigation cost. The growth rate of irrigation cost varies inversely with farm-size. The insurance effect on fertilizer and pesticide for Aman Paddy reaches the highest level for marginal farm and it is in the lowest level for large farm. Both the growth rate of fertilizer and pesticides cost arrive at the highest extent in the case of small and marginal farms and the lowest level for large farm. We observed that the insurance effect on use of labour cost for Boro Paddy is the highest extent for large farms. The growth rate of labour cost reaches at the highest point for large farm. On the other hand the insurance effect on use of labour cost is in the lowest position for medium farms. The growth rate of labour cost is in the lowest level for marginal farms followed by small farms but both are significant. The insurance effect on seed cost and fertilizer cost is in the highest position for marginal farms and it is the lowest extent for medium farms. The growth rate of irrigation cost, fertilizer cost and pesticide cost for Boro Paddy vary indirectly with the farmsizes. The insurance effect on pesticide cost is in the highest position for the marginal farms and it is followed by the small farms. On the other hand the insurance effect and also the growth rate of pesticide cost are in the lowest position for the large farms. We also observe that the education effect on all inputs for all farm-sizes is insignificant. The labour cost for Potato is in the highest level for the large farm. Both the insurance effect and the growth rate of labour cost are highest for large farm. On the other hand both the insurance effect and the growth rate of the labour cost are lowest for the marginal farms and it is followed by the small farms. The education effect on the labor cost for the semi-medium farm size is zero and is negative for the large, medium and marginal farms. The seed cost for Potato is lowest for the medium farms and it is followed by the large farms. On the other hand, the insurance effect on the use of seeds cost is highest for the marginal farms and 264

it is followed by the small farms. The growth rate of the seeds cost of the marginal farms is highest and it is followed by the small farms. The education effect on the seed cost of the different farm-sizes is negative and insignificant. The education effect on the irrigation cost is negative for the marginal farm size and positive and insignificant for the remaining farm-sizes. The growth rate of irrigation cost is highest for the large farm and lowest for the medium farms for Potato. The growth rate of the fertilizers cost of the marginal farms is highest and it is lowest for the large farms in the case of Potato. But the growth rate of pesticide cost is highest for the large farm and it is followed by the medium farm. On the other hand, the insurance effect on fertilizer and pesticide cost is lowest for the large farm and it is highest for the marginal farm and followed by the small farm. The education effect on the pesticide cost due to the insurance participation is insignificant for all types of farms. 265