Evaluating the Financial Impact of Insurance on Farmers: A Case Study from Andhra Pradesh, India

Abstract

Aims: To evaluate the cost-returns and technical efficiency of both insured and non-insured farmers of chilli and cotton in the study area. Study Design: A comprehensive ex post facto study was conducted, collecting data through a stratified random sampling design in the selected villages within the study area. Place and Duration of Study: The study was carried out in the Prakasam district of Andhra Pradesh. The final sample size included 150 farmers, out of which 90 were insured and 60 were non-insured. The study was conducted during the 2023-24 period. However, the data was collected on the costs and returns of chilli and cotton farming during the 2022 Kharif season. Methodology: Cost concepts and stochastic frontier analysis were used to estimate cost returns and technical efficiency in chilli and cotton crops, respectively. Results: The study findings highlighted the significant benefits of crop insurance for farmers. Insured chilli farmers achieved higher yields (40.94 q/ha) and returns (Rs. 722181/ha) compared to non-insured farmers, who had lower yields (39.72 q/ha) and returns (Rs. 700308 /ha). Similarly, insured cotton farmers also experienced better results with higher yields (18.65 q/ha) and returns (Rs. 121280/ha) compared to non-insured cotton farmers, whose yields were 17 q/ha and returns were Rs. 110551 /ha. The technical efficiency of insured farmers (chilli-0.91 and cotton-0.81) was greater than non-insured farmers (chilli-0.84 and cotton-0.75). Conclusion: The current study highlights the vital role of crop insurance in improving the yield, farm income, and efficiency of both chilli and cotton farmers.