2016 The Village Lottery A STUDY OF INDEX BASED AGRICULTURAL INSURANCE IN TAMIL NADU AND THE RESHAPING OF FARMER VULNERABILITY ALEJANDRO POSADA Alejandro Posada 998749449 Thesis submitted in partial fulfillment of the requirements for the degree of Honours B.A. International Development Studies (Co-op) Specialist Presented to Professor Anne-Emanuelle Birn and Professor Ryan Isakson University of Toronto at Scarborough April 2016 Acknowledgement: CIKS, PWSD-CARDS, KKFF Thesis Supervisor: Ryan Isakson Translators: Vinoth Kumar & Sankara Dwayne Kaan All the farmers in Tamil Nadu that helped with the study My Family ii Abstract Index Based Agricultural Insurance (IBAI) is being promoted as the ultimate fix to address the risk faced by farmers in the current context of climate change. India is said to have one of the largest weather-index insurance markets amongst developing countries. However, the success of the product has been questioned because of the low levels of effective demand seen from farmers. Certain studies have suggested that this problem is a result of financial illiteracy amongst farmers. However, these papers have left out the voices of farmers. As such, this paper critically evaluates that claim by incorporating and analyzing farmers’ perceptions and experiences with IBAI in the state of Tamil Nadu. The study consists of two case studies in the districts of Nagapattinam and Tirunelveli, where farmers who had been part of IBAI were interviewed. The study argues that their experiences situate the product within the process of roll-out neo-liberalization. As such, instead of addressing the risk faced by farmers, IBAI introduces and reproduces dimensions of vulnerability by entrenching processes of agrarian financialization, commodification, and modernization. Table of Contents Introduction ................................................................................................................................... 1 1. Literature Review .................................................................................................................... 5 1.1 Relational Political Ecology and Relational Vulnerability ..................................................................5 1.1.1 Relational Political Ecology .........................................................................................................5 1.1.2 Relational Vulnerability ...............................................................................................................7 1.1.3 Limitations and Responses ...........................................................................................................8 1.2 Production of Farmer Vulnerability ..................................................................................................10 1.2.1 Agricultural Transformation ......................................................................................................10 1.2.2 Neoliberal Restructuring: Debates .............................................................................................10 1.3. Development as Financial Inclusion ................................................................................................13 1.3.1 Origins and Critiques .................................................................................................................13 1.3.2 Commodification of Agricultural Risk ......................................................................................17 1.4. Index Based Agricultural Insurance (IBAI) .....................................................................................18 1.4.1 Origins and Debates ...................................................................................................................18 1.4.2 Demand and the Role of the State ..............................................................................................21 2. Methodology ............................................................................................................................ 23 2.1 Motivation and Approach ..................................................................................................................23 2.2 Methods and Rationale ......................................................................................................................25 2.2.1 Data Collection ...........................................................................................................................25 2.2.2 Data Analysis .............................................................................................................................28 2.3. How it was Conducted ......................................................................................................................28 2.3.1 Data Collection ...........................................................................................................................28 2.3.2 Data Analysis .............................................................................................................................31 2.4. Positionality ......................................................................................................................................31 3. Context: Agricultural Transformation in India................................................................... 34 3.1 Modernization of Indian Agriculture .................................................................................................34 iii 3.2 Neoliberal Restructuring in Agriculture: Dismantling of State Support ...........................................39 3.3 Rise of Insurance in India and Failure to Meet Small Farmer Needs ...............................................44 3.4 World Bank and the Weather Index Based Agricultural Insurance ..................................................49 3.5 Development as Financial Inclusion and Problems with Demand of IBAI ......................................52 4. Case Studies: Varsha Bima & Weather Based Crop Insurance Scheme .......................... 54 4.1 Insurance Schemes in Tamil Nadu since 1990s ................................................................................56 4.2 Case Study 1: Varsha Bima the Rainfall Insurance in Nagapattinam Distrcit ..................................57 4.3 Case Study 2: Weather Based Crop Insurance Scheme in Turnulveli Distrcit ................................61 5. Evidence and Analysis: Farmers’ perspective and the reshaping of vulnerability .......... 64 5.1 Farmers Conceptualization of Agricultural Transformation .............................................................64 5.2 Commodification of Agrarian Risk: Traditional Risk Management vs IBAI ...................................70 5.3 Basis Risk: Product Design for IBAI ................................................................................................74 5.4 Financial illiteracy? Farmers Response to Low Demand: IBAI as the “village’s lottery” ................78 5.5 Farmer Agency and Resistance .........................................................................................................86 6. Conclusion: The implications of IBAI in a context of agricultural transformation ......... 89 6.1 IBAI within Constructions of Neoliberal Reason: Roll-out Neoliberalism ......................................90 6.2 Implications for Agrarian Landscapes and Farmer Vulnerability .....................................................92 Work Cited .................................................................................................................................. 98 Appendix 1: Comparison of Yield and Weather Insurance ................................................. 105 Appendix 2: Relational spaces of neoliberlization ................................................................. 106 Appendix 3: Varsha Bima Details ........................................................................................... 107 Appendix 4: Interviews ............................................................................................................ 108 Appendix 5: Interview Questions ............................................................................................ 109 iv Tables and Figures Table 2.1: Actors involved in Study…………………………………………………………… p.25 Figure 3.1: Per capita food grains output and availability in India …...……….........……......... p.43 Table 4.1: Insurance Products in Tamil Nadu and Supply Chain Actors ……………………… p.55 Figure 4.1: Varsha Bima enrollment and payout in Nagapattinam Distrcit …………………… p.59 Figure 4.2: Actors and responsibilities for Varsha Bima ……………………………………… p.60 Figure 4.3: WBCI enrollment and payout in Tirunelveli District ……………………………... p.62 Figure 4.4: Actors and responsibilities for WBCI ……………………………………………... p.63 Table 5.1: Changes in Demand for Varsha Bima ……………………………………………… p.80 Table A.1: Comparison of Yield and Weather Insurance ……………………………………... p.105 Table A.2: Constructions of neoliberal reason ………………………………………………… p.106 Table A.3: Breakdown of all Interviews……………………………………………………….. p.108 Figure A.1: Varsha Bima Details ……………………………………………………………… p.107 Abbreviations Abbreviations Meaning CIKS Centre for Indian Knowledge Systems IBAI Index Based Agricultural Insurance WBCI Weather Based Crop Insurance Scheme NAIS National Agriculture Insurance Scheme MNAIS Modified National Agriculture Insurance Scheme AIC Agriculture Insurance Company of India Limited KKFF Kazhi Kadaimadai Farmer Federation SOFA Sirkazhi Organic Farmers Association IFI International Financial