1) Insurance of crops, livestock and farm assets:
– Insurance has following benefits to the farmers:
a) It offers protection to farmers against the failure of crops and stabilize their farm income,
b) It improves credit worthiness of farmers in securing loan from financial agencies
c) It provides confidence to farmers in the adoption of modern agricultural technology,
d) It reduces government responsibility to provide relief in case of crop failure,
e) It reduces complete loss of farm assets.
2) Subsidies and support prices/price stabilization:
– Agricultural products face high price variations due to seasonal fluctuations.
– The risk of market price instability can be dealt with the policy of price stability.
3) Provision of institutional loan and marketing facilities (Credit provision):
– Risk aversion among farmers may also result from lack of capital.
– So sound credit provision to the farmers may help to overcome resistance to the adoption of new technologies.
4) Development of irrigation facilities:
– The most obvious policy response to natural uncertainty is that of irrigation as an answer to rainfall variability to alleviate the risk of drought between one season and the next, and to smooth out within season fluctuations of water supply to plants.
5) Agricultural research and extension/Information (about market, market information, etc.) :
– Where risk-aversion is attributed to inadequate information (about prices, input use, new seeds etc.) then information provision is considered a useful component of risk policy.