In a bid to provide a social security net to millions of farmers across the country, who have been reeling under the impact of two consecutive droughts, the Union Cabinet on Wednesday approved a new crop insurance scheme having premiums as low as 1.5 per cent of the sum insured.
The scheme, to be called Pradhan Mantri Fasal Bima Yojana (Prime Ministers Crop Insurance Scheme) will charge a uniform premium of two per cent of the sum insured from farmers for all kharif crops and 1.5 per cent for rabi crops. For horticulture crops, the annual premium will be five per cent of the sum insured.
The balance premium would be paid by the government to the insurance companies. This would be shared equally by the Centre and state governments.
For the Centre, there would be no upper limit on the subsidy and even if the balance premium is 90 per cent, it would provide for the same.
This also means that if a state government does not fulfil its commitment of 50 per cent subsidy sharing, the Centre would step in but would not allow the scheme to falter.
Till now, the average premium for all foodgrain crops was as high as 15 per cent, while for horticulture crops, it was even higher.
According to a study by private weather forecasting agency Skymet along with industry association Assocham, around 20 per cent of Indias 130 million farmer families have crop insurance, which is why a vast majority of them are exposed to the vagaries of weather.
Even among loanee farmers, insurance penetration is not 100 per cent, for whom it is mandatory to get an insurance cover as soon as they avail a crop loan.
According to rules, farmers insurance claims have to be settled within 45 days of the risk assessment. However, often, claims are not attended to even after six months, which is a major reason why farmers dont for crop insurance.
There have been many crop insurance schemes in the past, but all of them have some problem or the other. Which is why the total crop insurance cover till now in agriculture is 23 per cent. The present, scheme will solve many such problems and perhaps for the first time after independence, offers the lowest premium rates, Home Minister Rajnath Singh told reporters after the Cabinet meeting.
The new insurance scheme would cost the government ~8,800 crore over the next three years, assuming that 50 per cent of farmers are covered.
At present, with 23 per cent insurance cover, the Centre spends ~3,100 crore a year on crop insurance. The insurance amount covered will also not be capped and so also the premium rates.
This should be seen in the overall context of PMs insurance initiatives through bank accounts, where he first rolled out life insurance and accident insurance and now crop insurance. The scheme has to be significantly different from the earlier ones as till now even loanee farmers dont get insurance cover. We need to see how many farmers actually avail this and to what extent the coverage is provided, Madan Sabnavis, chief economist at CARE Ratings, told Business Standard.
Agriculture Minister Radha Mohan Singh said pre-harvest losses, if the damage occurs while seeds have been planted, will be covered under the new scheme. So will post-harvest losses.
Data for crop cutting experiments could be uploaded through smartphones, mobiles, drones etc to speed up the claim process, said Radha Mohan Singh.
The unit of assessment would be individual farms, against villages in the current insurance schemes.
For farm lands on lease, Urban Development Minister Venkaiah Naidu, who was also in the press conference, said those will be included only if states certify the same.
Manmade calamities like fire, theft, burglary etc wont be covered under the scheme, said Avinash Kumar Srivastava, special secretary, agriculture.
Insurance companies are of the view this will be beneficial since unlike earlier, where there was a claim subsidy, this scheme would offer premium subsidy and would be more affordable to farmers.
Sanjay Datta, chief of underwriting and claims at ICICI Lombard General Insurance, said they would be keen to join this scheme. According to him, catastrophic events could be added to this cover to protect farmers against crop loss/damage due to incidents such as cyclone.
Anuj Tyagi, member of executive management at HDFC ERGO General Insurance, said since farmers premium is low, the uptake of policies would be high.
All the districts in India has been divided into clusters for distribution among insurance companies on a long-term basis to bring about uniformity in premium rates.
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