The scheme will cover risks due to fire and lightning, storm, hailstorm, cyclone, typhoon, tempest, tornado, floods, inundation, drought, dry spells, pests and disease. However, specific hailstorm insurance cover will also be offered on area approach basis. The exclusions are standards like losses arising out of war and nuclear risks and malicious damage.

According to a draft prepared for the proposed MCIS, the premium and claims will go into the accounts of GIC. But the claims in excess of 150 per cent of premium in the first five years of implementation of the scheme will go into the account of the Union government.

The Union government will support GIC by providing 10 per cent of premium asadministrative expenses and 5 per cent of premium as service charges reimbursable to banks. Premium subsidy in respect of small and marginal farmers will be equally shared by the Union government and the concerned state government of the Union territory.

The premium charged will be based on `actuarial premium rates' worked out at district level for various crops covered. The actuarial premium rates, once applied, will remain in force for a period of three years. The actuarial premium rates as applicable will be worked out in consultation with a professional agency. As the scheme would be based on actuarial rates of premium, efforts will also be made to obtain reinsurance cover in the international reinsurance market.

For this up to 100 per cent of premium will be borne by GIC, between 100 to 150 per cent of premium will be borne by the international reinsurance market and above 150 per cent of premium by the Union government.

Already premium rates has been worked out for kharif and rabi crops for 24districts in 20 states based on exposure rating method developed by Indian Agricultural Statistical Research Institute (IARI) at 60 per cent level of indemnity.

There is also an additional insurance cover in high risk areas for a given crop in respect of indemnity limits beyond 60 per cent and up to 90 per cent. The sum insured would cover the input cost and for this purpose, the sum insured would be equivalent to 100 per cent of loan disbursed in case of loanee farmers and 100 per cent of the scale of finance in case on non-loanee farmers.

The scale of finance is fixed by district level technical committee (DLTC) once, every year for crops grown during kharif and rabi seasons in the district. The scales represents input cost required by a cultivator for growing a crop and is fixed for cash and kind component, separately for each crop.

These scales fixed are mandatory for all crop loan disbursing branches in the district and the actual disbursements should be within the scales fixed. Generally, scale offinance fixed may not be more than two-third of the gross value of the expected produce.

If the actual yield per hectare of the insured crop for the defined area on the basis of requisite number of crop cutting experiments (CCEs) in the insured season, falls short of the specified threshold yield, all the insured farmers growing that crop in the defined area are deemed to have suffered shortfall in their respective yields and the scheme, therefore, seeks to provide coverage against such contingency.

The farmers who avail loans for kharif season in the period April-October will be eligible for insurance with cutoff date for receipt of declaration by November and cutoff date for receipt of yield data by January/March next year. Similarly, the farmers who avail loan for rabi season in the period between October to March next year will be eligible to avail insurance cover with cutoff date for receipt of declaration on May next year and cutoff date for receipt of yield data on July/September next year.

Thebroad cutoff dates for receipt of proposals in respect of non-loanee farmers will be July 31 for the kharif season and December 31, in case of rabi season. However, the state governments, depending on local conditions may recommend suitable seasonality discipline within the broad discipline suggested for these categories of farmers. The state departments will plan and conduct requisite number of crop cutting experiments for all notified crops in the notified insurance units in order to assess the crop yield. The state governments will notify the crops where requisite minimum number of CCEs will be conducted.

The threshold yield or guaranteed yield is 60 per cent of average of past three years yield in case of rice and wheat and five years in case of other crops in a defined area.

If there is a shortfall in the actual yield per hectare of the insured crop as compared to threshold yield, each of the insured farmers growing that crop in the defined area will be eligible for indemnity. This indemnity iscalculated as shortfall in yield divided by threshold yield and multiplied by the sum insured for the farmers.

If there is a crop failure in the mid season due to sudden occurrence of natural calamity like cyclone, floods or drought, affecting the entire defined area, the compensation would be restricted to the input cost incurred till the stage of crop failure and not the total sum insured.

The banks are envisaged to play the same role played under CCIS in respect of loanee farmers. In respect on non-loanee farmers too, banks would play an important role as they have wide network to collect premium and send it to GIC along with the declarations within the prescribed time limits. In order to select the banks, service area approach of RBI or the option of the banks including the cooperative banks will be considered.

The department of agriculture, agricultural statistics and bureau of economics and statistics in the Centre and the department of cooperation of the state governments would be activelyinvolved in smooth implementation of the scheme.

The participating banks would be paid service charges at the rate of 5 per cent of the premium collected in respect of non-loanee farmers in each crop season. Once the yield data is received from state governments, the claims will be worked out as per declarations received from banks for each notified area and approval is obtained.

The claim cheques along with claim particulars will be released to individual nodal banks. The banks at the grassroots level in turn shall credit the accounts of the individual farmers and display the particulars of beneficiaries on the notice board.