This plan was formulated at a meeting convened by the ministry of agriculture in New Delhi last week. "The meeting was attended by state government representatives, the Indian Banks' Association (IBA), officials from GIC and some commercial banks," an IBA official told The Financial Express, adding that GIC is expected to appoint a chief executive for scheme administration. GIC officials, however, were not available for comments.

RKBY was announced by the Prime Minister last month to replace the comprehensive crop insurance (CCI) scheme which extended the insurance cover to select crops only. The cover was available only to loanee farmers, and that too subject to a maximum cover of Rs 10,000.

"This meant that the larger farmers, who availed of bank financegreater than Rs 10,000 did not get full cover. This also made banks vulnerable to default on account of crop failure. Moreover, non-loanee farmers did not get any insurance cover for their crops despite willingness to pay the insurance premium," the IBA official said, adding that these factors made the scheme unpopular and the liabilities of the central and state governments shot up to more than Rs 1,700 crore against the Rs 300 crore premium collected.

However, the new RKBY crop insurance scheme has been made available for a much larger canvas of crops and to non-loanee farmers as well. "Banks would now play a bigger role in administration and marketing of the scheme, collect premium on behalf of GIC and credit the claims received from GIC to the farmers' account after deducting the dues," sources said.

At the last week's meeting, it was decided to divide the states into small "units" of concentration of that crop. "The crop loss will then be assessed on the `units' basis, based on a `crop cuttingexperiment' to be carried out at each harvest time to determine the yield per hectare for each unit," the IBA official said. Each unit will then be divided into three zones according to historical average yields --high risk zone (where the threshold yield is less than 60 per cent of the average), medium risk zone (threshold yield is more than 60 per cent of the average but less than 80 per cent) and low risk zone (where the threshold yield is more than 80 per cent of the average).

The farmers will, therefore, get compensation if the actual yield per hectare is below the threshold. "SLCCCI will formulate policies governing defination of units, crops to be covered, insurance premiumn and the threshold yields," the IBA official said.

A major stumbling block is the absence of historical data on crop yields and GIC will have to evolve its own procedures. However, the administrative expenses and the 50 per cent premium subsidy given to small and marginal farmers will be shared equally between the central andthe state government.

"This subsidy and support will, however, be on a "sunset basis" --100 per cent in the first year and progressively declining to nil subsidy by the fifth year. The differential amount will have to be borne by GIC," the IBA official said.