Government rolls out crop insurance scheme

By: |
New Delhi | Published: January 14, 2016 1:08:25 AM

In a move aimed at reducing the recurrence of agricultural distress without having to effect hefty hikes in the crops' minimum support prices that are at once inflation-inducing and fiscally burdensome...

Under the new scheme, the premia paid by farmers would be reduced to 2% of the insured value for the more rain-dependent kharif crop and 1.5% for the rabi season, compared with 3.5-8% at present under the two existing schemes. (Reuters)Under the new crop insurance scheme, the premia paid by farmers would be reduced to 2% of the insured value for the more rain-dependent kharif crop and 1.5% for the rabi season, compared with 3.5-8% at present under the two existing schemes. (Reuters)

In a move aimed at reducing the recurrence of agricultural distress without having to effect hefty hikes in the crops’ minimum support prices that are at once inflation-inducing and fiscally burdensome, the Modi government has come out with a reinforced crop insurance scheme, Pradhan Mantri Fasal Bima Yojana (PMFBY).

Under the new scheme, the premia paid by farmers would be reduced to 2% of the insured value for the more rain-dependent kharif crop and 1.5% for the rabi season, compared with 3.5-8% at present under the
two existing schemes. In the case of horticultural crops, farmers’ premium burden will be 5% of the sum
assured or 50% of the total premium.

Addressing the media after a Cabinet meeting that approved the new scheme on Wednesday, senior ministers said subsidy by the government would now be “unlimited” and grow a steep 183% to Rs 8,800 crore by FY19. The premium, including the subsidy by the government, would be around 10% of the sum assured, incentive enough for insurance firms.

“There is no upper limit on government subsidy (under PMFBY). Even if the balance premium (after farmers’ contribution) is 90%, it will be borne by the government,” according to an agriculture ministry release.

This would ensure that farmers get the full sum insured without any reduction or hassles from the 11 designated insurance companies if natural calamities ravage their crops. Also, the crop insurance coverage would rise from 45 million hectares or 23% of the area under cultivation now to 50% of the crop area by FY19.

Another benefit to farmers is that losses incurred by them at any stage of the farming activity — from the sowing to the post-harvest season — would be covered under the new scheme. Currently, only post-harvest losses can be offset by the insurance facility under the two existing schemes. Also, even those farmers who haven’t taken bank loans will be eligible for insurance cover under PMFBY.

Gr

“The new scheme will increase farmers’ income and resultant increase in rural demand,” home minister Rajnath Singh said. The subsidy would be borne by the Centre and the state government concerned equally.

Only 20 million of an estimated 120 million farmers in the country — earning for a population four to five times as many — had crop insurance cover in 2014-15, even as the facility was just against the cost of cultivation and barely provided any income protection. According to agriculture ministry data, most of the farmers who took crop insurance were in Rajasthan, Bihar, Uttar Pradesh, Maharashtra, Karnataka and Andhra Pradesh. In terms of the value of the farm output, the current schemes — the Modified National Agricultural Insurance Scheme and the Weather-based Crop Insurance Scheme — fare even more dismally, with a coverage of just 5.5%.

For dealing with delay in settlement of compensation, the new crop insurance policy proposes immediate payment of 25% of the sum insured amount to farmers for crop damage and use of latest technologies — drones, smartphones, mobile apps and satellite imaginary — to assess crop damages in the shortest possible time.

“The expansion of the crop insurance scheme would depend on the number of farmers voluntarily opting for it. Lower premium rates might encourage more farmers to take up crop insurance,” Ajay Vir Jahkar, chairman, Bharat Krishak Samaj, told FE.

Currently, the government-owned Agriculture Insurance Company of India (AICI) and 10 other private sector companies offer crop insurance products to farmers. AICI has the largest share of the market at 65%. The new scheme would cover tenancy farmers who take up farming in land not owned by them. The Centre would ask the state government to provide tenancy certificates to eligible farmers.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Non-financial companies to gain from healthy GDP growth: Moody’s
2NDMC budget for 2016-17 ‘repackages’ old projects
3WEF meet 2016: Arun Jaitley to lead over 100 strong Indian delegation