National

Centre cuts its share in crop insurance scheme by half

It makes enrolment optional for all farmers

The Centre has almost halved its contribution to its own flagship crop insurance schemes, slashing its share of the premium subsidy from the current 50% to just 25% in irrigated areas and 30% for unirrigated areas from the kharif season of 2020.

The Union Cabinet approved the revamp of the Pradhan Mantri Fasal Bima Yojana and the Restructured Weather Based Crop Insurance Scheme at its meeting on Wednesday.

In another significant step, in the two schemes has also been made voluntary for all farmers, including those with existing crop loans. When the PMFBY was launched in 2016, it was made mandatory for all farmers with crop loans to enrol for insurance cover under the scheme.

Announcing the decision after the Cabinet meeting, Agriculture Minister Narendra Singh Tomar said 58% of farmers enrolled in the schemes are loanees who will no longer have to compulsorily take insurance cover. “The numbers [of enrolled farmers] may go down in the first year, but will pick up again after that,” he said, adding that the Centre would launch an awareness campaign to encourage farmers to voluntarily sign up for crop insurance policies. Coverage under the scheme is now 30% of cropped area in the country, according to the government data.

The PMFBY has come in for flak from a wide variety of stakeholders. Farmers groups and Opposition politicians have claimed that private insurance companies have made windfall gains on the scheme. Several major insurers, including ICICI Lombard and Tata AIG, have opted out of the scheme in 2019-20, reportedly due to losses because of high claims ratios. Several States, including Punjab and West Bengal, have refused to participate as well.

The Centre has made changes to the scheme based on consultations with States and inputs from all stakeholders, said Mr. Tomar.

Farmers pay a fixed share of the premium: 2% of the sum insured for kharif crops, 1.5% for rabi crops and 5% for cash crops. Currently, the Centre and States split the balance of the premium equally among themselves.

However, the revamp now reduces the burden on the Centre and increases the share of States, as they will be left to take on 70-75% of the premium subsidy.

In the northeastern States, however, the balance will swing the other way, with the Centre agreeing to take on 90% of the premium subsidy.

So far, the schemes provide a comprehensive insurance package, covering crops from pre-sowing till post-harvest and a wide range of non-preventable natural risks. The restructuring now allows greater flexibility to States. They will now have the “option to select any or many of additional risk covers/features like prevented sowing, localised calamity, mid-season adversity, and post-harvest losses. Further, States/UTs can offer specific single peril risk/insurance covers, like hailstorm etc, under PMFBY even with or without opting for base cover,” said an official statement. States can also choose how to calculate the sum insured for any crop in any district, opting either for the scale of finance or a value based on notional average yield multiplied by minimum support prices.

Also, a separate scheme is being developed to “provide financial support and effective risk mitigation tools through crop insurance especially to 151 districts which are highly water stressed including 29 which are doubly stressed because of low income of farmers and drought,” it added.

The allocation of business to insurance companies will be done for a three-year period, unlike the current system which allows for one year periods.

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Printable version | May 31, 2020 4:32:37 PM | https://www.thehindu.com/news/national/centre-cuts-its-share-in-crop-insurance-scheme-by-half/article30863710.ece

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