Cabinet approves new crop insurance scheme

Pradhan Mantri Fasal Bima Yojana to charge 2% of sum assured for kharif crops; 1.5% for rabi crops; 5% for horticulture crops

In a bid to provide a social security net to millions of farmers across the country,  reeling under the impact of  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. To be called Pradhan Mantri Fasal Bima Yojana (Prime Minister’s Crop Insurance Scheme), it 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.

“Farmer brothers and sisters, at a time when you are celebrating festivals like Lohri, Pongal and Bihu, the government has given you a gift in the form of Prime Minister's Crop Insurance Scheme,” Prime Minister Narendra Modi tweeted hours after the Cabinet cleared the proposal.

Modi said the scheme would bring about “a major transformation” to farmers’ lives. “The scheme has the lowest premium, it entails easy usage of technology like mobile phone, quick assessment of damage and disbursement within a time-frame.”

Bharatiya Janata Party (BJP) president Amit Shah and chief ministers of BJP-ruled states congratulated the PM on the scheme. Shah said the new scheme is much simpler compared to earlier programmes and that farmers can now avail more benefits.

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 if a state government does not fulfil its commitment of 50 per cent subsidy sharing, the Centre would step in but 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 business association Assocham, around 20 per cent of India’s 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.

OTHER CABINET DECISIONS

• PANEL ON 7TH PAY COMMISSION: The Cabinet has decided to set up a panel headed by Cabinet Secretary P K Sinha to process the recommendations of the 7th Pay Commission, which will have a bearing on the remuneration of 4.7-million central government employees and 5.2 million pensioners. The additional burden from the implementation of the new pay scales will be Rs 1.02 lakh crore in 2016-17.
• HEALTH PACT: Nod to a pact with Maldives to facilitate greater cooperation between the two countries and assist the neighbouring country in developing human resources in healthcare.
• OCEAN ENERGY: Nod to India becoming a member country of the International Energy Agency — Ocean Energy Systems

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 don’t 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 Rs 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 Rs 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 PM’s 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 don't 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.

“Manmade calamities like fire, theft, burglary, etc, won’t 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.