New farm insurance scheme on the way

The agriculture ministry has decided to scrap the farm income insurance scheme introduced by the previous NDA government and come out with a new and vastly modified version of the national agricultural insurance scheme (NAIS) that has been in vogue since 1999-2000.

The modifications will be based on the recommendations of the joint group which probed into the merits and demerits of the NAIS as well as the functioning of the income insurance scheme.

These recommendations, constrained in its report submitted in December last, have been circulated to the states for their comments before finalising the modified insurance scheme.

The main objective of the farm income insurance scheme, implemented on a pilot basis during the rabi 2003 and kharif 2004 seasons, was to target the two critical components of a farmer's income-crop yield and prices- through a single policy instrument.

However, the concurrent evaluation of the actual performance of the scheme revealed various inherent and practical flaws in it. The joint group, consequently, suggested discontinuation of this scheme.

The old scheme NAIS, which is proposed to be suitably altered and revamped, is being operated by the Agricultural Insurance Company (AIC) promoted specially for this purpose by the public sector insurance companies. At present, it is being implemented in 23 states and two Union territories.

This scheme, too, is actually a loss making venture. Between rabi 1999 and kharif 2004 seasons, the total claims payable under this scheme amounted to Rs 4,992 crore, against the premium income of mere Rs 1,683 crore.

The proposed new insurance scheme could be broad-based, providing the farmers a package of personal insurance, animals insurance and important assets insurance.

In the case of crops insurance, the unit area of insurance coverage could be narrowed down to the jurisdiction of village panchayats, instead of blocks or clusters of villages.

As per the joint group recommendation, the modified insurance scheme should be placed on actuarial regime with indemnity levels of 90 per cent for low risk areas and crops and 80 per cent for other areas and crops.

The government could subsidise the premium actually paid by the farmers. The scheme could cover some pre-sowing risks, such as prevention of sowing due to adverse climate.

The indemnity payable in such cases would range between 20 per cent and 25 per cent of the sum insured. For crops, the threshold or guaranteed yield is proposed to be based on the yield data of the best five out of the seven preceding years.

An individual assessment of claims is proposed to be carried out in case of specified localised calamities, such as hailstorms, landslides and damage caused by wild animals.

The group has also recommended that the AIC should expand its network in terms of district level franchises, rural agents and micro-insurance agents to ensure better services to the farmers. It has also suggested the Income Tax exemption for the AIC and service tax exemption for the crop insurance scheme.