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Monday, Aug 25, 2003

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Centre withholds crop cover claims — Orders verification to end discrepancies

C. Shivkumar

Bangalore , Aug. 24

THE Centre withheld crop insurance claims filed by States such as Karnataka with the General Insurance Corporation of India and has ordered investigations to ascertain the veracity of the claims.

Sources said here that of the Rs 300 crore of claims filed by Karnataka on behalf of the farmers, to partially cover losses due to the drought in the State, only about Rs 40 crore had been cleared. Another Rs 10 crore was expected to be released during the course of the month. However, for the remaining Rs 250 crore, the Centre has asked the Agriculture Finance Corporation to verify the claims, before any settlement could be made.

The sources said that the investigation had been ordered in view of the discrepancies in the claim forms submitted by the State Government agencies, especially with relation to crops and notified areas. "Unless these issues are settled, claim payouts cannot be made," the sources added.

The crop insurance claims are shared equally between the Centre and the State Governments. The premiums range between 1.75 per cent and 5 per cent of the sum assured depending on the nature of the crops.

So far those farmers who have availed themselves of credit from public sector banks, regional rural banks and the cooperative banks were compulsorily covered under the crop insurance scheme. This was to ensure that the insurance cover, which would have to be assigned to the banks, offsets crop losses.

The sources said that the verification had been ordered to ensure that only genuine claims were settled. This was also being done to plug leakages in the crop insurance scheme. Crop insurance has typically had large claims ratios, 13 times the premiums collected. Besides, the sources said, these claims in the past have been mostly from the southern, western and eastern regions of the country, which are most prone to natural calamities.

For the last year, the claims ratios have been high in view of the drought situation, which has affected even part of the northern regions. But the liabilities arising out of these claims are unlikely to impact any of the insurers since the entire claims payouts are equally shared between the Centre and State Government.

In fact it is these high claims ratios that have prevented other insurers from entering the sector, the sources said. The only way that losses in the sector could be corrected was through a hike in premiums consistent with the claims ratios in the sector or through rationalisation of claims.

The sources said that since the former was not possible immediately, the alternative was to ensure that claims were controlled in the sector to more manageable levels.

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Centre withholds crop cover claims — Orders verification to end discrepancies

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