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Harish Damodaran
Phalguna Jandhyala

Awaiting formal nod from the Agriculture Ministry

New Delhi May 27 The Centre is all set to launch the new weather (rainfall) based crop insurance scheme proposed by the Finance Minister, Mr P. Chidambaram, in his 2007-08 Budget speech.

The details of the scheme have been worked out and a formal nod from the Agriculture Ministry for its implementation in the coming 2007 kharif season is expected in a couple of days, official sources told Business Line. It will be launched by Agriculture Insurance Company of India Ltd (AIC) on a pilot sub-district level in 10 tehsils of Maharashtra and 60 hoblies of Karnataka.

Proposals

"The two State Governments have submitted their proposals, including 25-30 years rainfall data for the reference weather stations in the particular tehsils/hoblies. Based on these proposals and also the draft scheme prepared by AIC, a final version will be cleared by the Ministry this week", the sources added.

The proposed rainfall-based insurance scheme is different from the AIC's existing National Agricultural Insurance Scheme (NAIS), which provides farmers cover against actual crop yields in a particular year for a block or taluka falling short of specified guaranteed yields (derived from the preceding five-year average).

Old scheme

The NAIS, despite covering some 1.8 crore farmers, suffers from the lack of reliable methodology for estimating and reporting crop yields. Since yield assessment is made on the basis of crop cutting experiments by the State agricultural departments, there are inevitable problems of delay in settlement of claims (often up to 12 months).

Rainfall indexed

Rainfall-based insurance schemes, by contrast, are seen as more transparent and less cumbersome to administer, especially given that nearly 90 per cent of crop insurance claims in India have been linked to rainfall variations. "Trigger events such as adverse rainfall can be independently verified and measured. The India Meteorological Department (IMD) also has daily and historical data for various rain gauge stations, which allows automatic computation of claim payouts. There is no need for submission of loss information or claims intimation by anyone", the sources pointed out.

The proposed scheme will, however, not be the first that is rainfall-indexed. Similar products have been introduced since 2003-04 by ICICI-Lombard, Iffco-Tokio General Insurance Company (`Baarish Bima') and AIC itself (`Varsha Bima'). But their coverage has been poor due to high premium rates.

Different new scheme

"In the new scheme, the premium will be charged as per actuarial calculations, but the premium payable by the insured cultivator would be capped at 5 per cent. The difference is an upfront subsidy to be borne on a 50:50 basis by the Centre and the States. The total subsidy liability for the identified areas in kharif 2007, assuming 100 per cent coverage, is estimated at Rs 110.04 crore", the sources informed.

More Stories on : Agriculture | Climate & Weather | General Insurance | Cultivation

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