The Hindu Business Line : Commerce Ministry sets store by crop insurance for plantations

The Commerce Ministry is seeking the endorsement of the Group of Ministers (GoM) for the implementation of the Rs 729-crore crop insurance scheme for tea, rubber, tobacco, spices (ginger, turmeric, chilli, pepper and cardamom).

The scheme entails subsidy on the annual premium to be fully disbursed by the Central Government out of the earnings of the Price Stabilisation Fund Trust (PSFT) and balance amount of Rs 499.55 crore through budgetary support.

Official sources told Business Line that in the National Agricultural Insurance Scheme (NAIS) under the aegis of the Ministry of Agriculture, the premium is not on actuarial basis with the Government paying all the claims exceeding the premium amount collected in the case of food crops and oilseed and 150 per cent of the premium for other crops. The difference between the actuarial premium and the premium charged from the farmer is the premium subsidy and is gleaned upfront from the Government at the commencement of risk.

However, the sources said, the proposed scheme is based on actuarial regime with Government’s liability restricted to subsidising the premium only and not the claims in excess of premium received as in the case of NAIS.

The main gain in the case of the proposed crop insurance scheme vis-À-vis sharing of premium subsidy as in the case of NAIS is basically “technical and operational and is difficult to wish away”, the sources said contending that under Section 64 VB of the Insurance Act, the entire premium has to be collected in advance before the commencement of risk.

Given that the Centre and State governments are sharing the burden of premium subsidy, the subsidy amount must be received in advance, the sources said adding that as most States do not remit the funds timely, the insurance cover becomes futile or could not commence until the premium subsidy amount is obtained in full by the insurer.

Hence, it is felt that if a single agency viz., the Central Government remits the premium subsidy, the loss of time could be minimised.

Moreover, the proposed crop insurance scheme is seen as replacement/substitute for Price Stabilisation Fund scheme, which is fully funded by the Central Government. Hence, there is a case that the proposed scheme too would be fully funded by the Central Government, the sources said.

When contacted, the Minister of State for Commerce and Power, Mr Jairam Ramesh, said that plantation crops such as tea, rubber, tobacco and spices have enormous potential to earn foreign exchange unlike the crops covered under the National Agricultural Insurance Scheme.

Besides, he said, the crops covered under the proposed crop insurance scheme are vastly grown in the North East States and crucial among them include tea, spices and rubber.

He said the crops covered under the proposed schemes have much longer gestation span than the crops under the NAIS.

Tea, rubber and cardamom plantations mature after a period of 5, 7 and 8 years of planting respectively while the crops covered under the NAIS are either biennial or at best annual.

Mr Ramesh noted that the growers of the plantation crops deserve “a separate treatment” and the sharing of subsidy between the Central and the State governments would impede the smooth implementation of the Scheme.

Insistence on sharing the financial liabilities of the proposed scheme may not only pose technical problems but also may derail the scheme, Mr Ramesh said adding that it would be proper if the entire premium subsidy might be borne by the Central Government. .

Once the Group of Ministers, headed by the Union Minister for Agriculture, Consumer Affairs, Food & Public Distribution, accords its approval, the Commerce Ministry would put up the scheme for the clearance of the Cabinet Committee on Economic Affairs, the sources said.

More Stories on : General Insurance | Plantations

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page