The Hindu Business Line : Govt reluctant to clear AICIL expansion move

Agricultural Insurance Corporation of India Ltd's (AICIL) attempts to expand its network in all the districts in the country have hit a roadblock, with the Government reluctant to clear the proposal.

Sources said that AICIL had sought permission to strengthen and extend the reach of the farm-specific risk cover, Rashtriya Krishi Bima Yojana.

The product was created to cover farmers of food crops, oil seeds, and commercial and horticultural crops.

The coverage was extended to all farmers in the country, including sharecroppers and tenants.

Besides, small and marginal farmers are eligible for 50 per cent subsidy.

Premium rates on this product launched about three years ago ranges from 1.5 per cent to 3.5 per cent depending on the season.

For extending the reach of the farm risk cover product, AICIL had proposed opening at least 550 branches because its existing network remains confined to metros and some class I cities.

The aim was also to have an extensive branch network so as to ascertain claims data and accelerate settlements.

Currently, AICIL is entirely dependent on State Governments for data verification.

In fact, many State Governments, which also meet a portion of the claims settlements in their respective crop insurance schemes, had supported widening the branch network, the sources said.

The State Government's support was partly because AICIL's expanded operations would help contain fiscal leakages, as part of the crop insurance claims settlements is borne by them.

The sources said that many financial institutions such as Nabard and banks also supported AICIL's proposal because banks are beginning to expand their farm loan portfolios.

At the same time, the proposal was aimed at helping banking institutions to help farmers overcome debt burden, which has been responsible for a spate of suicides in many parts of the country.

Besides, it was aimed at ensuring that bank credit was fully covered and disbursals expedited.

Moreover, greater insurance coverage would help banks keep the capital charge and provisioning low on loans that are credit-insured, especially since banks now have to classify even farm assets into performing and non-performing categories.

AICIL was set up three years ago after the cross-insurance business administered by General Insurance Corporation was transferred to it.

According to the sources, it is now looking to expand its business beyond plain-vanilla farm insurance business and provide insurance cover to all farm activities, including livestock and poultry activities.

The four public sector insurers are currently administering these activities.

The sources said that the move was also supported by the public sector insurers, who are stakeholders in AICIL.

GIC and Nabard currently hold 35 per cent and 30 per cent respectively of AICIL's paid-up equity of Rs 200 crore.

The remaining equity is held by the four public sector insurers.

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