Agri Business

PMFBY: A special model for Beed district

Rahul Wadke | TV Jayan Mumbai/New Delhi | Updated on August 13, 2020 Published on August 13, 2020

Maharashtra govt ropes in AIC where the insurance company will assume liability up to 110% of the premium collected

Beed district in Maharashtra is emerging as a new interesting model for crop insurance where the State government and insurance company would share loss or surplus from operations.

Beed — which was declared this year as a single district cluster under the PM Fasal Bima Yojana (PMFBY) — had failed to attract bids from insurance firms to offer the crop insurance scheme. This was because the central Maharashtra district has been witnessing high levels of claims ratio in the past — due to almost three years of successive scanty monsoon rainfall and drought — prompting the firms to shun from offering services there. However, the Maharashtra government managed to rope in public sector Agriculture Insurance Corporation of India Limited (AIC) to provide crop insurance in Beed district for the next three years under a unique scheme where the government would aid the firm if the claims become higher than what could be managed by the company.

Liability claim

As per the pact signed between the State government and AIC, a special model has been devised for Beed district. According to sources, while the liability of the Centre will remain capped as per revamped PMFBY guidelines, the insurance company will assume liability only up to 110 per cent of the premium collected and the rest will be paid from the State coffers if the claims exceed beyond. Similarly, if claims are below the gross premium, the company may have to share a part of the booty with the State government.

AIC will offer crop insurance in the district for the next three years starting with kharif 2020 under this new formula. Sources said that from the current kharif season, the government has decided to allow insurance firms to bid for three years at one go under PMFBY scheme. This disrupted the risk management planning for some insurance companies as the unpredictable nature of business would increase the cost of reinsurance, thus make it unviable for them in many regions. Beed, of course, is one among them.

After getting to know about Beed, many State governments are said to have approached the Centre urging the latter to allow them to offer a similar model in their States. According to an insurance industry source, both Gujarat and Madhya Pradesh sought to convince the Union Agriculture Ministry the need for going for a similar scheme in their States, but failed to get a positive signal. “They were hoping that this would reduce their premium subsidy burden to a great extent, but the Centre did not agree to it,” the industry source told BusinessLine.

While Gujarat decided to quit the PMFBY scheme at least for a year and launch its own State scheme, Madhya Pradesh is still struggling to find takers for offering crop insurance in many of its 11 clusters in the State. According to the source, PMFBY scheme has been finalised only in five clusters in the State so far.

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Published on August 13, 2020
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