New crop insurance scheme to charge 2% premium for pulses

At present, the average crop insurance premium on pulses that a farmer has to pay ranges between 10 per cent and 12 per cent of the sum insured

To provide a safety net to growers of pulses, which could also help boost production, the Centre's proposed new crop insurance policy has pegged the burden of premium on pulses at a moderate two per cent of the sum insured.

Officials said according to the broad contours of the new crop insurance scheme, which has been prepared and is now awaiting Cabinet nod, the premium on horticulture crops has been fixed at five-six per cent of the sum insured or on actuarial basis, whichever is lower, while that on non-horticulture crops has been fixed at two-three per cent.

The difference between the actual premium charged by the insurance company and what the farmer pays will be subsided by the Centre, officials added.

This means that if a farmer gets his pulses crop insured for Rs 200,000, his annually premium would be somewhere around Rs 4,000 or even lower. At present, the average crop insurance premium on pulses, which a farmer has to pay ranges between 10-12 per cent of the sum insured, which acts a big deterrent. The scheme would be a combination of weather-based and yield-based insurance for crops.

The government has been working on a new crop insurance scheme for a long time, but there has been some differences over the premium to be charged from the farmers and its impact on the Centre's subsidy. However, officials said the premiums have been finalised after much deliberation.

The financial burden on insurance companies would also be minimised as participants would be invited through open tenders conducted by the state governments.

"In the currently operational modified National Agriculture Insurance Scheme, premium is charged at market rates due to which for some crop the farmer burden is as high as 10 per cent of the sum insured. The new improved crop will lower this burden," another official remarked.

Village or block could continue to remain as a unit for measurement of insurance claim as with the existing schemes.

According to a study by private weather forecasting agency Skymet along with industry association Assocham, less than 20 per cent of India's 130 million farmer families have crop insurance, which is why a vast majority of them are exposed to the vagaries of weather.

Even among loanee farmers, insurance penetration is not 100 per cent, for whom it is mandatory to get an insurance cover as soon as they avail of a crop loan.

"Of the un-insured farmers, 46 per cent were found to be aware but not interested while 24 per cent said the facility was not available to them," the study showed.

Only 11 per cent felt they could not afford to pay the insurance premium.

Poor design of insurance products, particularly related to claims settlement, has led to farmers not being covered, despite significant government subsidy, the study pointed out.

According to rules, farmers' insurance claims have to settle within 45 days of the risk assessment. However, often, claims are not attended even after six months. This was one of the factors behind farmers' not opting for crop insurance.

However, there are some aberrations as well and in some states such as Rajasthan and Bihar, where 40-50 per cent of total area under crop is covered through insurance.