New Central insurance scheme to rescue farms from April | business | Hindustan Times
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New Central insurance scheme to rescue farms from April

The Narendra Modi government will roll out a new technology-driven subsidised farm insurance scheme from April, an attempt to shield farmers and the larger economy from now-frequent weather shocks. The challenge will still be about popularising it in a country where farm insurance has been hard to sell.

business Updated: Jan 13, 2016 22:27 IST
HT Correspondent
The prime minister described the scheme as being the ‘harvest’s bounty’ for India’s farmers.
The prime minister described the scheme as being the ‘harvest’s bounty’ for India’s farmers.(HT Photo)

The Narendra Modi government will roll out a new technology-driven subsidised farm insurance scheme from April, an attempt to shield farmers and the larger economy from now-frequent weather shocks. The challenge will still be about popularising it in a country where farm insurance has been hard to sell.

The new scheme, called Pradhan Mantri Fasal Bima Yojana and approved by the Cabinet on Wednesday, is a lot simpler and designed with the farmer in mind, an official said, requesting anonymity.

It does away with clumsy procedures of existing plans, which are so complex that they have only served to chase farmers away. Only about 5% of farmers take insurance in areas where it is available, a low penetration that shrivels farm incomes after drought, hailstorm and unseasonal rain.

Two consecutive droughts have shrunk food output and farmer incomes. An agrarian crisis has emerged as a key political challenge for the Modi government, which has its sights set on jobs, investment and growth. It’s a harvest season “gift” for farmers, Prime Minister Narendra Modi tweeted.

The new scheme fixes farmers’ share of premium at 1.5% for winter-sown crops and 2% for summer-sown crops. For cash crops and horticulture crops, it is 5%. The rest will be borne by the government. This is cheaper than current rates.

The real benefits should come from a scheme that promises larger compensation and faster payouts – two areas that needed attention. Slow payments and unprofitable amounts that could be claimed as insurance under the existing Modified National Agricultural Insurance Scheme meant insurance has never worked in a country of 135 million land holdings.

Currently, if a firm charged 20% as premium in a hectare land insured for Rs 30,000, then a farmer could eventually claim a compensation for only Rs 16,500 because at higher premium levels, the sum insured would be automatically reduced through an arbitrary formula so that government saved costs.