Plan to revamp farm insurance subsidy

Burdened by claims that far outweigh premium payments, the government is planning to revamp the 10-year-old National Agriculture Insurance Scheme which annually covers two crore farmers and 80 crops, slashing extensive subsidies. Falaknaaz Syed reports.

Burdened by claims that far outweigh premium payments, the government is planning to revamp the 10-year-old National Agriculture Insurance Scheme (NAIS) which annually covers two crore farmers and 80 crops, slashing extensive subsidies.

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The government incurs huge losses as it pays claims exceeding 100 per cent of the premiums for food crops and oilseeds and 150 per cent in the case of commercial and horticultural crops.

The government now plans to subsidise the premium determined on actuarial basis linked to the risk involved, ending the current method of subsidising claim payments, said sources at the Agriculture Insurance Company (AIC), the implementing agency for NAIS.

Farm insurance is considered highly risky result the commercial premium rates could be very high.

Currently the premium is as low as 2.5 to 3.5 per cent of the sum insured during the kharifcrop season and 1.5 per cent to 2 per cent for rabi.

The state and Central governments subsidise 10 per cent of the premium for small and marginal farmers, and also share the claim compensation.

Claims are staggering. For instance, the premium collected for Kharif 2008 was Rs 513.7 crore while the claims reported were as high as Rs 2,612.5 crore.

The AIC will now calculate premiums for NAIS on commercial lines.

The Centre and states will now pay the difference between the actuarial rate and the capped premium rate, with farmers liable to pay the latter.