Govt clears 'life transforming' Rs 17,600-cr new crop insurance scheme for farmers

New Delhi: In a major farm sector sop, the Centre Wednesday announced a new Rs 17,600-crore crop insurance scheme to cover loss of crops due to natural calamities like drought at a very low premium payout by farmers.

Prime Minister Narendra Modi described the scheme wherein the Centre will provide Rs 8,800 crore annually to make up for almost all of the premium for the crop insured, as a move "that will transform the lives of the farmers in a big way".

Under the scheme Pradhan Mantri Fasal Bima Yojana (PMFBY), the state will also provide a matching contribution while farmers will pay only only 2 percent of the premium fixed by the insurance company for kharif foodgrains/oilseeds crops and 1.5 percent for rabi foodgrains/oilseeds crops.

Premium will be 5 percent for horticultural and commercial crops for both seasons. The scheme will be rolled out from the coming kharif season starting June.

After the Cabinet approved the scheme, Modi said, "This is a historic day. I am confident that this scheme, which is inspired by the consideration of farmers' benefit, will bring about a major transformation to lives of farmers."

The scheme includes successful aspects of the existing schemes and "effectively addresses" whatever was lacking in those schemes, he tweeted.

Modi further said, "The scheme has the lowest premium, it entails easy usage of technology like mobile phone, quick assessment of damage and disbursement within a timeframe."

The definition of disaster has been expanded to include aspects like flooding of crop and damage after harvest, Modi said, adding "special attention" has been paid to several other aspects.

"It is easy to subscribe to the scheme and easy to benefit. So, do join it," he told the farming community, which of late has seen a spate of suicides.

The government aims to cover 50 percent of the crop area of 194.40 million hectares in the next three years under the new scheme, from the existing level of around 25 percent.

Among key features, there will be no provision of capping the premium rate so as to ensure farmers get a higher claim against the full sum insured. At least 25 percent of the likely claim will be settled directly on farmers' bank account.

Expressing confidence that farmers will adopt this new scheme, Home Minister Rajnath Singh said it will help them tide over financial uncertainties.

"This new crop insurance scheme will have lowest premium for farmers in the history of Independent India," Singh said.

Parliamentary Affairs Minister Venkaiah Naidu, Agriculture Minister Radha Mohan Singh, Food Minister Ram Vilas Paswan and BJP President Amit Shah hailed the scheme.

Stating that the Prime Minister has himself suggested reducing premium burden on farmers, Naidu said the farming community will be "very happy" with this scheme.

He observed that farmers get adversely affected by natural calamities in the absence of level-playing field for them. "This path-breaking measure will take care of farmers by providing them necessary assurance through this scheme."

Elaborating on the features, the Agriculture Minister said farmers will get a higher claim for the full sum insured unlike the existing schemes such as National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS).

The government will use remote sensing and smartphone and other modern technologies for accurate and quicker crop yield estimations.

The new scheme will cover yield loss of standing crops, prevented sowing/planting risk, post harvest losses and localised risks, including inundation.

Agriculture Secretary Siraj Hussain said the government aims to increase the coverage to 50 percent of the total crop area in the next three years, from the current 25 percent.

"The Government of India's expenditure would be Rs 8,800 crore for 50 percent coverage," he said, adding that in the first year in 2016-17, the government will target to cover 30 percent of the crop area for which the central outgo would be around Rs 5,700 crore.

At present, loanee farmers are mandated to take crop insurance cover. The new scheme is open to all farmers irrespective of whether they are loanees or not, he added.

Asked if tenant farmers can avail of the crop insurance, Hussain said already a few states like Andhra Pradesh have made provision in their law to bring such farmers under the formal credit system. Many states are yet to follow suit.

As for other features in the new scheme, there will be one insurance company for the entire state, farm-level assessment of loss for localised risks and post-harvest loss.

And private insurance companies, along with the Agriculture Insurance Company of India Ltd, will implement the scheme.

The new scheme is significant as the country is facing drought for the second straight year due to poor monsoon rains and the government wants to enhance insurance coverage to more crop areas to protect farmers from the vagaries of monsoon.

Under the existing crop insurance schemes NAIS and MNAIS, farmers' premium is up to 15 percent, but the actuarial premium is up to 57 percent depending on risky crops and areas.