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Current Affairs

Beed model of crop insurance

Date: 12 June 2021 Tags: Miscellaneous

Issue

The Beed model of implementing Pradhan Mantri Fasal Bima Yojana has been demanded by the Chief Minister of Maharashtra.

 

Details

  • The PM Fasal Bima Yojana is a central sector scheme implemented by state government that insures crops against adverse conditions.

  • Famers covered under the scheme will have to pay insurance premium of about 1-2 percent. The rest is divided between central and state government.

  • The scheme is attractive for farmers as a low premium of about Rs 1,300 can save a hectare of crops worth more than Rs 45,000.

  • The scheme was mandatory for all loan taking farmers but optional for non-loan taking ones. Since 2020, it is optional for all farmers.

 

Changes demanded by Maharashtra

  • There was opposition against the scheme due to its inability to identify local conditions, stringent claim conditions etc. They alleged profiteering by insurance companies.

  • The scheme soon became non-profitable for insurance companies as they had to pay high claims due to regular adverse weather.

 

The Beed model

  • Beed is located in drought-prone Marathwada region and failure of crops due to adverse conditions was a norm.

  • Insurance companies faced losses regularly and state government found it difficult to attract tenders for implementing the scheme.

  • The state decided to implement the scheme through Indian Agricultural Insurance Company, which gave cover of 110% of the premium collected.

  • If the claims would exceed the amount of premium collected, the difference amount would be paid by the state government.

  • In case the claim is less than the premium received, it would return the excess amount to the state government by keeping 20% as handling charges.

 

Benefits of Beed model

Profits of the insurance company is reduced and the state government will be able to get access to another source for funds.

 

Concerns

In case of severe weather induced losses, the state government has to pay heavy amount for bridging the premium and claim differences.