Crop insurance: State moots loss and profit sharing model

Nagpur: The state government is pushing the so-called cap and cup model for the Prime Minister’s crop insurance scheme. Launched during the first term of the BJP Government, the system is heavily subsidized by the Center and the State, with farmers having to pay just 2% of the premium.

The state has now come up with a proposal that if an insurance company causes damages beyond a certain amount, the government must intervene and share the burden. Additionally, if earnings reach a specific level, they must be shared with the government by the insurance company.

The scheme has, however, drawn flak from farmers ‘ groups who say that it has only ended up with insurance companies netting huge premiums with a little payout to farmers as compensation. This is due to the terms and conditions of the program, the groups pointed out.

As the Standing Committee on Agriculture visited Nagpur while part of its tour to research the insurance scheme in the state, the government official also made a proposal for a cap and cup model, according to the sources. The committee headed by Parvatagouda Gaddigoudar, a BJP MP from Bagalkot in Karnataka, held a meeting on Thursday at a luxury hotel, which also led to serious criticism.

Under the cap and cup model, the share of losses and gains can be kept at 20% or so on both sides, the source said. The design is at the drawing board stage. More information, such as whether the sharing will be done by the state government or both the state and the middle, need to be worked out, the source said.

The State Department of Agriculture has argued that crop insurance should be issued on a voluntary basis. At present, it is compulsory for those who use crop loans. A group of farmers feels that it is their money that is being used to pay compensation for those in crisis-ridden areas such as Marathwada who are vulnerable to losses.

When members of the Parliamentary Committee met with farmers ‘ representatives, there was a common complaint about the method for calculating damages by insurance companies. Farmers ‘ groups also called for an end to the system of assigning areas to insurance companies and allowing all companies to compete freely in a given market.

At present, specific areas are assigned to companies on the basis of bidding. Farmers, however, want the freedom to choose between all insurance companies, said sources.

“Crop insurance is the only scheme where there is no freedom to choose a service provider because a given area is allocated to a specific company. The point is valid and will be taken up, “said the source of the proceedings of the meeting.

Calls have also been made to reduce the geographical area for the estimation of losses. In Maharashtra, a block of villages is considered to be a single unit. Thus, if only a village is affected by natural disasters, farmers can not be compensated if the entire block is not affected. It stops many from benefiting from the insurance scheme. In Rajasthan, the device was set at the panchayat level, covering 2-3 villages, and sometimes only one, the source said.

Navneet Rana, MP from Amravati and also a member of the committee, said, “Insurance companies are earning almost Rs21 crore a day, but farmers are hardly getting anything in the way of compensation. The basic unit for calculating losses must be brought down to the village or panchayat level.