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Premium Capped at 2% for Foodgrains, 5% for Cash Crops in Insurance Scheme

Published: 14th January 2016 05:17 AM  |   Last Updated: 14th January 2016 05:17 AM   |  A+A-

NEW DELHI: In order to boost the farming sector, the Cabinet on Wednesday cleared the crop insurance scheme under which the farmers premium has been kept at a maximum of 2 per cent for foodgrains and up to 5 per cent for annual commercial horticulture crops.

Prime Minister Narendra Modi expressed confidence that the new crop insurance scheme that will bring about a major transformation in the lives of farmers, saying it expands the definition of disaster and addresses whatever was lacking in the existing programmes.

In a series of tweets, the Prime Minister said the scheme includes successful aspects of the existing schemes and effectively addresses whatever was lacking in those schemes.

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

To be rolled out from the kharif season this year, the much awaited scheme - Pradhan Mantri Fasal Bima Yojana(PMFBY) - will replace the existing two schemes National Agricultural Insurance Scheme as well as modified NAIS which have had some inherent drawbacks.

Premium.jpgMany economists feel that the move would further strain government finances, which has already lowered down this GDP target once. However, political pundits feel that the Prime Minister is trying to placate rural voters after the impact of unseasonal rains and two straight years of drought on agriculture dented his popularity and contributed to a humiliating loss for the ruling BJP in elections late last year in the largely rural state of Bihar.

BJP chief Amit Shah hailed the new crop insurance scheme as the “biggest” steps taken for their welfare since Independence as they will draw “maximum benefit by paying minimal premium”.

Under the new scheme, the premium rates to be paid by farmers are very low and balance premium will be paid by the government to provide full insured amount to the farmers against crop loss on account of natural calamities, the official release said.

“There is no upper limit on government subsidy. Even if balance premium is 90 per cent, it will be borne by the government,” the statement said.

PMFBY will increase the insurance coverage to 50 per cent of the total crop area of 194.40 million hectare from the existing level of about 25-27 percent crop area. The expenditure is expected to be around Rs 9,500 crore.

Private insurance companies, along with the Agriculture Insurance Company of India Ltd, will implement the scheme. All claim liability will be on insurer and the government would give upfront premium subsidy.

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