Pilot Project on Farm Income Insurance Scheme - Sa-Dhan
Pilot Project on Farm Income Insurance Scheme - Sa-Dhan
Pilot Project on Farm Income Insurance Scheme - Sa-Dhan
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AGRICULTURE INSURANCE COMPANY OF INDIA LTD.1. OBJECTIVES:PILOT PROJECT ONFARM INCOME INSURANCE SCHEME[synopsis]• To provide financial support to farmers, in the event of loss in income fromadverse incidence of Crop Yield (<strong>on</strong> account of natural calamities, pests &diseases) AND Market Price fluctuati<strong>on</strong>s.• To encourage the farmers to adopt prudent and progressive farming practices,both in terms of agricultural technology, and market ec<strong>on</strong>omics.• To enhance food and livelihood security of the farming community.• To help stabilize farm incomes, particularly in disaster years.2. SALIENT FEATURES:A. IMPLEMENTING AGENCY : Agriculture <strong>Insurance</strong> Co. of India Ltd. (AIC).B. STATES / UTs : The <strong>Scheme</strong> shall be applicable to selected States /Districts.However, it shall be implemented ONLY in those States/Districts, which givetheir “C<strong>on</strong>sent” theretoC. CROPS : PADDY (Rice), WHEAT.D. FARMERS COVERED : ALL [Compulsory for Loanee farmers; Voluntary forN<strong>on</strong>-Loanee farmers].E. RISKS COVERED – The <strong>Scheme</strong> provides “Comprehensive Risk <strong>Insurance</strong>”against LOSS IN FARM INCOME (Short fall in Actual <strong>Income</strong> [AI] overGuaranteed <strong>Income</strong> [GI]) in a Notified Area arising out of adverse fluctuati<strong>on</strong>sin yield due to occurrence of any <strong>on</strong>e or combinati<strong>on</strong> of n<strong>on</strong>-preventablenatural perils such as Flood, Inundati<strong>on</strong>, Storm, Cycl<strong>on</strong>e, Hailstorm, LandslideDrought, Dry spells, large-scale outbreak of Pests/ Diseases; AND, adversefluctuati<strong>on</strong> of market prices, as measured against MSP.F. SUM INSURED (i.e., Guaranteed <strong>Income</strong>) per hectare :Guaranteed <strong>Income</strong> (per hectare) = Average Yield of past 7 years X IndemnityLevel X Minimum Support Price (MSP) of current year.The Sum Insured will be Guaranteed <strong>Income</strong> (GI) per hectare multiplied bythe number of hectares sown with the crop. For this purpose, the acreageshown in the loan applicati<strong>on</strong> (in case of loanee farmers) and proposal form(in case of N<strong>on</strong>-loanee farmers) will be reck<strong>on</strong>ed as the acreage (hectaressown).G. PREMIUM RATES: Actuarial Premium Rates, State-wise, Crop-wise (irrigated& n<strong>on</strong>-irrigated categories if notified separately are treated as separate crops).
AGRICULTURE INSURANCE COMPANY OF INDIA LTD.H. PREMIUM SUBSIDY :The Premium Subsidy allowed is:Small / Marginal farmersOther farmers: 75% of Premium: 50% of PremiumThe Premium Subsidy is borne by the Government of India, and is released toAIC at the beginning of the Seas<strong>on</strong> based <strong>on</strong> estimates.I. SCHEME APPROACH :The <strong>Scheme</strong> shall operate <strong>on</strong> “Area Approach” basis.• The Yield shall be calculated at the District/Taluka/Block/Circle etc. level.• The Market Price shall be measured at District/State level.J. SEASONALITY DISCIPLINE :• Loanee farmers: As per the criteria to be fixed by the State LevelCoordinati<strong>on</strong> Committee <strong>on</strong> Crop <strong>Insurance</strong> (SLCCCI)• N<strong>on</strong>-loanee farmers: As decided by the SLCCCI, keeping in mind the<strong>on</strong>set of m<strong>on</strong>so<strong>on</strong>, sowing period etc.• The seas<strong>on</strong>ality discipline can be same for loanee and n<strong>on</strong>-loanee farmersK. INDEMNITY PROCEDURE :• Actual <strong>Income</strong> = current seas<strong>on</strong>’s Actual Yield x current seas<strong>on</strong>’s MarketPrice.• Market Price of a crop = the current sales price of its “comm<strong>on</strong> (i.e.,generic) variety” in the Market.• These prices are recorded by the ‘Agricultural Produce MarketCommittees’ [APMC].• From the first arrival of grain in the Market, each APMC shall record theDaily Modal Price of grain. This exercise shall be d<strong>on</strong>e for 8 weeks.• This DMP with quantity transacted shall be sent to AIC <strong>on</strong> a weeklybasis.• AMB / Mandi Board shall work out the APMC-wise weighted average ofthe DMP (weighted with quantity transacted) for the entire 8 weeks.• Finally, AMB / Mandi Board will submit the Market Price of the Districtbased <strong>on</strong> weighted averages of all APMCs in the District.• To limit the effects of external pressures <strong>on</strong> the market prices, a“capping” & “ cupping” range of 20% of MSP shall be applied <strong>on</strong> thecurrent seas<strong>on</strong>’s Market Price.• “Capping” is a limiting factor <strong>on</strong> the rising graph of prices.• “Cupping” is a limiting factor <strong>on</strong> the falling graph of prices.
AGRICULTURE INSURANCE COMPANY OF INDIA LTD.• Claims (i.e., ‘Shortfall in <strong>Income</strong>’) = Guaranteed <strong>Income</strong> – Actual<strong>Income</strong>.L. SHARING OF CLAIMS:The Product is new with unforeseen financial liabilities, as the Actual <strong>Income</strong>is based <strong>on</strong> Market price, while Guaranteed <strong>Income</strong> is based <strong>on</strong> MSP, (anoti<strong>on</strong>al price without a link to Market Price). Moreover, appropriate ratingmethodology is also not available at this stage. In view of the above, all claimsexceeding 100% of premium, will be borne by the Government of India. Thepremium for the purpose will be 100% of premium less the comp<strong>on</strong>ents ofloading towards administrative and marketing expenses.M. AGENTS COMMISSION AND BANK SERVICE CHARGES :• Agents Commissi<strong>on</strong> – 5% of Gross Premium, ONLY in respect of N<strong>on</strong>-Loanee farmers. This is available to Rural Agents who are authorized toprocure the business directly from farmers.• Bank Service Charges – 2.5% of Gross Premium, in respect of ALLfarmers. This is available to Banks who are directly serviced by them.N. REVIEW OF SCHEME : Review shall be d<strong>on</strong>e before launching a countrywide<strong>Scheme</strong>.O. REINSURANCE : AIC shall make efforts to obtain reinsurance cover in theinternati<strong>on</strong>al market.P. AREAS FOR PILOT PROJECT :• The Crop-wise and State-wise Districts selected for pilot project to bec<strong>on</strong>ducted during RABI 2003-04 seas<strong>on</strong> are:CROP STATE DISTRICTWHEAT BIHAR BuxarCHATTISGARHDurg & Rajanandaga<strong>on</strong>GUJARATBanaskanthaJAMMU & KASHMIR JammuJHARKHANDHazaribagh & <strong>Sa</strong>hebganjMADHYA PRADESH Hoshangabad, Thikamgarh & RaisenMAHARASHTRAParbhaniRAJASTHANKota & PaliUTTAR PRADESHEtawah, Kannauj, Mirzapur & MathuraUTTARANCHALDehradunRICE ASSAM KamrupKARANATKAMysoreTAMIL NADUMadurai• In these experimental districts/crops, NAIS shall be suspended ; in the restof the country, NAIS shall c<strong>on</strong>tinue.
AGRICULTURE INSURANCE COMPANY OF INDIA LTD.BENEFITS EXPECTED FROM SCHEMEThe “<strong>Farm</strong> <strong>Income</strong> <strong>Insurance</strong> <strong>Scheme</strong>” is expected to:• BE a critical instrument of development in the field of Crop Producti<strong>on</strong>,providing financial support to the <strong>Farm</strong>ers in the event of loss of farm income.• ENCOURAGE <strong>Farm</strong>ers to adopt progressive farming practices, both in termsof agricultural technology, and market ec<strong>on</strong>omics.• HELP in maintaining flow of Agricultural Credit.• PROVIDE significant benefits not merely to the insured <strong>Farm</strong>ers, but to theentire community directly and indirectly through spillover and multiplier effects,in terms of maintaining crop-producti<strong>on</strong> & farm-employment, generati<strong>on</strong> ofmarket fees & taxes, and net accreti<strong>on</strong> to ec<strong>on</strong>omic growth.• STREAMLINE Yield assessment procedures and Pricing mechanisms, thushelping to build up huge and accurate statistical database.