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What is the news?
Maharashtra Chief Minister has asked the Prime Minister for state-wide implementation of the ‘Beed model’ of the Pradhan Mantri Fasal Bima Yojana (PMFBY).
About Pradhan Mantri Fasal Bima Yojana (PMFBY)
Problems with the Scheme
Why was the Beed Model of Crop Insurance launched?
- Beed is a drought-prone district in Maharashtra. Farmers here have repeatedly lost crops either to failure of rains or too heavy rains.
- Due to this, insurance companies have sustained losses given high payouts. Moreover, the state government also had a difficult time getting bids for tenders to implement the scheme in Beed.
- Hence, the Maharashtra Government decided to modify the crop insurance guidelines for the district.
|Also read: Flash Droughts in India|
What is the Beed Model of Crop Insurance?
- Under this model, the insurance company provides a cover of 110% of the premium collected.
- In case the compensation amount exceeds the 110% mark, the state government would pay the bridge amount.
- But if the compensation was less than the premium collected, the insurance company would keep 20% of the amount as handling charges and reimburse the rest to the state government.
Benefits of Beed Model for Government
- In a normal season where farmers report minimal losses, the state government is expected to get back money that can form a corpus to fund the scheme for the following year.
- However, the state government would have to bear the financial liability in case of losses due to extreme weather events.
- Hence, in the model, the profit of the company is expected to reduce, and the state government would have access to another source of funds.
Source: Indian Express