What is Maharashtra’s “Beed model” of crop insurance?

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)

  • The scheme was launched in 2016 by the Ministry of Agriculture and Farmers Welfare.
  • Aim: To provide comprehensive insurance cover against failure of the crop thus helping in stabilising the income of the farmers.
  • Coverage of crops: It covers
    • food crops
    • oilseed crops
    • annual commercial/horticultural crops
  • Premium: The prescribed premium is
    • 2% for Kharif crops
    • 1.5% for Rabi crops
    • 5% for commercial and horticultural crops.
  • Completely voluntary: The enrollment under the scheme is 100% voluntary for all farmers.
    • Earlier, the scheme was compulsory for loanee farmers.

Problems with the Scheme

  • Delay in claim settlement
  • Failure to recognize localized weather events
  • Stringent conditions for claims
  • Alleged profiteering by insurance companies
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

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