Modified National Agriculture Insurance Scheme
In 2015-16, the Modified National Agriculture Insurance Scheme is functioning as a component of National Crop Insurance Programme (NCIP). This scheme provides insurance coverage and financial support to the farmers in the event of failure of crops and subsequent low crop yield.
The MNAIS covers following three kinds of crops:
- Food crops which include cereals, millets & pulses
- Annual Commercial / Horticultural crops
The state government notifies which particular crops are to be covered for a particular season or year. Thus, it does not cover all crops but only those crops belonging to above three broad categories, which have been notified by the state government level. The state government notifies those crops of which past yield data is available for adequate number of years.
The insurer companies are public sector as well as private sector General Insurance Companies, which have been empanelled by the Department of Agriculture & Cooperation (DAC) and selected by concerned State Government / Union Territory (UT). The companies must have approval of IrDA to conduct a General Insurance business in India.
This scheme is available to all kinds of farmers, big or small; loanee or non-loanee; Landholders, sharecroppers or tenant farmers. However, loanee farmers i.e. those who have taken farm-loans from financial institutions are covered compulsorily.
The scheme gives the freedom to farmers to choose insurance companies. Further, role of PRIs (Panchayati Raj Institutions is encouraged in implementation of this scheme)
Types of Loss Covered
Broadly, the scheme covers three stages of crop production.
- First stage is of planting or sowing, if the crop was prevented from planting / sowing due to deficit rainfalls and adverse seasonal conditions.
- Second stage is to cover standing crops which got damaged due to unpreventable risks such as drought, flood, Inundation, Pests, Landslides, Natural Fire, Storms, Cyclones etc.
- Third stage is the time period of two weeks after harvesting when the crops are allowed to dry in field and something wrong happens which destroys the crop such as cyclonic rains/ hailstorms etc.
Calculation of premium is done on actuarial basis, which implies that there is higher premium for riskier crops. Since a farmer would pay actuarial premium to insure his crops, the entire liability of claim is on insurer. The premium rates are defined by the Insurance companies for each notified crop as per standard actuarial methodology conforming with the IrDA provisions. However, the government has also put a cap on maximum premium to be collected. This cap is as follows:
- 11% for Kharif season
- 9% for Rabi for food crops & oilseeds
- 13% for annual commercial crops and horticultural crops.
However, for certain crops and certain areas, this premium may go above the given caps also. In that condition, the sum assured is deducted as per the capped amount. This can be understood by a small example. Suppose that for a particular Kharif crop, the sum assured is Rs. 20,000 per hectare and the insurance company calculates the premium to be 15%. However, it can charge a maximum premium of Rs. 2200 per hectare (11%), so at 15%, the sum assured will come down to Rs. 14667 only.
Farmers are provided Premium Subsidy for insuring their crops. The amount which they pay to insurance companies is net after deduction of the premium subsidy. This subsidy is provided only if the premium amount is more than 2% of the sum assured. The subsidy is as follows:
- If premium is less than 2% of sum assured – No subsidy provided
- If Premium is between 2-5%, subsidy provided is 40%
- If premium is between 5-10%, subsidy provided is 50%
- If premium is between 10-15%, subsidy provided is 60%
- If premium is above 15%, subsidy provided is 75%
The above slabs make it clear that riskier the crop, higher is premium and higher is government’s contribution to farmers in payment premium subsidy. For example, if sum assured is Rs. 100 and premium is Rs. 16, then, the net amount the farmer will pay as premium is only Rs. 4.
The premium subsidy is equally shared by the Union Government and State Governments. Further, if the state government wants to give additional subsidy, it is free to take that extra burden to keep its farmers happy.