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Recently, the Maharashtra Government asked the Prime Minister for state-wide implementation of the ‘Beed model’ of the crop insurance scheme Pradhan Mantri Fasal Bima Yojna (PMFBY).
Important point:
- Beed is a district of Maharashtra located in the drought-prone Marathwada region.
- 80-110 Formula: This model is also called 80-110 Formula.
- Under this plan, the insurer’s potential losses are restricted.
- The insurance firm does not have to entertain claims above 110% of the gross premium. The state government has to bear the cost of compensation above 110% of the premium collected to insulate the insurer from losses (bridge amount).
- However, if the compensation is 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 (premium surplus).
Benefits:
- Another Source of Fund: In most years, the claims-to-premium ratio is low. In the Beed model, the profit of the insurance company is expected to reduce and the state government would access another source of funds.
- Reduce the Burden of Financing PMFBY: The reimbursed amount can lead to lower budgetary provision for PMFBY by the state for the following year, or help in financing the paying the bridge amount in case of a year of crop loss.
- Fiscally-stressed states have over the years dissented to footing the premium bill for the PMFBY, resulting in insurers not honouring the farmers’ claims on time.
- In 2020, far-below-normal monsoon rainfalls in central Maharashtra’s Beed district dissuaded insurers from covering farmers in the district under the PMFBY for kharif 2020.
Challenges:
- Questions remain on how the state government is going to raise the excess amount, and how the reimbursed amount would be administered.
- For farmers, this model does not seem to have any direct benefit.
Use of Technology :
- Provides for easy enrollment of farmers.
- Facilitate easier reporting of crop loss within 72 hours of occurrence of any event.
- Latest Technological Tools: To assess crop losses, satellite imagery, remote-sensing technology, drones, artificial intelligence and machine learning are used.
- For integration of land records.
- The Scheme covers over 5.5 crore farmer applications on average per year.
- Aadhar seeding (linking Aadhaar through Internet banking portals) has helped in speedy claim settlement directly into the farmer accounts.
- One notable example is mid-season adversity claims of nearly Rs. 30 crore in Rajasthan during Rabi 2019-20 Locust attack
SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT
