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National crop insurance scheme

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The objectives of the scheme are as under: -

1. To provide insurance coverage and financial support to the farmers in the event of natural calamities, pests & diseases.

2. To encourage the farmers to adopt progressive farming practices high value in-puts and higher technology in Agriculture.

3. To help stabilize farm incomes, particularly in disaster years.

Salient features of the scheme: -

1. Crops covered:-

The crops in the following broad groups in respect of which i) the past yield data based on Crop Cutting Experiments (CCEs) is available for adequate number of years, and ii) requisite number of CCEs are conducted for estimating the yield during the proposed season:

a. Food crops (Cereals, Millets & Pulses)

b. Oilseeds

c. Sugarcane, Cotton & Potato (Annual Commercial/annual Horticultural crops)

Other annual Commercial/annual Horticultural crops subject to availability of past Yield data will be covered in a period of three years. However, the crops which will be covered next year will have to be spelt before the close of preceding year.

2. States and areas to be covered:

The Scheme extends to all States and Union Territories. The States/Uts opting for the Scheme would be required to take up all the crops identified for coverage in a given year.

Exit clause: The States/Union Territories once opting for the Scheme, will have to continue for a minimum period of three years.

3. Farmers to be covered:

All farmers including sharecroppers, tenant farmers growing the notified crops in the notified areas are eligible for coverage.

The Scheme covers following groups of farmers:

a. On a compulsory basis: All farmers growing notified crops and availing Seasonal Agricultural Operations (SAO) loans from Financial Institutions i.e. Loanee Farmers.

b. On a voluntary basis: All other farmers growing notified crops (i.e., Non-Loanee farmers) who opt for the Scheme.


4. Risks covered & exclusions:

Comprehensive risk insurance will be provided to cover yield losses due to non-preventable risks, viz.:

i) Natural Fire and Lightning

ii) Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Torando etc.

iii) Flood, Inundation and Landslide

iv) Drought, Dry spells

v) Pests/Diseases etc.

Losses arising out of war & nucler risks, malicious damage & other preventable risks shall be excluded.

5. Sum insured /limit of coverage:

The Sum Insured (SI) may extend to the value of the threshold yield of the insured crop at the option of the insured farmers. However, a farmer may also insure his crop beyond value of threshold yield level upto 150% of average yield of notified area on payment of premium at commercial rates.

In case of Loanee farmers the Sum Insured would be atleast equal to the amount of crop loan advanced.

Further, in case of Loanee farmers, the Insurance Charges shall be an additionality to the Scale of Finance for the purpose of obtaining loan.

In matters of Crop Loan disbursement procedures, guidelines of RBI/NABARD shall be binding.

7. Premium subsidy:

50% subsidy in premium is allowed in respect of Small & Marginal farmers to be shared equally by the Govt. of India and State/UT Govt. The premium subsidy will be phased out on sunset basis in a period of three to five years subject to review of financial results and the response of farmers at the end of the first year of the implementation of the Scheme.

The definition of Small and Marginal farmer would be as follows:

Small Farmer: A Cultivator with a land holding of 2 hectares (5 acres) or less, as defined in the land ceiling legislation of the concerned State/UT.

Marginal Farmer: A Cultivator with a land holding of 1 hectare or less (2.5 acres).

8. Sharing of risk:

Risk will be shared by IA and the Govt. in the following proportion.

Food crops & Oilseeds: Till, complete transition to Actuarial regime in a period of five years takes place, claims beyond 100% of premium will be bone by the Govt. Therefore, all normal claims, i.e. claims upto 150% of premium will be met by IA and claims beyond 150% shall be paid out of Corpus Fund for a period of three years. After this period of three years claims upto 200% will be met by IA and above this ceiling out of the Corpus Fund.

Annual Commercial crops/annual Horticultural crops: Implementing Agency shall bear all normal losses, i.e claims upto150% of premium in the first three years and 200% of premium thereafter subject to satisfactory claims experience. The claims beyond 150% of premium in the fist three years and 200% of premium thereafter shall be paid out of Corpus Fund. However, the period of three years stipulated for this purpose will be reviewed on the basis of financial results after the fist year of implementation and the period will be extended to five years if considered necessary.

To meet Catastrophic losses, a Corpus Fund shall be created will contributions from the Govt. of India and State Govt./UT in 50:50 basis. A portion of Calamity Relief Fund (CRF) will be used for contribution to the Corpus Fund.

9. Area approach and unit of insurance:

The Scheme would operate on the basis of ‘Area Approach’ i.e., Defined Areas for each notified crop for widespread calamities and on an individual basis for localised calamities such as hailstorm, landslide, cyclone and flood. The Defined Area (i.e., unit area of insurance) may be a Gram Panchayat, Mandal, Hobli, Circle, Phirka, Block, Taluka etc. to be decided by the State/UT Govt. However, each participating State/UT Govt. will be required to reach the level of Gram Panchayat as the unit in a maximum period of three years.

Individual based assessment in case of localised calamities, would be implemented in limited areas on experimental basis, initally and shall be extended in the light of operational experience gained. The District Revenue administration will assist Implementing Agency in assessing the extent of loss.

12. Levels of Indemnity & Threshold Yield:

Three levels of Indemnity, viz., 90%, 80% & 60% is corresponding to Low Risk. Medium Risk & High Risk areas shall be available for all crops (cereals, millets, pulses & oilseeds and annual commercial/ annual horticultural crops) based on Coefficient of Variation (C.V.) in yield of past 10 years’ data. However, the insured farmers of unit area may opt for higher level of indemnity on payment of additional premium based on actuarial rates.

The Threshold yield (TY) or Guaranteed yield for a crop in an Insurance Unit shall be the moving average based on past three years average yield in case of Rice & Wheat and five years average yield in case of Other crops, multiplied by the level of indemnity.

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