Agricultural Finance

NAIS (National Agriculture insurance Scheme)

Crop insurance is related to risk management in agriculture .our 70% of population depends upon agricultural. 

that Discussion come in 1947 that time minister of food and agriculture, Dr. Rajendra Prasad gave an assurance that the government would examine the possibility of crop and cattle insurance.

In 1965 the has introduce crop insurance Bill and a model  Scheme of crop Insurance in order to enable the state to introduce crop insurance if they so desired.  the draft Bill and the model scheme referred to expert committee headed by Dr . Dharma Narain.

1972-73 The first Crop insurance program introduced  as 'General Insurance ' Department  of Life Insurance Corporation of India  on H-4 Cotton In Gujarat.

Later  General insurance Corporation of India  took over the experimental  Scheme  and Subsequently Included  Groundnut,Wheat and Patato and implemented in the States of Gujarat,Maharashtra, Tamil Nadu,andhra Pradesh,Karnataka and west Bengal.

that experiment Scheme interdused as 'Individual  Approach '. That Scheme Continued uptown 1978-79 and covered only 3110 farmers for a premium  of 4.54 Lakhs against  claims of 37.88 Lakh.

Pilot Crop Insurance Scheme (PCIS)1979

Professor V.M. Dandekar is "Father of Crop Insurance  in India " Suggested an "Hamogeneous area approach" for crop insurance . Based on this Area approach, the General Insurance Corporation of India (GIC) interduced a pilot Crop Insurance Scheme(PCIS) from 1979. The Scheme covered  cereals, millets,oilseeds,cotton,potato,gram and barley.The risk was shared by GIC and the respective  State Govt. in the ratio of 2.1. The insurance Premium ranged from 5 to 10 per cent of the sum Insured.

the implementation and administration of Crop insurance Schemes, which which were being done by GIC , was taken over by agricultural Insurance  Company of India Ltd.(AIC) Since its Commencement of business  from 1 April 2003.

Scheme covers under the following groups of farmers

(a) On compulsory basis :All farmers growing  notified crops and availing seasonal  Agricultural  operations(SAO) Loan from Financial Institutions 

(b) On a Voluntary basis: All other farmers growing notified crop.

Risks covered 

 a)Natural Fire and lightning 

b) Storm,Hailstorm,Cyclone,Typhoon,Tempest,Hurricane,Tornado etc

c) Flood,Inundation  and Landslide

d) Drou6,Dry spells

e) Pests/Diseases

IRDA

CROP INSURANCE

a) National Agricultural Insurance Scheme

(NAIS)

Crop or Agriculture Insurance covers risks of

anticipated loss in yield of various crops. Almost

the entire of Crop Insurance business comes from

‘Schemes’ or ‘Programme’. These Schemes operate

on principles of ‘Area Approach’. Coverage is

compulsory for farmers taking crop loans from

rural financial institutions (RFIs) for cultivation of

crops, i.e., loanee farmers. Non-loanee farmers can

also insure their crops under the same schemes.

The main Schemes available to farmers in respect

of crop insurance are as under:

a) National Agricultural Insurance Scheme (NAIS)

of Government of India

b) National Crop Insurance Programme (NCIP) of

Government of India

i. Modified National Agricultural Insurance

Scheme (MNAIS),

ii. Weather Based Crop Insurance Scheme

(WBCIS) and

iii. Coconut Palm Insurance Scheme (CPIS)

NAIS was introduced in the year 1999 and is

presently in operation in a few states. The Scheme is practically an all-risk insurance cover based on 'Area Yield Index’.

The Scheme covers

all food, oilseeds and annual commercial /

horticultural crops for which historical yield data

is available and crop cutting experiments are

planned for the current year. State governments

issue notifications containing names of crops, areas eligible for insurance, rates of premium etc. at the beginning of each cropping season.

The Scheme is available to all Farmers - compulsory for borrowing farmers and

optional for non-borrowing farmers. Farmers

have to fill-up a simple Proposal Form and submit

the same with premium amount at the nearest

branch of bank or Primary Agricultural Credit

Society.

Sum Insured is at least equal to loan amount which can be increased to 150% of the value of average yield at the option of the farmer. There are limits for non-loanee farmers which are published in state government’s notification. Premium rates for Food crops and Oilseeds ranges from 1.5% to 3.5% and actuarial rates are charged for Annual Commercial / Horticultural Crops. Subsidy in premium is available to small and marginal farmers at 10% of premium. Some State governments offer

higher subsidy.

Network of financial institutions viz. commercial

banks, regional rural banks and cooperative banks,

spread across length and breadth of country, play

the role of intermediaries. The scheme operates

broadly on bancassurance model.

Levels of indemnity are

60%, 80% and 90% which means farmers are

themselves to bear the loss of first 40%, 20% or

10% respectively. This condition is also broadly

called ‘deductible’.

The Scheme

operates on principles of Area-Yield Index or

Guarantee. There is a guaranteed yield termed as

Threshold Yield for every crop in every

Homogenous Area e.g. taluka, block or gram

panchayat etc. Threshold Yield is moving average

of past five years actual yield (three years in case of Paddy andWheat) multiplied by applicable level of indemnity. If current season’s actual yield

recorded is lower than the Threshold yield, then

claims become payable. Yield data used for claims is generated under General Crop Estimation Surveys (GCES) by way of crop cutting

experiments. Procedure of assessment and settlement of claims are automated processes and the claim amount is credited to insured farmers’ bank account. No paper work is required to be done by insured farmers or intermediaries.

NCIP has three components- viz. MNAIS,

WBCIS and CPIS. There are some common

features for MNAIS andWBCIS components i.e.

1. Private sector insurance companies are allowed as

‘implementing agencies’.

2. Rates of premium are charged on actuarial basis.

Actuarial rates of premium help insurance

companies to transfer the risk in global

reinsurance market and the governments to

budget their liabilities.

3. Premium payable by farmers is subsidized

substantially to make it affordable.

4. Sum insured is broadly equal to cost of cultivation.

5. All claims will be paid by insurance company as

there will be no sharing of claims by state and

central governments.

MNAIS is an improved version of NAIS.

The Scheme covers

all food, oilseeds and annual commercial /

b) National Crop Insurance Programme (NCIP)

Component – I: Modified National

Agricultural Insurance Scheme (MNAIS)

Which are the crops covered:The Scheme covers

all food, oilseeds and annual commercial /  horticultural crops for which historical yield data

is available and crop cutting experiments are

planned for current year. State governments issue

notifications containing names of crops and areas eligible for insurance, rates of premium etc. at the beginning of each cropping season.

Available to all Farmers -

compulsory for borrowing and optional for non-

borrowing farmers- who have to fill-up a simple

Proposal Form and submit the same with

premium amount in a nearest branch of bank or

Primary Agricultural Credit Society.

Sum Insured is based on cost of cultivation and at least equal to loans disbursed. Often the State

government decides the sum insured for various

crops for a district within the State. Sum insured

can extend up to value of Threshold Yield.

Premium rates vary from crop to crop and area to

area based on risk profile reflected in historical

yield data, past insurance and claims experience.

Network of financial institutions viz., commercial

banks, regional rural banks and cooperative banks,

spread across length and breadth of country plays the role of intermediaries. Additionally, insurance intermediaries licensed by IRDAI are also allowed to insure non-loanee farmers.

Levels of Indemnity:

What is the procedure for claims:

New provisions on claims:

Component – II: Weather Based Crop

Insurance Scheme (WBCIS):

Which are the crops covered:

Who can insure:

Levels of indemnity are 80%

and 90% which means farmers have to bear first

20% or 10% of losses respectively.

Operates on principles of Area-Yield Index or Guarantee. The guaranteed yield termed as Threshold Yield for every crop in every Homogenous Area e.g. taluka, block or gram panchayat, is based on past seven years’ moving average yield with a provision for excluding yields of maximum two calamity years.

The other process is same as the NAIS.

MNAIS provides for additional features in terms of coverage of‘Prevented sowing’, post harvest losses, individual farm level assessment in case of localized calamities, and On-Account settlement of claims in case of serious crop losses/major disasters.

The Scheme covers all food, oilseeds and annual

commercial / horticultural crops. All crops for

which historical yield data is not available can also  be covered.

Available to all Farmers -

compulsory for borrowing farmers and optionalfor non-borrowing farmers -who have to fill-up a simple Proposal Form and submit the same with premium amount in a nearest branch of bank or Primary Agricultural Credit Society.

Major perils covered are deficit, excess and deviation of rainfall, relative humidity,

temperature (high and low), wind speed and

combination of above. Risks of hail-storm and

cloud burst can also be covered as add-on covers.