Maharashtra has asked for the Centre's approval to implement the 'Beed formula' or '80:110' plan under the flagship Pradhan Mantri Fasal Bima Yojana (PMFBY), while Tamil Nadu has expressed its willingness to return to the original scheme, with the Kharif season sowing set to begin in 20 days. But, like the previous year, Madhya Pradesh has yet to make a decision.
According to PMFBY guidelines, enrolment for the kharif season should have begun on April 1 and the premium rate set before that. However, due to a variety of factors, including states' lack of interest, delayed enrollment has become the norm. According to sources, enrolment for the kharif season has yet to begin in all major agricultural states this year.
Farmers pay a fixed premium of 1.5 percent of the insured amount for rabi crops, 2% for kharif crops, and 5% for cash crops under PMFBY. The balance premium is subsidised 50:50 by the Centre and the States.
Concerned about insurance companies charging premiums that are higher than the average 'burned out' cost, Maharashtra wants to implement the 80:110 plan, which was first approved for Beed district during kharif 2020 when no insurer participated in the tender due to two consecutive years of poor monsoon, which resulted in high claims.
The insurance company's potential losses are limited to less than 110 percent of the gross premium under the 80-110 plan. The company is guaranteed 20% of gross premium if the claims ratio stays below 80%, and any premium surplus (gross premium minus claims) that exceeds 20% is refunded to the state government. While the insurance company is obligated to pay up to 110% of the gross premium, it is the State government's responsibility to pay when claims exceed that amount.
For example, if the claims-to-premium ratio is 70%, the insurer keeps 20% and returns 10% to the state government.
According to sources, the Centre is likely to approve the plan because Maharashtra has a genuine concern about high premiums despite a forecast of normal monsoon, and the State has also agreed to use technology in calculating yield losses. According to the sources, once approved, the State will solicit premium bids again.
According to sources, Tamil Nadu will make a decision after analyzing the premium bids under the normal PMFBY plan, which will be released soon. In the previous Kharif season, the State implemented an 80:20 co-insurance model in which its liability and gross premium collected were split 80:20 between the State and the insurer. The state does not want to implement the 80:20 model right now.
According to official sources, the state no longer wishes to implement the 80:20 model and may instead opt for either normal PMFBY or the 80:110 formula.
Following implementation in Kharif 2020 in Beed, the claims to premium ratio fell to 1.7% from as high as 245% in Kharif 2018 and 89.4% in Kharif 2019. Beed is one of the most populous districts, with a gross premium of Rs 798 crore in the 2020 Kharif season.
After meeting with farmer organizations in February, Maharashtra's Agriculture Minister Dada Bhuse stated that the government would consider their request for a state-level crop insurance scheme, similar to what Andhra Pradesh, West Bengal, and other states had done.
