The Centre has communicated to the state governments that pursuing their stands on including the ‘Beed formula’ as a way under its flagship crop insurance scheme of Pradhan Mantri Fasal Bima Yojana (PMFBY). The progress arrives at a point when many states have enhanced cold feet on PMFBY and mention the price of the premium subsidy being supported by them.
Under the ‘Beed formula’, also known as 80-110 plan, in the situation where requests come 60% of premium assembled, then the insurance company will have to pay back 20% to the state government and then if the claims are at 70%, the repay to the state will be 10%. In the case of claims which are higher than 80%, then the state will not obtain any return. And the insurer’s possible losses are restricted – the company won’t have to consider claims above 110% of the total premium. The insurer will pay back the premium surplus that is gross premium minus the claims, immensely 20% of the gross premium to the state government.
Naturally, the state government has to support the value of any claims above 110% of the premium obtained to envelop the insurer from their losses, but such greater levels of claims seldom happen, so the states compute the formula in consequence to diminish their cost to manage the scheme. Earlier, Maharashtra and Rajasthan wrote to the Centre looking at the Beed formula to manage the crop insurance scheme for the present Kharif season. But the Centre said the two states had to hold back as the 80-110 plan required a comprehensive analysis and likely Cabinet clearance. And the sources pointed out that both the states hesitantly turned out the PMFBY scheme late last month.
During 2018 and 2019, a distant-below-normal monsoon in central Maharashtra’s Beed district, arising in high claims ratio discouraged the insurers from covering the farmers in the district under the PMFBY Scheme for Kharif 2020, and the Centre said the public sector Agriculture Insurance Company of India (AIC) to require. And they guaranteed that it wouldn’t have to entertain claims above 110% of the total premium and the scheme ran prosperously.
Under the PMFBY, the premium to be paid by farmers is certain at 1.5% of the total insured for rabi crops and 2% for Kharif crops and it is 5% for cash crops. The balanced Premium is equally divided among the Centre and states. And many states have asked their share of the government-paid premium to be at 30%, with the balance of 70% carried by the Centre. Then many states like Gujarat, Andhra Pradesh, Telangana and Jharkhand left the PMFBY scheme last year. Punjab has not executed the crop insurance scheme and Bihar and West Bengal have their schemes where the farmers do not bear any premium but they get a fixed amount of return in case of failure of crops.
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