Welcome to Presentation on

Pilot Modified National Agricultural Insurance

Scheme (MNAIS)

Risks affecting Agriculture Production - A Major Risks affecting Agriculture Production - A Major ChallengeChallenge

Vagaries of weatherVagaries of weather- rainfall- rainfall- temperature- temperature- humidity- humidity- wind - wind - cyclone- cyclone

- hailstorm- hailstorm- flood- flood- frost- frost

Pest & diseasesPest & diseases FireFire Quality of inputsQuality of inputs SoilSoil Market pricesMarket prices

Risk Management in Agriculture Risk Management in Agriculture

Crop Insurance - An effective risk management tool Crop Insurance - An effective risk management tool which provides a mechanism to the farmers against which provides a mechanism to the farmers against uncertainties of crop productionuncertainties of crop production

Existing SchemesExisting Schemes

- NAIS: yield based; non-actuarial premium except - NAIS: yield based; non-actuarial premium except horticultural crops / annual commercial crops; horticultural crops / annual commercial crops; underwriting of losses by Central & State Govt. on underwriting of losses by Central & State Govt. on 50:50 ratio 50:50 ratio

- WBCIS: weather based ; actuarial premium with - WBCIS: weather based ; actuarial premium with premium subsidy shared equally by Central & State premium subsidy shared equally by Central & State Govt.Govt.

- CPIS: plant based; actuarial premium - CPIS: plant based; actuarial premium

Objectives of Crop InsuranceObjectives of Crop Insurance

To provide insurance coverage and financial support to To provide insurance coverage and financial support to the farmers in the event of prevented sowing & failure of the farmers in the event of prevented sowing & failure of any of the notified crop as a result of natural calamities, any of the notified crop as a result of natural calamities, pests & diseases.pests & diseases.

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

To help stabilize farm incomes, particularly in To help stabilize farm incomes, particularly in unfavorable years.unfavorable years.

Limitations of NAISLimitations of NAIS

Large insurance unit areaLarge insurance unit area Delay in payment of claims due to late submission of Delay in payment of claims due to late submission of

yield data & availability of Govt. funds yield data & availability of Govt. funds Pre- sowing/ Planting Risk is not covered Pre- sowing/ Planting Risk is not covered Unattractive basis of calculation of threshold yieldUnattractive basis of calculation of threshold yield Low indemnity levelLow indemnity level Localized calamities are not coveredLocalized calamities are not covered Post Harvest Losses are not coveredPost Harvest Losses are not covered Different seasonality discipline for loanee & non-loanee Different seasonality discipline for loanee & non-loanee

farmersfarmers Lack of competitionLack of competition

Review of NAISReview of NAIS

As per direction of PMO, a Joint Group was As per direction of PMO, a Joint Group was constituted by DAC on 31constituted by DAC on 31stst August, 2004 to August, 2004 to study NAIS & suggest improvementsstudy NAIS & suggest improvements

Joint Group under chairmanship of AS (MoA) Joint Group under chairmanship of AS (MoA) and JS (MoA), JS (MoF) & CMD(AIC) as and JS (MoA), JS (MoF) & CMD(AIC) as membersmembers

Joint Group submitted its Report on 20.12.2004Joint Group submitted its Report on 20.12.2004

Proposed ModificationsProposed Modifications

Sl. Sl. No.No.

ParametersParameters NAISNAIS Modified NAISModified NAIS

11 Insurance UnitInsurance Unit The defined area may The defined area may be a Gram Panchayat, be a Gram Panchayat, Mandal, Hobli, Circle, Mandal, Hobli, Circle, Phirka, Block, Taluka Phirka, Block, Taluka etc declared by GOS etc declared by GOS

Village Panchayat Village Panchayat

22 Early SettlementEarly Settlement The claims are settled The claims are settled based on the final yield based on the final yield estimates submitted by estimates submitted by GOSGOS

On account On account settlement of claims settlement of claims upto 25% of likely upto 25% of likely total claimstotal claims

33 Pre- sowing/ Pre- sowing/ Planting RiskPlanting Risk

Presently not coveredPresently not covered Prevented/Failed Prevented/Failed Sowing Risk to be Sowing Risk to be covered upto 25% of covered upto 25% of SISI

Proposed ModificationsProposed Modifications

SNSN ParametersParameters NAISNAIS Modified NAISModified NAIS

44 Threshold yield Threshold yield Moving average Moving average yield of preceding yield of preceding 3 years for Rice & 3 years for Rice & wheat and 5 years wheat and 5 years for other cropsfor other crops

Average yield of preceding 7 Average yield of preceding 7 years excluding max. 2 years years excluding max. 2 years of declared natural calamity of declared natural calamity by concerned Govt./authority. by concerned Govt./authority.

55 Indemnity Indemnity levels levels

60%, 80% & 90% 60%, 80% & 90% 70%, 80% and 90% 70%, 80% and 90%

66 Compulsory/ Compulsory/ voluntary voluntary naturenature

Compulsory for Compulsory for loanee farmers loanee farmers and voulntary for and voulntary for other farmersother farmers

No change, compulsory for No change, compulsory for loanee farmers and voluntary loanee farmers and voluntary for other farmersfor other farmers

Proposed ModificationsProposed Modifications

Sl. Sl. No.No.

ParametersParameters NAISNAIS Modified NAISModified NAIS

77 Localized Localized calamitiescalamities

Presently not Presently not coveredcovered

Individual assessment of Individual assessment of claims in case of hailstorm, claims in case of hailstorm, landslide landslide

88 Post Harvest Post Harvest LossesLosses

Presently not Presently not coveredcovered

Post harvest losses on Post harvest losses on account of cyclones to be account of cyclones to be covered in coastal areascovered in coastal areas

99 Seasonality Seasonality DisciplineDiscipline

Different for loanee Different for loanee and non-loanee and non-loanee farmersfarmers

Uniform seasonality Uniform seasonality discipline for loanee and discipline for loanee and non-loanee farmersnon-loanee farmers

Subsidy & Net Premium for Farmers under MNAIS

Sl.NoSl.No Actuarial Actuarial Premium Premium (% of SI)(% of SI)

Subsidy to Farmers Subsidy to Farmers (equally shared by (equally shared by Central and State Central and State Govt.)Govt.)

Premium Premium payable by payable by farmersfarmers

11 Upto 2% Upto 2% NILNIL Upto 2%Upto 2%

22 >2-5% >2-5% 40% subject to 40% subject to minimum net premium minimum net premium of 2% of SIof 2% of SI

2-3%2-3%

33 >5-10% >5-10% 50% subject to 50% subject to minimum net premium minimum net premium of 3% of SIof 3% of SI

3-5%3-5%

44 >10-15%>10-15% 60% subject to net 60% subject to net premium of 5% of SIpremium of 5% of SI

5-6%5-6%

55 >15%>15% 75% subject to 75% subject to minimum net premium minimum net premium of 6% of SIof 6% of SI

>=6>=6

Steps to be taken by GOI/States/IAGOI Issue approval. ImmediateStates Select 5 districts - 22.09.10 Provide (historical) yield data of past 7 yrs to all IA (indicate calamity yrs) - 30.09.10 Decision to implement - 30.09.10 Decide reference parameters & W.S. for prevented sowing / on a/c payment - 05.10.10 Decide IA district-wise - 10.10.10 Issuance of State Government Notification - 15.10.10 Conduct State Level Bankers’ workshop - Before 20.10.10 Preparation & Plan for CCEs at village level - 30.11.10 Payment of premium subsidy (advance) - 31.12.10IA Finalise actuarial premiums - 07.10.10 Publicity - Immediately upto the cut off

date

Financial Implications on Govt.Financial Implications on Govt.

The scheme would be on actuarial regime in which insurance The scheme would be on actuarial regime in which insurance company will receive premium on commercial basis and will company will receive premium on commercial basis and will be responsible for all claimsbe responsible for all claims

GOI & State Govts. will provide premium graded subsidy at GOI & State Govts. will provide premium graded subsidy at different slabs of actuarial premium to make the scheme different slabs of actuarial premium to make the scheme affordable for farmers affordable for farmers

The coverage in proposed MNAIS is expected to 25% of total The coverage in proposed MNAIS is expected to 25% of total farmers in 50 districts (about 30 lakh farmers) farmers in 50 districts (about 30 lakh farmers)

The financial implications of MNAIS in 50 districts (NAIS The financial implications of MNAIS in 50 districts (NAIS will be withdrawn) would be Rs. 715 crore during XI Plan will be withdrawn) would be Rs. 715 crore during XI Plan (2010-11 Rs.156.50 crore & 2011-12 Rs.558.50 crore)(2010-11 Rs.156.50 crore & 2011-12 Rs.558.50 crore)

Benefits to farmers under NAIS & MNAISBenefits to farmers under NAIS & MNAIS

ThanksThanks