Stalin seeks Modi’s intervention to remove key bottleneck in crop insurance scheme for farmers

CHENNAI: Chief Minister MK Stalin has sought the intervention of Prime Minister Narendra Modi in removing the capping of the central share of premium subsidy under the Prime Minister's Crop Insurance Scheme and revert to 49:49:2 ratio (central, state and farmer's share respectively) since the huge hike in the state's share of the premium subsidy has stymied the very purpose of the scheme.

The Chief Minister, in his letter dated July 28 to the Prime Minister, explained that Tamil Nadu had witnessed a huge growth in terms of area insured under the above insurance scheme and farmers’ enrolment due to the sincere efforts and best practices adopted by the state under the scheme.

"However, the state’s share of the premium subsidy has increased at a compound annual growth rate of 28.07 percent in the last five years. This has stymied the very purpose of the scheme as the Tamil Nadu government is finding it difficult to sustain the continuance of the scheme due to increasing financial liability, that too during this pandemic period," the Chief Minister pointed out.

"Initially the pattern of sharing in 2016-17 was 49:49:2 (i.e. central, state and farmer’s share respectively). Now, the central share has been capped at 25 percent for irrigated area and 30 percent for rain-fed area which leads to a large increase of the state share of premium subsidy by 12 percent (totally 61 percent). In money value, the state share of premium subsidy which was only Rs 566 crore in 2016-17 has mounted by 239 percent to Rs 1,918 crore during 2020-21 after the capping of central share of premium subsidy. This has further increased to Rs 2,500 crore during 2021-22 due to exorbitant Actuarial Premium Rates (APR) quoted by the insurance companies empanelled by the government of India," Stalin noted.

Stalin also brought to the notice of the Prime Minister that the insurance scheme launched with the noble intention of mitigating the economic losses of farmers at the time of natural calamities has become a heavy liability for states over the years.

“The intention of capping the subsidy to bring down the APR has not happened in reality as the insurance companies are continuing to quote exorbitant APR citing reasons like high loss ratio, inadequate financial capacity and lack of support from reinsurers. States are coerced to tweak the existing guidelines and adopt new co-insurance models increasing the risks to them. Otherwise, the insurance companies refrain from bidding,” the Chief Minister added.