MODIFIED NATIONAL AGRICULTURAL INSURANCE SCHEME

• Objectives
• Salient Features
• Frequently Asked Questions

OBJECTIVES
The objectives of the Scheme are as under: -
i) To provide insurance coverage and financial support to the farmers in the event of prevented sowing & failure of any of the notified crop as a result of natural calamities, pests & diseases.
ii) To encourage the farmers to adopt progressive farming practices, high value in-puts and better technology in Agriculture.
iii) To help stabilize farm incomes, particularly in disaster years.

SALIENT FEATURES OF THE SCHEME

In addition to Agriculture Insurance Company of India Ltd., Private sector insurance companies with adequate infrastructure and experience will be allowed on selective basis to implement the scheme by the implementing States from out of the companies short listed by the Department of Agriculture & Cooperation.

CROPS COVERED

i. Food crops (Cereals, Millets & Pulses)
ii. Oilseeds
iii. Annual Commercial / Horticultural crops
(a) Loanee farmers would be covered under compulsory component.
(b) Non-loanee farmers would be covered under voluntary component.
(c) The Crops are covered subject to availability of i) the past yield data based on Crop Cutting Experiments (CCEs) for adequate number of years, and ii) requisite number of CCEs are conducted for estimating the yield during the proposed season.

Ten years historical data is adequate for setting premium rates, fixing indemnity limit and threshold yield etc. Wherever such historical yield data at insurance unit is not available for some years, the data of nearest neighboring unit / weighted average of contiguous units / next higher unit can be adopted, subject to appropriate loading in the premium rate, if necessary.

STATES AND AREAS TO BE COVERED

Modified NAIS based on major improvements suggested by the Joint Group is to be  implemented in 50 districts. These districts may be identified in consultation with the States/UTs.
FARMERS TO BE COVERED
All farmers* including sharecroppers, tenant farmers growing the notified crops in the notified areas are eligible for coverage.
* includes
I. Individual owner-cultivator/ tenant farmers/ share croppers.
II. Farmers enrolled under contract farming, directly or through promoters / organizers
III. Groups of farmers / societies serviced by Fertiliser Companies, Pesticide firms, Crop Growers associations, Self Help Groups (SHGs), Non-Governmental Organisations (NGOs), and Others
The Scheme will extend coverage Component-wise:-
Compulsory Component
All farmers availing Seasonal Agricultural Operations (SAO) loans from Financial Institutions (i.e. loanee farmers) would be covered compulsorily.
Voluntary Component
The Scheme would be optional for all non-loanee farmers.
RISKS COVERED & EXCLUSIONS

(A). STANDING CROP (Sowing to Harvesting)
Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, viz.:
(i) Natural Fire and Lightning
(ii) Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
(iii) Flood, Inundation and Landslide
(iv) Drought, Dry spells
(v) Pests/ Diseases etc.

(B) PREVENTED SOWING / PLANTING RISK
In case farmer of an area is prevented from sowing / planting due to deficit rainfall or adverse seasonal conditions, such insured farmer who failed to sow /plant (but otherwise has every intention to sow / plant and incurred expenditure for the purpose), shall be eligible for indemnity. The indemnity payable would be a maximum of 25% of the sum-insured. The scale of payment for different crops will be worked out by implementing agency in consultation with experts.

(C) POST HARVEST LOSSES
Coverage is available only for those crops, which are allowed to dry in the field after harvesting against specified perils of cyclone in coastal areas, resulting in damage to harvested crop. Further, the coverage is available only upto a maximum period of two weeks from harvesting. Assessment of damage will be on individual basis.

SUM INSURED / LIMIT OF COVERAGE

In case of Loanee farmers under Compulsory Component, the Sum Insured would be at least equal to the amount of crop loan sanctioned/advanced, which may extend up to the value of the threshold yield of the insured crop at the option of insured farmer. Where value of the threshold yield is lower than the loan amount per unit area, the higher of the two is the Sum Insured. Multiplying the Notional Threshold Yield (district/region/state level) with the Minimum Support
Price (MSP) of the current year arrives at the value of Threshold Yield. Wherever Current year’s MSP is not available, MSP of previous year shall be adopted. The crops for which, MSP is not declared, farm gate price established by the marketing department / board shall be adopted.
Further, in case of Loanee farmers, the Insurance Charges payable by the farmers shall be financed by loan disbursing office of the Bank, and will be treated as additional component to the Scale of Finance for the purpose of obtaining loan. For farmers covered on voluntary basis the sum-insured is upto the value of Threshold yield of the insured crop. If the farmer so desire he may be provided with higher level of risk coverage. Sum insured up to 100% of threshold/average yield of notified area with normal premium subsidy but sum insured above 100% and up to 150% of the value of average yield without premium subsidy.

PREMIUM RATES & SUBSIDY

Premium rates are to be worked out on actuarial basis. However, the premium paid by the farmer is subsidized on the following lines:

BENEFITS EXPECTED FROM SCHEME

The Scheme is expected to:
• Be a critical instrument of development in the field of crop production, providing financial support to the farmers in the event of crop failure.
• Encourage farmers to adopt progressive farming practices and higher technology in Agriculture.
• Help in maintaining flow of agricultural credit.
• Provide significant benefits not merely to the insured farmers, but to the entire community directly and indirectly through spillover and multiplier effects in terms of maintaining production & employment, generation of market fees, taxes etc. and net accretion to economic growth.
• Streamline loss assessment and enable expeditious settlement of claims.

Modified National Agricultural Insurance Scheme is proposed to be implemented as  pilot scheme in Namakkal, Cuddalore and Sivagangai Districts of  Tamil Nadu during 2012-13 by the State Government through Agricultural Insurance Company of India Limited., Chennai-1 with the following main features.

I.  Actuarial rate of premium will be paid for insuring crops and hence claims liability will be on insurers.

II.  Unit area of insurance for major crops will be Revenue Village.

III.  Indemnity amount will become payable, for prevented sowing / failed sowing, planting risks,  post harvest losses and due to Cyclones.

IV.  On account payment up to 25% of likely claim under Modified National Agricultural Insurance Scheme will be released as advance by  

 Agricultural Insurance Company, for providing immediate relief to  the farmers.

V.  Uniform seasonality norms will be applicable for both loanee and non- loanee farmers.

VI.  More proficient basis for calculation of thresh hold yield (average yield of  last 7 years excluding up to two years declared as affected by  natural calamity year) will be applicable.

VII. Minimum indemnity level  under Modified National Agricultural  Insurance Scheme will be 70% instead of 60% as in National Agricultural Insurance  Scheme.

VIII.  All claims will be borne by the insurance companies. 

CROPS COVERED

Annual Commercial / Horticultural Crops.

These crops will be covered subject to availability of 

(i) the past yield data, based on crop cutting experiments (CCE's) for adequate number of years and

(ii) requisite number of CCE's are conducted for estimating the yield during the proposed seasons. 

FARMERS  COVERED

All farmers including share croppers, tenant farmers, growing the notified crops, in the notified areas are eligible for coverage. The category of farmers  include,

i. Individual owners - Cultivator / Tenant Farmers / Share Croppers.

ii. Farmers enrolled under contract farming directly or through Promoters /    

Organizers.

iii. Groups of Farmer / Societies, serviced by Fertilizers Companies, Pesticide  

Firms, Crop Growers associations, Self Help Groups (SHGs), Non-Governmental organizations (NGOs) and others.

   - Loanee farmers would be covered on  compulsory basis.

   -  Non-Loanee farmers would be covered on voluntary basis.

The scheme is expected to :

a. Be a critical instrument in the field of crop production, providing financial support to the farmers in the event of crop failure.

b. Encourage farmers to adopt progressive farming practices and higher technology in  Agriculture/Horticulture.

c. Help in maintaining flow of Agricultural credit

d. Provide significant benefits not merely to the insured farmers, but to the entire community directly and indirectly through spillover and multiplier effects in terms of maintaining production and employment, generation of market fees,  taxes etc., and net accredition to economic growth.

e. Stream line loss assessment and enable expeditious settlement of claims.

Compensation payment is met by the Insurance Companies as actuarial rate of premium is charged and commitment to Government will be negligible. 

Frequently Asked Questions (FAQs)
1. What is MNAIS, highlight its main features?
The ongoing NAIS has been reviewed and modified to make it more farmer friendly. It has been launched as a pilot in selected States / UTs. In addition to payment of claims for yield loss on area approach basis (as under NAIS), its other features include:
i. Unit area of insurance reduced to village/village panchayat level for major crops
ii. Minimum number of CCEs required to be conducted at village / village Panchayat level reduced to four (except groundnut crop)
iii. Threshold yield based on average yield of the preceding 7 years excluding upto 2 calamity years declared by concerned government/authority
iv. indemnity payment for Prevented sowing/planting risk
v. coverage of Post harvest losses due to coastal cyclone
vi. On-account payment upto 25% advance of likely claims as immediate relief
vii. Minimum Indemnity Level (IL) is raised to 70%
viii. Uniform seasonality disciplines both for loanee & non-loanee farmers
ix. Private sector insurers apart from Agriculture Insurance Company (AIC) of  India, are also permitted to implement the scheme with the aim of creating a competitive market for crop insurance to enable the farmers to insure their crops at reasonable premium rates.

2. What is the difference between NAIS (National Agricultural Insurance Scheme) and MNAIS? Which is more beneficial?
MNAIS is an improvement over NAIS, and is based on actuarial premium rates.  This scheme is expected to generate more benefits to farm ers through coverage  of prevented sowing/planting risk and post harvest losses,  higher indemnity level  of minimum 70%, more precise calculation of threshold yield.

3. What would be the Sum insured for loanee farmers under MNAIS?
The MNAIS envisages that loanee farmers, are to be covered compulsorily for at least equal to the amount of crop loan sanctioned/advanced for notified crops, which may extend upto the value of the threshold yield of the insured crop at the option of insured farmers. Where value of the threshold yield is lower than the loan amount per unit area, the higher of the two is sum insured. Maximum sum insured can be 150% of value of threshold yield.

4. What are the benefits of compulsory coverage of loanee farmers?
In order to meet the objectives of the Scheme i.e. providing financial support to the farmers and help in stabilizing farm income, element of compulsory coverage of loanee farmers is incorporated under NAIS/MNAIS/WBCIS so that the insured farmer gets the claim in the event of shortfall in the yield due to the insured perils/disasters, which would off set the crop loan to the extent of the claims and he would be in a better position to obtain fresh crop loan for the next season after liquidating earlier crop loan. In the event of the crop not insured (sum insured being then loan amount obtained from the bank), the loan remains outstanding in the books of Account of the Bank and farmer is deprived of any support which he would have otherwise got. It also encourages the financial institutions to increase the credit flow for crop production purposes to the farmers as the insurance provides an additional security. It also ensures the maximum coverage/participation under the scheme.

5. How is premium calculated under the scheme?
Before the start of each crop season , participating insurance companies will work out actuarial premium as well as net premium rates (premium rates actually payable by the farmers after premium subsidy) for each notified crop through standard actuarial methodology in conformity with provisions of IRDA.

6. What is the limit of Sum Insured for availing Premium subsidy?
Actuarial premium on sum insured upto 100% of threshold yield of notified areas is eligible for Government subsidy, but there is no provision for subsidy beyond 100% sum insured.

7. Can the State government opt / decide the Indemnity Level (IL)?
Indemnity Level is assigned on the basis of risk profile / classification of the crop in the selected district (low, medium & high). The IL will be decided by the State Level  Coordination Committee on Crop Insurance (SLCCCI) based on a standard  principle, and the premium rate will be given at the Indemnity Level.  In other words, the State/insurance companies cannot arbitrarily decide the Indemnity Level.

8. How do the States classify Major and Minor crops?
The major and minor crops are categorized at national / State level. However, for the purpose of MNAIS, it’s important to keep in mind that adequate cropped area  is required at Insurance Unit (IU) level for conduct of Crop Cutting Experiments (CCEs). In view of this requirement, it may be ideal to consider acreage in terms

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Source

http://www.aicofindia.com/AICEng/Pages/Product_Profile/Present.aspx