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National Agricultural Insurance Scheme (NAIS)
(Rashtriya Krishi Bima Yojana - RKBY)
Objectives
Top
The objectives of the RKBY are as under :- To provide insurance coverage and financial support to the farmers in the event of failure of
any of the notified crop as a result of natural calamities, pests & diseases.
To encourage the farmers to adopt progressive farming practices, high value in-puts andhigher technology in Agriculture.
To help stabilise farm incomes, particularly in disaster years.Salient Features of the NAIS Scheme
Top
1. Crops Covered:
The Crops in the following broad groups in respect of which i) the past yield data based onCrop Cutting Experiments (CCEs) is available for adequate number of years, and ii) requisite
number of CCEs are conducted for estimating the yield during the proposed season:
Food crops (Cereals, Millets & Pulses), Oilseeds, Sugarcane, Cotton & Potato
(Annual Commercial / annual Horticultural crops)
Other annual Commercial / annual Horticultural crops subject to availability of past Yielddata will be covered in a period of three years. However, the crops which will be covered
next year will have to be spelt before the close of preceding year.
2. States and Areas to be covered
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The Scheme extends to all States and Union Territories. The States / UTs opting for theScheme, would be required to take up all the crops identified for coverage in a given year.
Exit clause: The States / Union Territories once opting for the Scheme, will have to continuefor a minimum period of three years.
3. Farmers to be covered
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All farmers including sharecroppers, tenant farmers growing the notified crops in the notified
areas are eligible for coverage.
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The Scheme covers following groups of farmers:
On a compulsory basis: All farmers growing notified crops and availing Seasonal Agricultural
Operations (SAO) loans from Financial Institutions i.e. Loanee Farmers.
On a voluntary basis: All other farmers growing notified crops (i.e., Non-Loanee farmers) who opt
for the Scheme.
4. Risks Covered & Exclusions
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Comprehensive risk insurance will be provided to cover yield losses due to non-preventablerisks, viz.:
i. Natural Fire and Lightningii. Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
iii. Flood, Inundation and Landslideiv. Drought, Dry spellsv. Pests/ Diseases etc.
Losses arising out of war & nuclear risks, malicious damage & other preventable risks shallbe excluded.
5. Sum Insured / Limit of Coverage
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The Sum Insured (SI) may extend to the value of the threshold yield of the insured crop atthe option of the insured farmers. However, a farmer may also insure his crop beyond value
of threshold yield level upto 150% of average yield of notified area on payment of premium
at commercial rates.
In case of Loanee farmers the Sum Insured would be at least equal to the amount of croploan advanced.
Further, in case of Loanee farmers, the Insurance Charges shall be an additionally to theScale of Finance for the purpose of obtaining loan.
In matters of Crop Loan disbursement procedures, guidelines of RBI / NABARD shall bebinding.
6. Premium Rates
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S.No
Season Crops Premium rate
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1 Kharif Bajra & Oilseeds 3.5% of SI or Actuarial rate, whichever
is less
Other crops (cereals, other millets &
pulses)
2.5% of SI or Actuarial rate, whichever
is less
2 Rabi Wheat 1.5% of SI or Actuarial rate, whichever
is less
Other crops (other cereals, millets,
pulses & oilseeds)
2.0% of SI or Actuarial rate, whichever
is less
3 Kharif &
Rabi
Annual Commercial / annual
Horticultural crops
Actuarial rates
Transition to the actuarial regime in case of cereals, millets, pulses & oilseeds would bemade in a period of five years. The actuarial rates shall be applied at District / Region / State
level at the option of the State Govt./UT.
7. Premium subsidy
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50% subsidy in premium is allowed in respect of Small & Marginal farmers, to be sharedequally by the Government of India and State/UT Govt. The premium subsidy will be phased
out on sunset basis in a period of three to five years subject to review of financial results and
the response of farmers at the end of the first year of the implementation of the Scheme.
The definition of Small and Marginal farmer would be as follows:Small Farmer:
A Cultivator with a land holding of 2 hectares (5 acres) or less, as defined in the land ceilinglegislation of the concerned State/ UT.
Marginal Farmer:
A Cultivator with a land holding of 1 hectare or less (2.5 acres).10. Seasonality Discipline
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* The broad seasonality discipline followed for Loanee farmers will be as under:
Activity Kharif Rabi
Loaning period April to
September
October to Next March
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Cut-off date for receipt Of
Declarations
November May
Cut-off date for receipt Of yield
data
January / March July / September
The broad cut-off dates for receipt of proposals in respect of Non-loanee farmers will be asunder :
a. Kharif season : 31st Julyb. Rabi season : 31st December
However, seasonality discipline may be modified, if and where necessary in consultationwith State / UT and the Govt. of India.
11. Estimation of Crop Yield
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The State/UT Govt. will plan and conduct the requisite number of Crop Cutting Experiments(CCEs) for all notified crops in the notified insurance units in order to assess the crop yield.
The State / UT Govt. will maintain single series of Crop Cutting Experiments (CCEs) andresultant Yield estimates, both for Crop Production estimates and Crop Insurance.
Crop Cutting Experiments (CCEs) shall be undertaken per unit area /per crop, on a slidingscale, as indicated below :
A Technical Advisory Committee (T.A.C.) comprising representatives from N.S.S.O., Ministryof Agriculture (G.O.I.) and IA shall be constituted to decide the sample size of CCEs and all
other technical matters.
12. Levels of Indemnity & Threshold Yield
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Three levels of Indemnity, viz., 90%, 80% & 60% corresponding to Low Risk, Medium Risk &High Risk areas shall be available for all crops (cereals, millets, pulses & oilseeds and annualcommercial / annual horticultural crops) based on Coefficient of Variation (C.V) in yield of
past 10 years data. However, the insured farmers of unit area may opt for higher level of
indemnity on payment of additional premium based on actuarial rates.
The Threshold yield (TY) or Guaranteed yield for a crop in an Insurance Unit shall be themoving average based on past three years average yield in case of Rice & Wheat and five
years average yield in case of Other crops, multiplied by the level of indemnity.
15. Financial Support towards Administration & Operating (A&O) expensescial Support towards
Administration & Operating (A&O) expenses
Top
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The A&O expenses would be shared equally by the Central Government & respective State
Government on sunset basis [ 100% in 1st year, 80% in 2nd year, 60% in 3rd year, 40% in 4th year,
20% in 5th year and zero thereafter ].
16. Corpus Fund
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To meet catastrophic losses, a Corpus Fund shall be created with contributions from the
Government of India and State / UT on 50:50 basis. A portion of Calamity Relief Fund (CRF) shall be
used for contribution to the Corpus Fund.
The Corpus Fund shall be managed by Implementing Agency (IA).17. Re-Insurance Cover
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Efforts will be made by IA to obtain appropriate reinsurance cover for the proposed
RKBY in the international Reinsurance market.
18. Management of the Scheme, Monitoring and reviewagement of the Scheme, Monitoring and
review
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In respect of Loanee farmers, the Banks shall play the same role as under CCIS. In respect of non-Loanee farmers, Banks shall collect the premium along with the
Declarations and send it to IA within the prescribed time limits. However, in areas where IA
has requisite infrastructure, a non-loanee farmer will have option to send premium along
with Declaration, directly to IA within the time limits.
Selection of the Banks will be on the basis of Service Area Approach (SAA) of RBI or at theoption of the Banks (where Co-operative Banks have good network). The Department of
Agriculture, Agricultural Statistics, Directorate of Economics and Statistics, Department of
Co-operation, Revenue Department of the State Government will be actively involved in
smooth implementation of the Scheme.
The Scheme will be implemented in accordance with the operational modalities as workedout by IA in consultation with Dept. of Agriculture & Co-operation.
During each crop season, the agricultural situation will be closely monitored in theimplementing States / Union Territories. The State / UT Department of Agriculture and
district administration shall set up a District Level Monitoring Committee (DLMC), who will
provide fortnightly reports of Agricultural situation with details of area sown, seasonal
weather conditions, pest incidence, stage of crop failure {if any} etc.
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The operation of the Scheme will be reviewed annually, and modifications as may berequired would be introduced. Periodic Appraisal Reports on the Scheme would be prepared
by Ministry of Agriculture, the Government of India / Implementing Agency.
19. Implementing Agency (IA) Agency (IA)
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An exclusive Organization would be set up in due course, for implementation of RKBY. Untilsuch time as the new set up is created, the G.I.C. of India will continue to function as the
Implementing Agency.
20. Benefits expected from Scheme
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The Scheme is expected to:
Be a critical instrument of development in the field of crop production, providing financialsupport to the farmers in the event of crop failure.
Encourage farmers to adopt progressive farming practices and higher technology inAgriculture.
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 maintainingproduction & employment, generation of market fees, taxes etc. and net accretion to
economic growth.
Streamline loss assessment procedures and help in building up huge and accurate statisticalbase for crop production.
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Issues related to the NAIS
A look into some of the issues related to NAIS which has been identified by the Planning
Commission, 2007 and in other related studies (Raju and Chand, 2008) is discussed below:
a) Reducing the insurance unit to the village panchayat level
The insurance unit under NAIS was taken on the basis of homogeneous area, and the
insurance unit were Mandal/ Taluk/ Block or equivalent unit, in most instances. Since these
are large administrative units, considerable differences in yield and level of impact of natural
calamities arise. Reducing the unit for determining claim to level of village in the case of
large villages and to cluster of villages in the case of small villages, will help in increasing 14
the popularity of the scheme. However, the most ideal approach is individual approach
which would reflect crop losses on a realistic basis, and has been regarded most desirable.
b) Threshold yield/ guaranteed yield
Under the scheme, the Guaranteed Yield, on which indemnities are calculated, are
estimated based on the moving average yield of the preceding three years for rice and wheat,
and preceding five years for other crops, multiplied by the level of indemnity. In areas where
there are consecutive adverse seasonal conditions, it pulls down the average yield.
Therefore, the best suggested method is to consider the best five, out of the preceding ten
years yield.
c) Extending risk coverage to prevented sowing/planting in adverse seasonal conditions
In many instances, sowing/ planting is prevented due to adverse seasonal conditions and
the farmer not only loses his initial investment, but also loses the opportunity value of the
crop. The NAIS does not cover such loses which comes under crop related seasonal risk.
Pre-sowing risk particularly prevented/ failed sowing/ re-seeding on account of adverse
seasonal conditions should be covered, wherein up to 25 per cent of sum insured could be
paid as compensation, covering the input cost incurred till that stage.
d) Coverage of post-harvest losses
Post-harvest losses include the crops getting damaged by cyclones, floods, etc., when left
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in the field for drying after harvest which is practiced for some crops like paddy. Under
NAIS, the coverage of risk is only upto harvesting, and such post-harvest loss are not
compensated. Extending the insurance cover for a specific time period after harvest will help
to help the farmers deal with such risk.
e) On-account settlement of claims
One of the most important set back in NAIS was the long gap between the occurrence of
loss and actual claim payment, which was around 8-10 months. Claims settlement usually
has to wait for the results of the Crop Cutting Experiments (CCEs) and the release of
requisite funds from the central and state governments. It has been suggested to introduce
on-account settlement of claims, without waiting for the receipt of yield data, to the extent
of 50 per cent of likely claims, subject to adjustment against the claims assessed on the yield
basis.
f) Increasing awareness among non-loanee farmers
For loanee farmers, the premia is deducted at the time of loan disbursement and claim
settlements being credited to the farmers loan account. In most of the cases, an illiterate or
The awareness and participation of non-laonee farmers is worse. Initiating, major pilot
studies to develop good communication with the farmers and increasing the awareness 15
among the farmers, is hence very important; to enhance the knowledge of the farmers
regarding crop insurance and at the same time, increase its penetration rate.
MODIFIED NATIONAL AGRICULTURAL INSURANCE SCHEME (MNAIS)
The Government of India has modified the NAIS and launched Modified National
Agricultural Insurance Scheme (MNAIS) with some additional features which were lacking in
the NAIS, in addition to those available under NAIS, in selected States / districts from Rabi
2010-11. The features of the pilot MNAIS launched is discussed below:
FARMERS COVERED: All farmers including sharecroppers, tenant farmers growing the
notified crops in the notified areas are eligible for coverage.
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The Scheme covers following groups of farmers:
a) On a compulsory basis: All farmers growing notified crops and having sanctioned credit
limits for Seasonal Agricultural Operations (SAO) loans from Financial Institutions for
notified crop (s) i.e. Loanee Farmers.
b) On a voluntary basis: All other farmers growing notified crops (i.e., Non-Loanee
farmers) who opt for the Scheme. These farmers could be:
(i) Individual owner-cultivators
(ii) Farmers enrolled under contract farming, directly or through promoters /
organizers
(iii) Groups of farmers / societies serviced by Fertilizer Companies, Pesticide firms,
Crop Growers associations, Self Help Groups (SHGs), Non-Governmental
Organizations (NGOs), and Others
(iv) Corporate farms
INSURANCE UNIT (IU)
For a major crop like paddy, the IU will be village or Gram panchayat, while for Minor
crops; the IU would be between Gram panchayat and block / tehsil. To facilitate implementation
of this Scheme at village level, the requirement of minimum number of CCEs to be conducted at
village / village panchayat level has been brought down from 8 to 4 CCEs for all crops except
groundnut.
LEVELS OF INDEMNITY & THRESHOLD YIELD
Three levels of Indemnity, viz., 90%, 80% & 70% corresponding to Low Risk, Medium
Risk & High Risk areas shall be available for all crops.
The Threshold yield (TY) or Guaranteed yield for a crop in a Insurance Unit shall be the
average of seven years [excluding a maximum of two years in which a calamity such as drought
etc. was declared by the concerned authority of Government], multiplied by the level of
indemnity.16
RISKS COVERED
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(A) STANDING CROP (Sowing to Harvesting)
Comprehensive risk insurance is provided to cover yield losses due to non-preventable
risks. If the Actual Yield (AY) per hectare of the insured crop for the defined area [on the basis
of requisite number of Crop Cutting Experiments (CCEs)] in the insured season, falls short of the
specified Threshold Yield (TY), all the insured farmers growing that crop in the defined area
are deemed to have suffered shortfall in their yield. The Scheme seeks to provide coverage
against such contingency.
Indemnity shall be calculated as per the following formula:
Shortfall in Yield
X Sum Insured for the farmer
Threshold yield
[Shortfall = Threshold Yield - Actual Yield for the Defined Area]
ON ACCOUNT PAYMENT OF CLAIMS
In case of adverse seasonal conditions during crop season, claim amount up to 25 percent
of likely claims would be released in advance subject to adjustment against the claims assessed
on yield basis. The on account payment will be considered only if the expected yield during the
season is less than 50 percent of normal yield. The criteria for deciding on-account payment of
claims shall be based on agro-meteorological data / satellite imagery or such other indicators to
be decided by the Insurer, and will be implemented in States and for crops for which such proxy
indicators can be established.
(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
eligibility for payment would be decided at IU level, and the insurance cover gets terminated
once the unit qualifies for the prevented sowing / planting
risk.
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(C) LOCALISED RISKS
In case there is loss due to localized calamities i.e. hailstorm and landslide, the loss would
be assessed on individual farm basis and compensation so paid shall be adjusted from the losses
payable due to loss in yield on area approach basis.17
(D) POST HARVEST LOSSES
Coverage is available only for crops like paddy, which are allowed to dry in the field
after harvesting, against specified perils of cyclone in coastal areas, resulting in damage to
harvested crop. The coverage is available upto a maximum period of two weeks from
harvesting. Assessment of damage will be on individual basis.
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:
S. No Premium slab Subsidy to Farmers
1 Up to 2% Nil
2 >2 - 5% 40% subject to minimum net premium of 2%
3 >5 10% 50% subject to minimum net premium of 3%
4 >1015% 60% subject to minimum net premium of 5%
5 >15% 75% subject to minimum net premium of 6%.
Premium subsidy shall be available to farmers up to Compulsory coverage or value of
Threshold Yield, whichever is higher for loanee farmer and value of TY for non loanee farmers.
The difference between the Actuarial (Gross) Premium and the Premium payable by the farmer
is shared equally between the Government of India and State Government.
SHARING OF RISK: All claims will be borne by the Insurance Companies.