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Post at: Jul 22 2021

Beed Model of Crop Insurance and PMFBY

CONTEXT
In June 2021, Maharashtra government asked center for state-wise implementation of the “Beed Model” of the crop
insurance scheme Pradhan Mantri Fasal Bima Yojna (PMFBY).
INTRODUCTION
Beed district in Maharashtra is emerging as an interesting model for crop insurance.
In Maharashtra where farmers depend on the Monsoonal rains for irrigation. The district of Beed is located in the
drought-prone Maharashtra region. It presents a challenge for any insurance company.

SIGNIFICANCE AND HOW DOES IT WORK
PMFBY was launched to ensure farm losses against inclement weather events. Farmers pay 1.5—2% of the
premium with the rest borne by the state and central governments.
WHY BEED PROPOSAL?

  • Beed district a drought prone area is a challenge for insurance company.
  • It is seen in most years, the claims to premium ratio is low with the premium being paid to the companies.
  • Profit of company is expected to reduce state government would access another source of funds prior to 2020. Since 2020, it has been optional for all farmers.

ADVANTAGES

  • If Farmers, report minimal losses, the state government can get back money to fund the scheme.
  • State government would bear the financial liability in cases of losses due to inclement weather.

WHY DOES THE STATE WANT CHANGES?
There are several reasons such as:

Moreover state government also had challenges getting bids for tenders to implement the scheme in Beed. Therefore
the Maharashtra Government decided to modify the crop insurance guidelines for the district.
Under this model, the insurance company provides a cover of 110% of the premium collected.
In case the compensation amount exceeds the 110% mark, the state government would pay the payouts cover were
close to or expected the premium collected in some years, leading to losses to insurance companies.
CONCLUSION
However Beed Model does not have any direct benefit but it will help the insurance company to a great extent and
government would access another source of funds.
 

Amit Gupta


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