Centre moots deposit of premium subsidy by States earlier than begin of PMFBY enrolment

The Centre desires to make sure well timed settlement of claims underneath crop insurance coverage scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) and has proposed some quantity must be deposited by States in addition to insurers earlier than the enrolment begins however the initiative is being opposed by each stakeholders. The problem could also be mentioned in a gathering subsequent week in order that tips are amended earlier than subsequent kharif season.

“Whereas one of many pleas taken by insurance coverage corporations in late fee of claims to farmers as delay by States to deposit their share of premium subsidy, it’s not at all times that States are at fault. Even insurers additionally make delayed fee to farmers and take a plea that they don’t get the claims from the re-insurers,” mentioned an official. All stakeholders want to grasp the need of well timed claims settlement and fee to farmers, the official added.

One of many proposals says: “State/UT will make mandatory budgetary provision for premium subsidy primarily based on truthful estimates, initially of the crop season to make sure well timed premium fee to insurance coverage corporations to allow quicker declare settlement.”

States search establishment

States akin to Maharashtra, Uttar Pradesh, Tamil Nadu and Chhattisgarh have requested the Centre to take care of establishment whereas corporations have agreed with the plan for well timed deposit of premium subsidy.

Chhattisgarh has mentioned it is going to disburse the premium subsidy in accordance with the prevailing mannequin whereas Uttar Pradesh has mentioned when a State has accepted to implement the scheme, it’s implied that it’s dedicated for the fee of subsidy and it has been paying its subsidy frequently, largely inside timelines.

Going a step additional Maharashtra has mentioned “funds can’t be made obtainable by State earlier than enrolment begins. However letter of assurance may be issued.” However Tamil Nadu has mentioned that fee of full subsidy in an escrow account earlier than issuance of notification is under no circumstances doable because the financial institution would declare for deposit of a substantial quantity and in addition declare service prices to subject the Letter of Credit score (LoC) which can be a further burden to the States.

Standby LoC

The Centre has additionally proposed: “Insurance coverage corporations will deposit their share of possible declare quantity within the type of Standby Letter of Credit score (SBLC) or Financial institution Assure (BG) in favour of the State/UT Authorities, with the ‘contracting financial institution’ previous to signing of contract between the State Authorities and the Insurance coverage Firm. The possible declare quantity shall be calculated on the premise of final 3-year common declare quantity.

“If the insurance coverage firm fails to launch the claims inside the stipulated interval as specified within the operational tips then the SBLC or BG can be triggered by the State Authorities and the declare quantity shall be pushed into the PFMS mapped debit account to be maintained by State Authorities and can be transferred to the account of the person beneficiary farmer. In case any extra quantity is left after the discharge of full claims or after the triggering of SBLC or BG, the identical shall be returned to the Insurance coverage Firm.”

Sources mentioned that insurance coverage corporations have taken the plea that since they’re depositing a very good chunk of premium with the re-insurer, it is not going to be doable for them to deposit further quantity for a similar objective. If the function of re-insurers can also be introduced into the ambit of PMFBY, the problem may be resolved, mentioned an government of an insurance coverage firm.

“The primary downside lies with the regulator’s rest of 180 days to States to deposit their share of premium. As soon as relaxed, States additionally don’t take it critically and assume nothing to occur even when they fail to deposit the subsidy premium in time. The regulator has to take a name,” a supply mentioned.

Below PMFBY, farmers pay a nominal 2 per cent of the sum insured as premium in kharif season and 1.5 per cent in rabi and 5 per cent for money crops in each seasons. The remaining premium quantity, derived after tender for various crops in numerous clusters, is shared equally by Centre and States.

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