Current AffairsEconomics

Maharashtra’s Beed Model

Maharashtra CM has urged the Prime Minister for state-wide implementation of the ‘Beed model’ of the crop insurance scheme Pradhan Mantri Fasal Bhima Yojana (PMFBY).

Beed model
  • Delay in claim settlement, failure to recognize localized weather events, and stringent conditions for claims were among the concerns. Another complaint was about alleged profiteering by insurance companies.
  • For Maharashtra, where farmers predominantly depend of monsoon rains to water their crops, the scheme soon turned out to be non-profitable for insurance companies given the high payments they had to make.
  • Payouts were close to or exceeded the premium collected in some years, leading to losses to insurance companies.
  • Located in the drought-prone Marathwada region, the district of Beed presents a challenge for any insurance company.
  • During the 2020 kharif season, tenders for implementation did not attract any bids. So, the state Agriculture Department decided to tweak the guidelines for the district.
  • The state-run Indian Agricultural Insurance Company implemented the scheme.
  • Under the new guidelines, the insurance company provided a cover of 110% of the premium collected, with caveats.
  • If the compensation exceeded the cover provided, the state government would pay the bridge amount.
  • If the compensation was less than the premium collected, the insurance company would keep 20% of the amount as handling charges and reimburse the rest to the state government.
  • The reason why Maharashtra is pushing for this scheme is that in most years, the claims-to-premium ratio is low with the premium being paid to the company.
  • In the Beed model, the profit of the company is expected to reduce and the state government would access another source of funds.
  • The reimbursed amount can lead to lower provisioning by the state for the following year, or help in financing the paying the bridge amount in case of a year of crop loss.
  • For farmers, however, this model does not have any direct benefit.
Tags: Current Affairs, Economics

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