Wrong to claim crop insurance scheme benefiting private insurers, says govt3 min read . Updated: 24 Jul 2017, 10:49 AM IST
Bidding process for crop insurance transparent, states are free to set up own companies, says Centre, in rebuttal to an assessment by Centre for Science and Environment
New Delhi: In a rebuttal to independent assessments which showed that the Prime Minister’s flagship crop insurance scheme is aiding private insurers to rake in large profits, the government has said that the allegations are not only wrong but also preposterous.
“The scheme was implemented in the first year (2016) through 16 empaneled insurance companies including five govt. companies and premium rates were settled by state governments through a transparent bidding procedure and obviously the lowest bid won the award," the Centre said in a statement late on Sunday evening.
States are free to set up their own insurance companies, it added.
The rebuttal by the Centre is seemingly a response to an assessment by Delhi based think-tank Centre for Science and Environment (CSE) which on Friday said that high actuarial premium rates (borne by Centre and states) under the Pradhan Mantri Fasal Bima Yojana helped insurance companies earn “massive profits" during the 2016-17 crop year.
Also, the Comptroller and Auditor General of India (CAG) said on Friday, in a performance audit, that the Centre and state governments spent a staggering Rs32,606 crore towards premium subsidy and claim settlement under crop insurance schemes in five years (2011-12 to 2015-16), but did not maintain any record of beneficiary farmers. The government was not in a position to ensure that the money spent on crop insurance schemes “reached the intended beneficiaries or achieved the intended purposes", the CAG said in its assessment.
In response, the government, in a statement running over 1,600 words, said that during Kharif 2016, gross premium amount of Rs16,675 crore was collected by insurance companies and this was primarily due to a substantial increase in the sum insured from Rs1,15,000 crore in 2015-16 to Rs2,04,000 crore in 2016-17.
“Higher sum of insurance will result in more substantive payouts to the farmers when they become eligible for claims during the season that turns out to be a bad one," the Centre said.
However, the government admitted that timely claim settlement to farmers is a work in progress.
“The timely payment of claims is dependent on providing the yield data and premium subsidy to the insurance companies (responsibility of states). As on date, claims worth a total of Rs6,478 crore have been approved for Kharif 2016 season and a sum of Rs4,274 crore paid," the government said.
It added that for Kharif 2016, total claims are estimated to be more than Rs10,000 crore against the gross premium of Rs16,675 crore. “This needs to be visualised in a situation that saw normal crop seasons in both Kharif and Rabi, 2016-17," the government said.
The CSE assessment found that average actuarial premium rates charged by insurance companies were the highest ever at 12.6% during Kharif 2016. The rates were 20.5% in Gujarat, 19.9% in Rajasthan and 18.9% in Maharashtra.
The high actuarial premium rates is one reason (the other being a substantial rise in overall sum insured) that insurance companies collected close to Rs22,000 crore in insurance premium during 2016-17, mostly borne by the Centre and state governments, as premiums paid by farmers are capped between 1.5% and 5% of the sum insured.
“We have clearly said in our study that the latest scheme is better than earlier ones. The basic problem lies in implementation. It speaks a lot that (after seven months of harvest) in July (2017) the government does not know the exact claims arising out of Kharif 2016," said Chandra Bhushan, deputy director general at CSE.
“If farmers are not getting timely benefits there is a need to revisualise the scheme. The Centre must also realise that states are diluting the scheme," Bhushan added.