"The entire economy is dependent on a good monsoon and agriculture produce. I hope monsoon will be good. Should there be a shortfall, Agriculture Insurance Company will step in. It (Varsha Bima) will go a long way in mitigating the suffering of farmers," Chidambaram said launching the scheme of AIC.
"I appeal to all the farmers to take advantage of the scheme," he said. The launch of 'Varsha Bima' assumes importance in the wake of conflicting reports of normal to poor monsoon projected by various agencies.
The Indian meteorological department projected in April that the monsoon will be normal this year. It later forecast a week's delay in arrival of South West Monsoon in India.
In contrast, Bangalore-based Centre for Mathematical Modelling and Computer Simulation has projected 34 percent deficient rainfall.
Against this backdrop, Agriculture Insurance Company has hastened up the launch of its weather insurance scheme and aims to cover 2 lakh farmers through 'Varsha Bima' and a drought cover 'Sookha Suraksha Kavach' offered in Rajasthan.
'Varsha Bima', priced at 4-8 percent of crop value, will cover 13 crops in 10 states till June 30 this year. It would be extended to more crops across the nation next year. AIC will start compensating farmers from middle of August after getting actual picture of monsoon from the MET.
Terming 'Varsha Bima' as the most important product offered by insurance industry, Chidambaram said, "I sincerely hope this product will be successful... The product will be refined depending on the actual experience."
Elaborating on the scheme, he said "lower the rainfall, higher will be the pay-out to farmers." Recalling the experience in motor insurance, he urged AIC to make attempts for minimising disputes in claims and payout.
He admitted that one of the main drawbacks of domestic insurance industry was the lack of comprehensive agricultural insurance coverage against crop failures.
"We must recognise agriculture insurance is a complex subject and weather insurance is even more complex," he said. All over the world several experiments and research have been done on weather insurance products, he said, adding "results have been mixed."
The Indian farm insurance is heavily subsidised due to variety of reasons as farmers are unable to pay actuarially determined premium. Yet, he said "claims from farmers far exceed the premium they pay."
The Finance Minister lauded AIC for launching 'Varsha Bima' 2005 and 'Sookha Suraksha Kavach' for Rajasthan. AIC has introduced three insurance products this year, including coffee insurance scheme unveiled in March this year.
AIC chairman Suparas Bhandari said the cut off date for opting for the weather insurance schemes has been fixed at June 30.
The AIC chief promised claim settlement within 15 days after receiving data from 140 rain guage stations of Indian meteorological department spread over 10 states.