Private insurance companies will be involved in the operation of the proposed income insurance scheme for farmers.
"A few private companies have already been approached for this purpose and their response is encouraging," Agriculture Minister Rajnath Singh told Business Standard.
The proposed scheme envisages insuring the income of farmers who are forced to sell their produce at rates below the minimum support prices (MSP) announced by the Centre. The insurance companies will compensate the farmers for the difference between the MSP and the actual realised prices.
Singh said the concept paper for the scheme was ready and the necessary spade work was underway.
A high level meeting between him, Finance Minister Jaswant Singh and Minister of Food and Consumer Affairs Sharad Yadav was likely early next week to give final touches to the proposal.
The scheme would operate throughout the country. To begin with, two most predominantly grown crops in every agro-climatic zone would be covered under the scheme.
Subsequently, it would be extended to all the crops. Singh said the Agricultural Insurance Company of India, which was implementing the present national agricultural insurance scheme, alone would not be able to operate such a massive insurance programme.
Private companies would have to be roped in. An extensive countrywide infrastructure would have to be created for this purpose.
The scheme would be operated on an actuarial premium basis though the government would provide subsidies on the insurance premium for the benefit of farmers.
The total outgo of subsidy on the new scheme would be lower than the cost of subsidy now being incurred by the government on running present procurement-based price support operations, he asserted.
Explaining the necessity of such a scheme, the minister said the existing procurement system covered only a few crops and that too in three or four states only. The farmers elsewhere were denied the benefit of the MSP.
The new scheme would be different from the present crop insurance scheme which essentially compensated for the loss in products, as also from the procurement arrangements under which the produce was actually bought by the state agencies at the MSP.
Singh also said that some modifications in the existing crop insurance were on the cards. The base area for calculation of crop losses under the scheme would soon be reduced from the tehsil level to the gram panchayat level. This would make it more situation-specific.
Asked about the reduction in the interest on tractor loans in line with the recent cut in the case of crop loans, the minister said this was likely to happen in about a month. The finance ministry was taking action on this front.
He also revealed that the proposed Kisan Commission, announced by Prime Minster Atal Bihari Vajpayee in his Independence Day address, would be constituted soon. Modalities for this were already being worked out.
He, however, conceded that there was no progress on his proposal to reduce the prices of urea and other fertilisers in the wake of switching over to a new fertiliser pricing formula from April 1 last, which would help save about Rs 550 crore (Rs 5.50 billion) in fertiliser subsidies.
The proposal was to pass on this saving to the farmers through a cut in farm-gate prices of fertilisers.