Attributing this to lack of awareness about crop insurance among the farmers, an Agriculture Insurance Company of India (AIC) official said the problem gets further aggravated as few public sector banks are willing to cover farmers under the National Agriculture Insurance Scheme (NAIS).
Of the around 7-million farmers in the state, only 586,000 are covered by AIC, compared with 15.1 million in Maharashtra, 11.9 million in Andhra Pradesh, 6.6 million in Gujarat and 5.7 million in Karnataka, said C Anbarasu, regional manager (Tamil Nadu, Pondicherry and Andaman & Nicobar Islands), AIC.
According to AIC data, NAIS penetration in Rajasthan is at 40 per cent, while it is 30 per cent in Andhra Pradesh and 29 per cent in Karnataka.
Anbarasu said public sector banks in Tamil Nadu disbursed loans worth over Rs 16,000 crore (Rs 160 billion) to farmers in 2007-08. Majority of them had taken loan against jewellery instead of crop insurance, which is against the Reserve Bank of India's diktat for compulsory crop insurance when banks lend money to farmers.
While agreeing that crop insurance is yet to catch on, a few public banks felt they alone should not be blamed.
A Chennai-based public sector bank's chairman and managing director said they were willing to give crop insurance but farmers were reluctant to avail of this benefit. They shun from paying the Rs 200 premium for an insurance cover. The cap on the number of crops that can be covered under NAIS too has been removed.
In 2007, AIC settled claims worth Rs 267 crore (Rs 2.67 billion), compared with Rs 7.88 crore (Rs 78.8 million) in 2006, an increase of 167 per cent. Of this, Rs 222 crore was settled through co-operative banks, Rs 17 crore (Rs 170 million) through regional rural banks (RRBs) and Rs 38 crore through commercial banks.
In terms of premium, commercial banks brought in only Rs 2.27 crore (Rs 22.7 million) , as compared with Rs 12.72 crore (Rs 127.2 million) by cooperative banks and Rs 48 lakh by RRBs in 2007-08.
Currently, cooperative banks account for 80 per cent of AIC's business in Tamil Nadu, since these banks were initially responsible for the promotion of crop insurance in the state, which has now taken over by the agriculture department.
The state government has set a target of covering 2.5 million farmers under NAIS and allocated Rs 40 crore (Rs 400 million) as subsidy compared with Rs 15 crore (Rs 150 million) in 2007.
...to implement weather insurance plan
Tamil Nadu has joined 13 other states to run a weather insurance plan on a pilot basis. The plan, announced by the finance minister in his last Budget, is expected to cover around 1 million farmers by the end of the current rabi season.
The pilot, which is being run by AIC in 13 states including Andhra Pradesh, Karnataka, Bihar, Chhattisgarh, Madhya Pradesh and Rajasthan, offers farmers a substitute to the National Agriculture Insurance Scheme (NAIS).
Initially, five districts - Dharmapuri, Salem, Virudunagar, Ariyalur and Perambalur - will be covered in Tamil Nadu, said C Anbarasu. The pilot project will run for 2 or 3 seasons for which central and state governments have provided Rs 2 crore each as subsidy.
The premium for Rs 10,000 sum assured would be Rs 1,095, of which Rs 870 will be contributed by both central and state governments while farmers will contribute the remaining Rs 225.