What is Maharashtra’s “Beed model” of crop insurance?

What is the news?

Maharashtra Chief Minister has asked the Prime Minister for state-wide implementation of the ‘Beed model’ of the Pradhan Mantri Fasal Bima Yojana (PMFBY).

Why was the Beed Model of Crop Insurance launched?

• Beed is a drought-prone district in Maharashtra. Farmers here have repeatedly lost crops either to failure of rains or too heavy rains.
• Due to this, insurance companies have sustained losses given high payouts. Moreover, the state government also had a difficult time getting bids for tenders to implement the scheme in Beed.
• Hence, the Maharashtra Government decided to modify the crop insurance guidelines for the district.

What is the Beed Model of Crop Insurance?

• Under this model, the insurance company provides a cover of 110% of the premium collected.
• In case the compensation amount exceeds the 110% mark, the state government would pay the bridge amount.
• But 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.

Benefits of Beed Model for Government

• In a normal season where farmers report minimal losses, the state government is expected to get back money that can form a corpus to fund the scheme for the following year.
• However, the state government would have to bear the financial liability in case of losses due to extreme weather events.
• Hence, in the model, the profit of the company is expected to reduce, and the state government would have access to another source of funds.

Source: Indian Express