Cabinet to take final call on farm insurance scheme

NEW DELHI: Farmer-unfriendly SEZs may not be the only issue for policymakers in the UPA to worry about in the agriculture sector. An over two-year-long tussle between the Planning Commission and the farm ministry over the implementation of a crucial risk mitigation instrument, the Modified National Agricultural Insurance Scheme (MNAIS), may now only be settled by the Cabinet.

The note on the MNAIS was first submitted to the plan panel by the agriculture ministry, as far back as February 2005. Twenty-five months later, it’s still hanging fire. Through the later half of 2006, the plan panel did not send its comments on the memo prepared by the farm ministry for the Expenditure Finance Committee (EFC) on the MNAIS and circulated to all appraisal agencies for their comments. It is only after the plan panel sends its reply that the farm ministry will submit the note to the EFC for consideration. Once that is done, the note will be forwarded to the Cabinet Committee on Economic Affairs (CCEA).

The commission has been dragging its feet over MNAIS, although the agriculture ministry has openly acknowledged that the existing NAIS is flawed and a modified scheme needs urgently to be implemented to benefit more farmer beneficiaries. The tussle over the MNAIS is notwithstanding the fact that the government is battling the impact of severe supply side constraints engendered in the farm sector, leading to high domestic prices. Risk mitigation through insurance and other instruments is viewed as a key factor in countering the crisis in the primary sector.

The MNAIS takes into cognisance shortcomings/limitations like ‘unit’ area of insurance, calculation of guaranteed income, low indemnity level, delay in the settlement of insurance claims, etc., and it was expected that it would be announced in finance minister P Chidambaram’s Budget speech for 2007-08, at least in pilot form.

In April 2006, more than a year after the MNAIS draft was submitted, the plan panel returned it to the farm ministry. It contended that the NAIS itself should be shifted to the non-plan side and asserted that it favoured funding only the overhead component of costs of MNAIS such as undertaking crop cutting experiments and threshold yield determination for major crops. It also wanted the MNAIS to be implemented only on a pilot basis in districts/states which had requisite data collection capability and infrastructure for feedback.

The farm ministry said this was a ‘harsh blow’ to its extensive efforts to bring more farmers under the umbrella of insurance. The plan panel, though, stuck to its position that in the absence of data required for actuarial calculations, the MNAIS could not be a plan activity and should come under non-plan activity.

That put paid to any hopes of pushing the MNAIS through the plan panel. The NAIS is an ongoing scheme which has been implemented as a plan scheme since 2000 and, experts stress, there is little logic behind insisting that if the current scheme is modified, it has to be classified as a non-plan activity.

The proposal that the MNAIS be implemented on a pilot basis was also seen as defeating the very purpose of including more farmers under the ambit of the insurance scheme.