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Poornima Mohandas

Of the Rs 250-crore initial capital (which will be raised to Rs 500 crore later), GIC will hold 40 per cent and Nabard 30 per cent while the balance 30 per cent will be held by GIC's subsidiaries.

MUMBAI, June 21

NATIONAL Agricultural Insurance Corporation, announced by the Finance Minister, Mr Yashwant Sinha, in the last Union Budget, is expected to issue its first crop insurance policy by the end of calendar year 2002, the Nabard Managing Director, Mr M.V.S. Chalapathi Rao, has said.

The new entity being constituted would be a board-run company with a great deal of autonomy, he said.

The company is being jointly set up by General Insurance Corporation (GIC), its subsidiaries and Nabard.

Of the Rs 250-crore initial capital (which will be raised to Rs 500 crore later), GIC will hold 40 per cent and Nabard 30 per cent while the balance 30 per cent will be held by GIC's subsidiaries — National Insurance, New India Assurance, Oriental Insurance and United India Insurance.

"The core focus of the new entity will be crop insurance, but the cover will be later on extended to tractors, pumpsets, cattle and even huts,'' said a senior official in the Ministry of Finance. A new network of offices would dot the country in addition to using the existing infrastructure of Nabard and GIC offices.

The new entity would use information technology extensively, with the wide area network (WAN) connecting all its offices.

Fresh recruitments were also expected for this new organisation, said a senior GIC official.

"Nabard will be part of the management. We will offer technical advice in project appraisals and anything else that it might be needed'', said Mr Rao. The bank might also deploy its personnel, said a senior Nabard official. It will be integral to the designing and marketing of the new products and schemes with its expertise in the agricultural sector.

GIC would only serve as a reinsurer to the new entity. At the moment, the corporation with its national agricultural insurance scheme was the only crop insurer in the country.

Its present scheme would be continued by the new body, thereby ruling out retrenchment of staff, said a senior GIC official.

Crop insurance was never a business proposition. Around the world, crop insurance survived on Government subsidy, said a senior Nabard official.

The following data elucidates this. During kharif 2000 season, 84.09 lakh farmers were covered by GIC's crop insurance scheme. The claims reported for the season were Rs 1122.48 crore out of which GIC paid Rs 180.47 crore, the rest being borne by the Central and State governments staking claims.

All the same, "this organisation's aim is to achieve profit'', said a GIC official. Through this scheme, the Government will try to restrict subsidy only to the premium-end unlike in the existing GIC scheme, where the Government doles out subsidies at the premium and the claims end.

The premiums of the new schemes would be more fair being "risk based''. There would be a "shift from flat rates to actuarial rates'' i.e., differential rates based on a particular crop grown in a particular geographical area subject to the likely weather conditions and risks of the area, said a Nabard official.

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