Yield-based insurance scheme available for spring paddy cultivatorsCultivators of spring paddy (Chaite Dhaan) can now insure their products using a brand new policy introduced by the Insurance Board (IB) which allows policyholders to seek compensation based on projected yield.
Cultivators of spring paddy (Chaite Dhaan) can now insure their products using a brand new policy introduced by the Insurance Board (IB) which allows policyholders to seek compensation based on projected yield.
This is the second agriculture related insurance product, after seed crop scheme, that covers risks based on anticipated yield. This type of policy enables policyholders to demand for compensation if actual harvest fails to meet the yields projected at the time of purchasing the insurance scheme.
“The new product was endorsed by the IB on Tuesday,” said IB Deputy Director Kundan Aryal. “We will forward a circular to all non-life insurance companies on Wednesday after which the policy will be available in the market.”
Most of the crop related insurance products introduced by the IB, the insurance sector regulator, cover risks based on input cost.
The input cost, as per the IB, includes money spent on labour, transportation, irrigation, and farm management; and expenditure made while buying fertilisers, pesticides and seedlings. Also, amount paid as land and irrigation tax, depreciation cost of agricultural equipment, and cost that has gone into repair and maintenance of agricultural equipment are referred to as the input cost.
Input cost based policies only cover losses incurred by cultivators till the time the crops are ready for harvest.
“If the yield-based spring paddy scheme becomes successful, we will introduce more of similar products in the agricultural sector,” Aryal said.
Spring paddy is planted in 35 districts in between mid-March and mid-April. Plantation of this crop, however, is not common because it requires better irrigation facilities. As a result, most of the cultivators prefer to grow paddy during summer when there is abundance rain.
Currently, around 1.42 million hectares of land in the country are suitable for growing paddy. Spring paddy is planted on only 112,000 hectares.
Despite low acreage, productivity of spring paddy is high, with harvest standing at 4 tonnes per hectare, as against 3.17 tonnes for regular summer paddy. This has prompted the government to promote plantation of this paddy and is extending a grant of Rs5,000 per hectare to those who plant this crop.
“From now onwards, this grant will only be available to those who purchase the insurance scheme,” Aryal said, adding, “We have asked district agricultural development offices, which distribute the grants, to strictly monitory this.”
This insurance scheme, however, cannot be purchased by individuals. “Insurance companies will issue this policy to a group of cultivators based on information made available by district agricultural development offices,” Aryal said. “Cultivators who have planted spring paddy in half a hectare of land are eligible for this scheme.”
One can subscribe to this scheme by paying a premium equivalent to five per cent of the coverage amount. This means if cultivators wish to provide cover to Rs 100 worth of yield, they have to pay a premium of Rs 5 per year.
The policy covers the deficit in the projected yield. It also covers losses triggered by fire, lightning, earthquakes, floods, drought, landslide, cyclonic storm, hailstorm, snow, sleet, other disasters, pests and diseases. Policyholders will be entitled to compensation of up to 90 per cent of the coverage amount.