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groundnut and castor farmers of Mahboobnagar district in Andhra Pradesh,
followed by the pilot rainfall insurance scheme by IFFCO-Tokio General
Insurance (ITGI) in 2004-05 in Andhra Pradesh, Karnataka and Gujarat. The
Agricultural Insurance Company of India (AIC), the public sector insurer, also
introduced rainfall insurance (Varsha Bima) in 20 rain gauge areas spread
over Andhra Pradesh, Karnataka, Rajasthan and Uttar Pradesh in 2004-05,
providing five different options suiting varied requirements of the farming
community – seasonal rainfall insurance based on aggregate rainfall from June
to September, sowing failure insurance, rainfall distribution insurance with
the weight assigned to different weeks, agronomic index based on the water
requirement of crops at different phenophases, and a catastrophic option,
covering extremely adverse deviations in rainfall during the season (Nair,
Reshmy 2010, p.21).
“Weather insurance in the country received a big boost when the finance
minister in his 2007-08 budget speech termed it as a “promising risk mitigation
scheme” and earmarked
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100 crore for its implementation on a pilot basis in
a few states as an alternative to NAIS. Weather-Based Crop Insurance Scheme
(WBCIS) was piloted by the AIC in Karnataka in kharif 2007. Presently, these
products are being offered in selected regions for different crops by AIC and
private insurers ICICI Lombard General Insurance Company and ITGI. WBCIS
also operates on the concept of “area approach”, whereby each reference unit
area (RUA) is linked to a reference weather station (RWS) and all farmers in
a given RUA are deemed to have suffered the same level of adverse weather
incidence. WBCIS is based on actuarial rates of premium (with a cap at 8-10%
for food crops and oilseeds and 12% for commercial crops) but to make the
scheme attractive, premium actually charged from farmers has been restricted
to “at par” with the NAIS. The difference between flat premium rates and the
actuarial premium rates are borne by the central and the implementing state
government on a 50:50 basis. The private companies are extended the same
level of financial support by the government. Unlike NAIS, the entire claim
under the scheme is borne by the insurers. Weather insurance is already being
treated as an “alternative” to NAIS (at least in the pilot areas) as the latter
is not available to the farmers in areas where the former is notified” (Nair
Reshmy 2010). In areas where WBCIS is implemented, loanee farmers would
be compulsorily covered under the scheme. Since NAIS is not implemented in
these areas, the farmers do not have the option of choosing amongst the two.
As displayed in Annexure 103, WBICS has made a significant impact
in 20 states and has already covered 24.33 million farmers with a period of
