``The cabinet is likely to take a decision soon on this issue and other modalities of the scheme,'' agriculture minister Sompal said.

The idea behind setting up a seperate agency was that the scheme should be self-sustaining on a long-term basis, relieving the exchequer of the burden, Sompal said, adding the scheme would also cover some cash crops where past yield data were available besides covering all the farmers.

The government is considering two alternatives regarding charging of insurance premiums and liability on account of claims -- fixing the insurance charges and subsidising the farmers or giving a lumpsum amount to the implementing agency and leaving it to that agency to fix charges, Sompal said.

To encourage participation of non-loanee farmers, which would bevoluntary, an appropriate reward/disincentive system would be evolved, ministry sources said.

Although the scheme was proposed to be implemented all over the country at the same time, the project might be started in 24 districts in case the implementing agency needed more time to complete the requisite formalities before full launch, they said.

The agriculture ministry sources said the liability on account of claims would be the responsibility of the implementing agency. Appropriate safeguards would be worked out to avoid misuse of the scheme.

Crop insurance was started for the first time in the country during kharif 1985 when the Comprehensive Crop Insurance Scheme (CCIS) was launched.

The basic objectives of the scheme were to provide financial support to farmers in the event of crop failure following natural calamities, restore the credit eligibility of farmers for the next cropping season after a crop failure and support and stimulate production of desired commodities such as foodgrains, pulsesand oilseeds.

CCIS was an area-based and credit-linked scheme. States were free to join the scheme which operated in defined areas for each crop as notified by the State Crop Insurance Fund.

Wheat, paddy, millet, oilseeds and pulses were the crops covered under the scheme while commercial and horticulture crops were not included.

Under the scheme, the sum insured was equal to the crop loan disbursed subject to a maximum of Rs 10,000 per farmer. The insurance charges payable were 2 per cent of the sum insured in the case of wheat, paddy and millets and 1 per cent for oilseeds and pulses.

On the basis of the experience gained in operating CCIS, certain constraints had been identified. Owing to the voluntary nature of the scheme, states like Punjab, Haryana and Uttar Pradesh, which were having low risk cropping system, had opted to stay away from the scheme.

Demands were made to include cash crops like sugarcane, potato and cotton under the scheme. Implementing states were demanding enlargement ofcoverage to include non-loanee farmers.

For removing these constraints, a revised scheme called Experimental Crop Insurance Scheme (ECIS) was approved by the government in November 1997.

The main feature of the experimental scheme was that it covered all the small and marginal farmers (both loanee and non-loanee) growing wheat and, paddy, millets, oilseeds and pulses in 24 selected districts of eight states.

The entire amount of insurance charges was borne by the central and state government and they shared the financial liability on account of premium subsidy in the ratio of 4:1

The review of the performance of the experimental scheme during rabi 1997-98 brought to light many administrative and financial difficulties. In many states coverage of non-lonee farmers posed problems far beyond the ability of administrative machinery, sources said.