Atal Behari Vajpayee had recently called a high-level meeting of policy-makers in both the agriculture and insurance ministries inDelhi.

The meeting included the members of the standing committee on agriculture, and top GIC officials.

``The prime minister himself had conducted the meeting for almost two hours and made plenty of suggestions about the new plan,'' sources in the ministry said.

According to the sources, Vajpayee has assured GIC of a contribution of Rs 100 crore from the centre as capital for the new subsidiary.

The deliberations during the meeting would be sent to the cabinet for final approval before a concrete proposal is prepared to float the subsidiary. GIC has also constituted a special team of 10 officials to work on the new proposals.

According to the proposals, the new crop insurancescheme will be implemented in two districts of the interested states. Also, the scheme will be extended to all kinds of crops.

The existing schemes provide cover for only cereals, millet, oilseeds and pulses and are based on ``area approach'' and only lonee farmers are covered under this.

Going by the demands, the new scheme will cover all farmers (lonee and non-lonee) from the state governments.

The new scheme will be run on a purely commercial basis, except that poor framers' premium may be shared by the state and central governments. The centre may continue to share two-third risk and one-fourth insurance charges for small and marginal farmers. At present, the existing insurance schemes are operative in 15 states and two union territories and the premium and claims are shared between the centre and the state in the 2:1 ratio.

The schemes have provided cover to a total of 582.17 lakh farmers and the claim ratio is as high as 566 per cent. The sum insured is estimated at Rs 16,512.08 crore. Manyconstraints plagued the effectiveness of the existing crop insurance schemes started in the 1985 kharif season. As the existing schemes are voluntary, Punjab and Haryana chose not to implement them. Flat/low rate of premium (2 per cent for cereals and millet and 1 per cent for oilseeds and pulses) led to a high claims ratio.

There were difficulties in covering non-lonee farmers and commercial crops are not covered. The unit of insurance is too huge (block/tehsil/mandal) to reflect the actual crop losses.