The agriculture ministry has also sent a note for cabinet approval to set up a subsidiary of General Insurance Corporation (GIC) for exclusively dealing with crop insurance, Sompal said.

In other parts of the country, the existing comprehensive crop insurance scheme (CCIS) will continue till the time it is replaced by the new scheme, he said.

The ministry is also planning to set up an expert committee to finalise the modalities relating to insurance premium, role of the central agencies and the state governments and involvement of panchayati raj institutions.

It may take about two to three years to make MCIS fully operational throughout the country, covering all types of farmers and all crops, he said. The agriculture ministry has finalised the newcrop insurance scheme after discussing about 25 different models, Sompal said.

The modified CCIS will cover all farmers including loanee, non-loanee, small and marginal farmers, he said. Agriculture ministry is considering two alternatives relating to charge of insurance premia and liability on account of claims. The first alternative is to extend a lump-sum fixed subsidy to the implementing agency and leave it to the agency to alter or modify insurance charges in such a way as to make the scheme internally viable.

Another alternative is to fix the insurance charges and then cross-subsidise the difference between actual premium collected and the real estimated premium.

The ministry is of the view that the liability on account of claims under both alternatives would be the responsibility of the implementing agency.

A separate GIC subsidiary will ensure that the scheme will be self-sustaining on a long-term basis and fully utilise the available international re-insurance facilities, relieving theexchequer of the burden. Appropriate safeguards and mechanisms will be worked out to avoid misuse of the scheme, Sompal said.

Crop insurance was attempted for the first time in India during kharif 1985 when the comprehensive crop insurance scheme was launched.

It was conceived as an instrument of risk management in agriculture and as a measure to provide relief to farmers whose crops were damaged due to natural calamities.

The basic objectives of the scheme was to provide a measure of financial support to farmers in the event of crop failure following droughts and floods, to restore credit-eligibility of farmers and to support production of desired commodities such as foodgrains, pulses and oilseed.

CCIS was an area based and credit linked scheme. States were free to join the scheme and it operated in defined area of each crop as notified by the state crop insurance fund. Wheat, paddy, millets, oilseeds and pulses were the crops covered under the scheme while commercial and horticultural crops werenot 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 two per cent of the sum insured in the case of wheat, paddy and millets and one per cent for oilseeds and pulses. As compared to CCIS, the proposed scheme would cover all farmers and all types of crops, the minister said.