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BEED Model of crop insurance in Maharashtra explained

BEED Model of crop insurance in Maharashtra explained


  • GS 3 || Economy || Agriculture || Agricultural Insurance

Why in the news?

The Maharashtra government has requested that the crop insurance programme Pradhan MantriFasalBhimaYojna’s (PMFBY) “Beed model” be implemented throughout the state.

About Beed Model:

  • Beed is a Maharashtra district in the Marathwada area, which is prone to drought.
  • 80-110 Formula: Another name for this model is 80-110 Formula.
  • The insurer’s potential losses are limited under this plan.
  • Claims over 110 percent of the gross premium are not required to be considered by the insurance company. To protect the insurer from losses, the state government must fund the cost of compensation exceeding 110 percent of the premium received (bridge amount).
  • However, if the compensation is less than the premium collected, the insurance company will keep 20% as handling fees and pay the remainder to the state government (premium surplus).

Why Beed Model is implemented?

  • PMFBY flaws: Fiscally strapped states have refused to foot the premium payment for the PMFBY throughout the years, resulting in insurers not honoring farmers’ claims on time.Insurers declined to cover farmers in central Maharashtra’s Beed district under the PMFBY for kharif 2020 due to far-below-normal monsoon rainfalls.
  • State benefits:
    • Another Funding Source: The claims-to-premium ratio is often low. The insurance company’s earnings is likely to drop under the Beed model, and the state government would have to find another source of funding.
    • Reduce the Financial Burden of PMFBY: The refunded amount may result in the state making a smaller budgetary provision for PMFBY the next year, or it may assist in funding the payment of the bridge amount in the event of a crop loss year.

Why is that the government pushing for it for the whole state?

  • Maharashtra is pushing for this program since the claims-to-premium ratio is low in most years, and the premium is paid to the corporation. According to the Beed model, business profits are expected to decline, requiring the government to seek funding from another source.
  • The refunded amount may result in the state reducing its provisioning for the next year, or it may assist in funding the payment of the bridge amount in the event of a crop loss year. This paradigm, on the other hand, has no immediate advantage for farmers.
  • The model’s chances of being used for the current Kharif season look to be minimal. There are still questions about how the government will increase the excess amount and how the reimbursement money will be distributed.

Why does the government want to change things?

  • Farmers in Maharashtra spoke out against the plan during an open consultation, citing difficulties like as claim payment delays, failure to identify localized weather occurrences, and onerous claim requirements as reasons for change.
  • There was also a complaint regarding insurance firms allegedly profiting.
  • In Maharashtra, where farmers rely heavily on monsoon rains to irrigate their crops, the system quickly proved unprofitable for insurance firms due to the large payouts they were required to make.
  • In certain years, payouts were close to or surpassed the premium received, resulting in insurance company losses.

Challenges associated with Beed Model:

  • There are still questions about how the state government will raise the surplus funds and how the refunded funds will be distributed.
  • This methodology does not appear to assist farmers in any way.

Brief about Pradhan MantriFasalBimaYojana (PMFBY):

  • PMFBY was established in 2016.
  • It provides a comprehensive insurance protection against crop failure, therefore assisting farmers in stabilizing their income.
  • All food and oilseed crops, as well as annual commercial and horticultural crops for which previous yield data is available are included in this study.
  • Premium: Farmers are required to pay a premium of 2% for all Kharif crops and 1.5 percent for all rabi crops. The premium is 5% in the case of annual commercial and horticultural crops.
    • The expense of premiums over and beyond the farmer share is supported equally by the states and the government of India.
    • However, to encourage adoption in the region, the Government of India split 90% of the premium subsidy with the North Eastern States.
  • PMFBY 2.0 (Launched in the 2020 Kharif Season):
    • Prior to 2020, the programme was completely voluntary for farmers who did not have any loans pending, but it was required for loanee farmers. It has become voluntary for all farmers from 2020.
    • The Cabinet agreed to restrict the Centre’s premium subsidy under the plan at 30% for unirrigated areas/crops and 25% for irrigated areas/crops under the plan.
    • Investing in Information, Education, and Communication (IEC) Initiatives: Insurance firms are required to spend 0.5 percent of the entire premium collected on IEC activities.
    • More State Freedom: The government has provided states/UTs more flexibility in implementing PMFBY by allowing them to choose from a variety of extra risk covers/features.


Climate changes brought out many of its impact on natural environment, from single cell organism to human life all have been impact due to climate change, agricultural and seasonal cropping pattern has faced many challenges due to unpredictable season it is need of hour that government take initiatives to protect and promote farmers and safe farming.

Mains oriented question:

What is Maharashtra’s crop insurance scheme, the Beed model? (150 words)