Chennai, Jul 29 (IANS): Tamil Nadu Chief Minister M.K. Stalin has urged Prime Minister Narendra Modi to remove the cap on the Centre's share of premium subsidy under the "Pradhan Mantri Fasal Bima Yojana" (PMFBY) and revert to the old formula.

Under the PMFBY scheme, the crop insurance premium was first shared in the ratio of 49:49:2 (49 per cent each by the Centre and the state governments and two per cent by the farmers).

"Now, the Central share has been capped at 25 per cent for irrigated area and 30 per cent for rain-fed area which leads to a large increase of the state share of premium subsidy by 12 per cent (totally 61 per cent)," Stalin said.

According to him, in money value, as per the revised sharing formula, Tamil Nadu's share of premium subsidy, which was only Rs 566 crore in 2016-17, has mounted by 239 percent to Rs 1,918 crore during 2020-21.

"This has further increased to Rs 2,500 crore during 2021-22 due to exorbitant Actuarial Premium Rates (APR) quoted by the insurance companies empanelled by the Government of India. Thus, the financial implications on the state are causing a lot of concern," Stalin said.

The intention of capping the subsidy to bring down the APR has not happened in reality as insurers are continuing to quote exorbitant APR citing reasons like high loss ratio, inadequate financial capacity, and lack of support from reinsurers, he added.

"The states are coerced to tweak the existing guidelines and adopt new co-insurance models increasing the risks to the states. Otherwise, the insurance companies refrain from bidding," Stalin said.