New Delhi/Calcutta, Feb. 23: Tea, coffee and rubber plantations — which have been roiled in recent times by the downturn in the plantation industry — finally have something to cheer about. There is a real chance that the insurance premia they pay out to hedge against plantation industry risks will come down in the near future.

From April 1, the insurance schemes for plantation crops — tea, coffee and rubber — will be de-tariffed. What this means is that the insurance companies will be free to fix the premia they charge for the risk covers. The Insurance Tariff Advisory Committee— which sets premia limits for a variety of covers — will no longer have a role to play.

The TAC’s decision means that the tea and coffee plantations — especially the ones that make profits — will be able to shop for the best deal on the insurance policies they take out.

De-tariffication has been a long-standing demand of the plantation industry. When the All India Marine Cargo Tariff was de-tariffed in 1994, the sub-sections under it — tea, rubber and cardamom — were booked under tariff lines as per tariffs provided by the TAC.

According to insurance companies, the basic premise for tariffing these plantations was to first determine how viable or profitable the business would prove to be in the long run. Insurers say that especially since the liberalisation of insurance industry in 2001, tea planters, rubber and cardamom growers have been aggressively demanding detariffication of these products.

The tea industry is chuffed over the move to allow insurers to set the premia on their risk covers.

“Earlier the tea companies were not in a position to bargain with the insurance companies. They had to pay at the higher rates that the insurance companies were demanding from them. But now the tea companies will be able to bargain over the rates. At least, the move will help the good tea companies,” said Ullas Menon, secretary general of United Planters Association of South India .

The Indian Tea Association says the move will help the small growers as well. C. K. Dhanuka, chairman of Indian Tea Association and the promoter of Dhunseri Tea, said, “It is a good move by the Insurance Regulatory Development Authority (IRDA). It will not only help big tea companies but also the small growers who have a relatively low paying capacity.”

The delay in de-tariffing these sectors arose because of the lack of statistical data on claims ratio. With the TAC taking up the matter twice with insurers, the insurance community has finally come up with figures.

The insurers have informed that they unanimously cough up approximately 50-55 per cent of their premium every year to settle claims.

B. R. K. Prasad, manager-marine, Oriental Insurance, said: “The demand (for detariffication) was a long-standing one. Our experience of providing a cover to this community has been fairly good. With both the insurance market and these industries gaining experience, it is an opportune time to de-tariff.”

At present, Oriental pays nearly 40 per cent of its premium each year in settling claims of tea planters. The premium collected on tea transits could even go as high as 1.5 per cent of the total liability, said Prasad.

The “bush to cup” policy for tea planters covers the insured against the perils that may take place right from plucking tea leaves to its processing, storage and final delivery.

David Stephanian, head of marine portfolio at Calcutta-based National Insurance, said, “Though our claims experience with tea is good, settling claims for rubber and cardamom can burn a hole in the pocket.”

National Insurance estimates that it will garner premia income of Rs 2 crore from tea estates in fiscal 2003-04.

However, the premium earned for cardamom and rubber could be fairly low at Rs 40 lakh each.

“While claims from the tea industry will not exceed 50 per cent, claims for cardamom plantations can be as high as 85 per cent and that from rubber growers can even be a stunning 100 per cent,” said a senior official.