Pradhan Mantri Fasal Bima Yojana

  1. Introduction
  2. Objectives
  3. Highlights of the scheme
  4. Farmers to be covered
  5. Risks covered under the scheme
  6. Unit of Insurance
  7. Criticism

Introduction

  1. The new Crop Insurance Scheme is in line with One Nation – One Scheme theme.
  2. It incorporates the best features of all previous schemes and at the same time, all previous shortcomings/weaknesses have been removed.
  3. The Pradhan Mantri Fasal Bima Yojana will replace the existing two schemes National Agricultural Insurance Scheme as well as the Modified NAIS.

Objectives

  • To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
  • To stabilise the income of farmers to ensure their continuance in farming.
  • To encourage farmers to adopt innovative and modern agricultural practices.
  • To ensure flow of credit to the agriculture sector.

Highlights of the scheme

  • There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.
  • There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.
  • Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.
  • The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.
  • PMFBY is a replacement scheme of NAIS / MNAIS, there will be exemption from Service Tax liability of all the services involved in the implementation of the scheme. It is estimated that the new scheme will ensure about 75-80 per cent of subsidy for the farmers in insurance premium.

Farmers to be covered

  • All farmers growing notified crops in a notified area during the season who have insurable interest in the crop are eligible.
  • To address the demand of farmers, the scheme has been made voluntary for all farmers from Kharif 2020.
  • Earlier to Kharif 2020, the enrollment under the scheme was compulsory for following categories of farmers: Farmers in the notified area who possess a Crop Loan account/KCC account (called as Loanee Farmers) to whom credit limit is sanctioned/renewed for the notified crop during the crop season. and Such other farmers whom the Government may decide to include from time to time.

Voluntary coverage

Voluntary coverage may be obtained by all farmers not covered above, including Crop KCC/Crop Loan Account holders whose credit limit is not renewed.

Risks covered under the scheme

  • Yield Losses (standing crops, on notified area basis). Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as Natural Fire and Lightning, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado. Risks due to Flood, Inundation and Landslide, Drought, Dry spells, Pests/ Diseases also will be covered.
  • In cases where majority of the insured farmers of a notified area, having intent to sow/plant and incurred expenditure for the purpose, are prevented from sowing/planting the insured crop due to adverse weather conditions, shall be eligible for indemnity claims upto a maximum of 25 per cent of the sum-insured.
  • In post-harvest losses, coverage will be available up to a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field.
  • For certain localized problems, Loss / damage resulting from occurrence of identified localized risks like hailstorm, landslide, and Inundation affecting isolated farms in the notified area would also be covered.

Unit of Insurance

  • The Scheme shall be implemented on an ‘Area Approach basis’ i., Defined Areas for each notified crop for widespread calamities with the assumption that all the insured farmers, in a Unit of Insurance, to be defined as “Notified Area‟ for a crop, face similar risk exposures, incur to a large extent, identical cost of production per hectare, earn comparable farm income per hectare, and experience similar extent of crop loss due to the operation of an insured peril, in the notified area.
  • Defined Area (i.e., unit area of insurance) is Village/Village Panchayat level by whatsoever name these areas may be called for major crops and for other crops it may be a unit of size above the level of Village/Village Panchayat. In due course of time, the Unit of Insurance can be a Geo-Fenced/Geo-mapped region having homogenous Risk Profile for the notified crop.
  • For Risks of Localised calamities and Post-Harvest losses on account of defined peril, the Unit of Insurance for loss assessment shall be the affected insured field of the individual farmer.

Criticism

  • Insufficient reach and the issue of penetration.
  • Data constraints: With just around 45% of the claims made by farmers over the last three crop seasons data for the last rabi season is not available paid by the insurance companies.
  • Low payout of claims: The reason for the very low payout of claims is that only few state governments are paying their share of the premiums on time and till they do, the central government doesn’t pay its share either. Till they get the premium, insurance companies simply sit on the claims.
  • Gaps in assessment of crop loss: There is hardly any use of modern technology in assessing crop damages. There is lack of trained outsourced agencies, scope of corruption during implementation and the non-utilisation of technologies like smart phones and drones to improve reliability of such sampling

Less number of notified crops than can avail insurance, Inadequate and delayed claim payment.

  • High actuarial premium rates: Insurance companies charged high actuarial premium rates. If states delay notifications, or payment of premiums, or crop cutting data, companies cannot pay compensation to the farmers in time.
  • Poor capacity to deliver: There has been no concerted effort by the state government and insurance companies to build awareness of farmers on PMFBY. Insurance companies have failed to set-up infrastructure for proper Implementation of PMFBY. PMBY is not beneficial for farmers in vulnerable regions as factors like low indemnity levels, low threshold yields, low sum insured and default on loans make it a poor scheme to safeguard against extreme weather events.