Pradhan Mantri Fasal Bima Yojana (PMFBY) is a government scheme introduced by the Ministry of Agriculture and Farmers Welfare in 2016. This scheme replaced the former National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS). PMFBY aims to provide insurance coverage and financial support to farmers, including sharecroppers and tenant farmers growing notified crops in notified areas, who suffer crop failures due to natural calamities, pests, and diseases.
Main Objectives of PMFBY
The scheme has several key objectives geared towards the welfare of the farmers. These objectives include stabilizing the income of farmers to ensure their continuance in farming, encouraging farmers to adopt innovative and modern agricultural practices, and ensuring the flow of credit to the agriculture sector.
Premium Rates and Government Subsidies under PMFBY
Under PMFBY, farmers are required to pay a uniform premium of only 2% for all Kharif crops and 1.5% for all Rabi crops. For annual commercial and horticultural crops, the premium to be paid by farmers is set at 5%. The premiums above these limits are shared by the Central and State Governments on a 50:50 basis except in the North Eastern Region where the ratio is 90:10. Notably, there is no upper limit on Government subsidies.
Scale and Impact of PMFBY
PMFBY has the distinction of being the largest crop insurance scheme in the world in terms of farmer enrolments, averaging 5.5 crore applications every year. It stands third globally in terms of the premium received. The scheme has been decisive in protecting the livelihoods of farmers during harsh seasons marred by weather extremities.
Recent Modifications to PMFBY
Originally mandatory for loanee farmers, the Centre modified the scheme in 2020 to make it optional for all farmers. Also, the premium subsidy from the Centre was capped at 30% for unirrigated areas and 25% for irrigated ones, where previously it had no upper limit. Further, features like the Weather Information and Network Data Systems (WINDS), Yield Estimation System based on Technology (YES-Tech), and Collection of Real Time Observations and Photographs of Crops (CROPIC) were introduced to enhance efficiency and transparency.
Challenges Facing the Implementation of PMFBY
Despite its potential benefits, the implementation of PMFBY has been plagued with challenges. These include financial constraints of states, low claim ratio during normal seasons, delays in releasing insurance compensation due to State governments failing to release funds on time, dissatisfaction among farmers regarding compensation levels and settlement delays, and a lack of interest from insurance companies in bidding for regions that are prone to crop loss.
Looking Ahead: The Way Forward for PMFBY
Recognizing the extreme weather risk as a significant threat over the next decade, it is essential to provide a safety net to protect farmers’ financial positions and encourage farming continuity, thus ensuring food security. To achieve this, comprehensive rethinking among states and central government is required to resolve pending issues so that farmers can benefit from this scheme. Investments in new insurance models instead of subsidies under this scheme are also recommended. As such, a union of Agri-Tech and rural insurance can be a catalyst for financial inclusion, instilling trust in the scheme.
Last Modified: February 18, 2024