The recent news of Maharashtra considering to opt out of Pradhan Mantri Fasal Bima Yojana (PMFBY) has brought the scheme into focus. Other predominantly agricultural states such as Andhra Pradesh, Jharkhand, Telangana, Bihar, Gujarat, Punjab, and West Bengal, have already opted out. PMFBY is a comprehensive insurance cover launched in 2016 to protect farmers against crop failure.
About Pradhan Mantri Fasal Bima Yojana (PMFBY)
The scheme is under the administration of the Ministry of Agriculture and Farmers Welfare, replacing the National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS). The main goal of the scheme is to provide insurance coverage against crop failure, therefore stabilising the income of the farmers. The scope includes all food & oilseed crops and annual commercial/horticultural crops for which past yield data is available.
Premium and Implementation of PMFBY
Farmers have to pay a premium of 2% for all Kharif crops and 1.5% for all Rabi crops. For annual commercial and horticultural crops, the premium is 5%. Any premium cost above the farmer share is subsidized by the States and Government Of India (GoI), while GoI offers a 90% premium subsidy for North Eastern States to promote uptake. Implementation is done by empanelled general insurance companies selected by the concerned State Government through bidding.
Revamped PMFBY or PMFBY 2.0
In the revamped version of the scheme, enrolment is 100% voluntary for all farmers from 2020. Initially, it was compulsory for loanee farmers availing Crop Loan/Kisan Credit Card (KCC) accounts for notified crops. The Centre capped the PMFBY premium rates – against which it would bear 50% of the subsidy – at a maximum of 30% in un-irrigated and 25% in irrigated areas. The government has allowed states/UTs more flexibility to implement PMFBY, offering them the option to select any number of additional risk covers/features.
Issues with PMFBY
The scheme faces various issues, including financial constraints of State governments, low claim ratio during normal seasons, and delayed compensation release due to late fund release by the State governments. Farmers have expressed dissatisfaction over both the level of compensation and the delays in settlement. Other problems include insurance companies showing no interest in risk-prone clusters and the fact that the scheme does not distinguish between large and small farmers.
Improving PMFBY
To make the scheme more appealing to farmers, the product needs improvement. Insurance companies should be required to bid for a cluster for about three years, providing a better chance to handle both good and bad years. The bidding process should be completed before the start of the Kharif/Rabi season. The ‘Beed model’ from Maharashtra, where a company assumes liability only up to 110% of the premium collected or shares gains in a good year with the State government, can potentially alleviate some of the current issues.
