The Ministry of Agriculture and Farmers Welfare (MoA&FW) has recently signed a Memorandum of Understanding (MoU) with the United Nations Development Programme (UNDP). This MoU will allow UNDP to provide technical support for the Pradhan Mantri Fasal Bima Yojana (PMFBY) scheme and the Kisan Credit Card Scheme, two critical pillars of India’s agricultural sector.
Understanding the Pradhan Mantri Fasal Bima Yojana (PMFBY)
PMFBY is a comprehensive insurance cover designed to protect farmers against crop failures, thus helping stabilize their income. The program became mandatory for borrowers availing of Crop Loan/Kisan Credit Card (KCC) account for notified crops, while it remains voluntary for others. It covers all food, oilseed crops and annual commercial/horticultural crops for which past yield data is available.
Farmers 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%. Premium costs exceeding the farmer’s share are equally subsidized by the states and the Government of India (GoI), with GoI providing 90% of the premium subsidy for North Eastern States to encourage uptake.
The PMFBY scheme covers over 5.5 crore farmer applications per year on average. Aadhaar seeding, or linking Aadhaar through internet banking portals, has sped up claim settlements directly into farmer accounts. A striking example is the almost Rs. 30 crore mid-season adversity claims during the Rabi 2019-20 Locust attack in Rajasthan.
Revamping PMFBY – PMFBY 2.0
In 2020, the central government launched PMFBY 2.0 to improve the scheme’s efficiency and effectiveness. Key features of PMFBY 2.0 include complete voluntary enrollment for all farmers, a cap on the Centre’s premium subsidy for premium rates up to 30% for unirrigated areas/crops and 25% for irrigated areas/crops, and providing more flexibility for states/UTs in implementing PMFBY.
Additionally, insurance companies must now spend 0.5% of the total premium collected on information, education and communication activities (IEC). The use of technology for crop loss assessment is also strongly encouraged, with satellite imagery, remote-sensing technology, drones, artificial intelligence and machine learning being leveraged.
What is the Kisan Credit Card Scheme?
Introduced in 1998, the Kisan Credit Card Scheme aims to provide timely credit support from the banking system to farmers under a single window with simplified procedures. Intended uses include the purchase of agricultural inputs such as seeds, fertilizers, and pesticides, as well as cash withdrawal for production needs. The scheme was extended in 2004 to cover the investment credit requirements of farmers for allied and non-farm activities.
The Objectives of Kisan Credit Card Scheme include supporting short-term credit requirements for cultivation of crops; post-harvest expenses; the marketing of produce; consumption requirements of farmer households; working capital for maintenance of farm assets and activities related to agriculture; and investment credit requirement for agriculture and allied activities.
Implemented by commercial banks, RRBs, small finance banks and co-operatives, this scheme does not cover the purchase of combine harvesters, tractors and mini trucks or the construction of family house and establishment of village cold storage facility.
Achievements of the Kisan Credit Card Scheme
As part of the Atmanirbhar Bharat Package, the government announced plans to extend the Kisan Credit Card Scheme to 2.5 crore farmers, providing a credit boost of Rs. 2 lakh crores through a special saturation drive.