Recently, the Union Cabinet gave its approval for a comprehensive reform of two key agricultural insurance schemes – the Pradhan Mantri Fasal Bima Yojana (PMFBY) and the Restructured Weather Based Crop Insurance Scheme (RWBCIS). The revised scheme will come into effect starting from the 2020 Kharif season. The key modifications in these schemes aim at empowering farmers and enhancing agricultural productivity.
Key Changes in the Revamped Schemes
In a critical shift, the Centre has reduced its stake in the premium subsidy from the present 50% to just 25% in irrigated areas and 30% for non-irrigated regions. Farmers will continue to pay a constant share of the premium, which includes 2% of the total insured amount for Kharif crops, 1.5% for Rabi crops, and 5% for cash crops. Previously, the Centre and State equally divided the remaining balance of the premium, but the revamped design now decreases the Centre’s load and raises the States’ share.
Voluntary Enrollment and Customised Risk Covers
Another notable alteration is that enrollment in these schemes is now voluntary for all farmers, unlike earlier when it was mandatory for all farmers with crop loans to register for insurance coverage under the PMFBY. This provides greater flexibility and choice to the farmers.
Moreover, the updated rules provide states with the authority to select diverse additional risk covers based on the specific needs of their region, regardless of whether they opt for the fundamental PMFBY cover or not. This amendment came after Andhra Pradesh, West Bengal, and Bihar opted to leave the scheme citing high costs and the requirement to modify it according to their unique geographical diversities.
New Guidelines for State Premium Subsidy Release
The Centre has put forth new cut-off dates for States to release their share of the premium subsidy. In case the States fail to release their share before March 31 for the Kharif season and September 30 for Rabi, they will not be allowed to execute the scheme. This measure is designed to overcome delays as several States participating in the scheme have been known to release their share late, resulting in tardy compensation payments to farmers.
Mandatory Service Tenure for Insurance Companies
The government has also mandated a minimum service duration of three years for insurance firms working with States under these schemes. Presently, the tenders issued by States vary, ranging from one to three-year periods.
Overview of Pradhan Mantri Fasal Bima Yojana (PMFBY)
Launched in 2016, the PMFBY is managed by the Ministry of Agriculture and Farmers Welfare. It aims to provide exhaustive insurance coverage against crop failures to stabilize farmers’ income. The plan encompasses all food and oilseed crops along with annual commercial and horticultural crops. Farmers pay a fixed premium, which is 2% for Kharif crops, 1.5% for Rabi crops, and 5% for commercial and horticultural crops. The scheme is executed by approved general insurance companies selected by the respective State Government.
Insights into Restructured Weather Based Crop Insurance Scheme (RWBCIS)
The RWBCIS, also launched in 2016, is governed by the Ministry of Agriculture and Farmers Welfare. Its goal is to alleviate financial stress on insured farmers due to expected crop loss resulting from adverse weather conditions such as rainfall, temperature, wind, and humidity etc. The scheme uses weather parameters as a proxy for crop yields, thus compensating farmers for presumed crop losses.