Pradhan Mantri Fasal Bima Yojana (PMFBY)

The latest Crop Insurance Scheme aligns seamlessly with the One Nation – One Scheme theme, embodying the finest aspects of its predecessors. It not only integrates the strengths of previous schemes but also addresses and rectifies any shortcomings or weaknesses they may have had. The Pradhan Mantri Fasal Bima Yojana is poised to replace both the National Agricultural Insurance Scheme and the Modified NAIS, bringing in a comprehensive approach to safeguard farmers’ interests.

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

Farmers will only need to pay a minimal uniform premium of 2% for Kharif crops and 1.5% for Rabi crops, while the government covers the rest to provide full insurance coverage for crop loss due to natural calamities. There’s no upper limit on government subsidy, even if it covers 90% of the premium.
Previously, there was a cap on premium rates, resulting in lower claims for farmers.
The government encourages the use of technology, such as smartphones for efficient data collection during crop cutting and remote sensing to minimize the need for physical experiments. This tech-driven approach aims to reduce delays in claim payments to farmers.
The Pradhan Mantri Fasal Bima Yojana (PMFBY) replaces the earlier schemes (NAIS/MNAIS) and exempts all services related to its implementation from Service Tax liability.

Farmers to be Covered

If you’re a farmer growing crops in a specified area during a season and have a vested interest in insuring your crop, you’re eligible for the scheme.
Starting from the Kharif season of 2020, the scheme is now optional for all farmers, responding to the needs and preferences of the farming community.
Before the Kharif season of 2020, specific categories of farmers, namely those in the notified area with a Crop Loan or KCC account (referred to as Loanee Farmers), had to enroll in the scheme.
Additionally, the scheme was compulsory for other farmers whom the Government deemed necessary to include from time to time.

Risks Covered Under the Scheme

If natural disasters like fire, lightning, storms, hailstorms, cyclones, typhoons, tempests, hurricanes, or tornadoes affect your crops, your insurance will cover yield losses. If bad weather prevents the majority of insured farmers in an area from planting, they can claim indemnity for up to 25% of the sum insured.You can also claim post-harvest losses for a maximum of 14 days from harvesting. This applies to crops left in the field in a “cut and spread” condition for drying.

Unit of Insurance

We will implement the insurance scheme using an ‘Area Approach,’ where we designate specific areas for each notified crop to address widespread calamities. We assume that all farmers with insurance within a defined unit, referred to as the “Notified Area” for a crop, face similar risks, have comparable production costs per hectare, earn similar farm income, and experience similar crop losses due to insured perils in that area.
We establish the defined area or unit of insurance at the Village/Village Panchayat level for major crops. For other crops, it may be a unit larger than the Village/Village Panchayat level. Over time, the Unit of Insurance may evolve to a Geo-Fenced/Geo-mapped region with a homogeneous Risk Profile for the specified crop.
When assessing risks associated with localized calamities and post-harvest losses due to specific perils, we will use the affected insured field of the individual farmer as the Unit of Insurance for loss assessment.

Criticism

Insufficient Reach and the Struggle of Penetration:

Only about 45% of farmers claims from the past three crop seasons have been honored by insurance companies, leaving a significant gap in coverage.
Unfortunately, data for the last rabi season is not available, further complicating the issue.

Low Payout of Claims:

The primary reason for the meager compensation to farmers is the delay in state governments contributing their share of premiums.
Until the state payments are received, the central government also withholds its share, causing insurance companies to sit on pending claims.

Gaps in Crop Loss Assessment:

Outdated methods of assessing crop damage persist, with a lack of utilization of modern technology such as smartphones and drones.
The absence of trained outsourced agencies, coupled with the potential for corruption during implementation, adds to the unreliability of the assessment process.

Limited Coverage for Crops:

There is a deficiency in the number of crops that are officially covered by insurance, restricting the scope of protection for farmers.
Delayed claim payments further exacerbate the challenges faced by farmers in times of need.

High Actuarial Premium Rates:

Insurance companies impose steep actuarial premium rates, creating financial burdens for farmers.
Delays in state notifications, premium payments, or the submission of crop cutting data hinder companies from promptly compensating farmers.

Poor Delivery Capacity:

The lack of a coordinated effort between state governments and insurance companies has resulted in insufficient awareness among farmers about the PMFBY scheme.
Inadequate infrastructure for implementing PMFBY, especially in vulnerable regions, diminishes the scheme’s effectiveness due to factors like low indemnity levels, threshold yields, sum insured, and loan defaults.

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