On paper, the Pradhan Mantri Fasal Bima Yojana scheme seems good, but in reality, things are different
By Dr Seela Subba Rao
The Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched on 18 February 2016 with a lot of refinements and hope, replacing the existing three schemes viz, National Agricultural Insurance Scheme (NAIS), Modified National Agricultural Insurance Scheme and Weather based Crop Insurance Scheme. The PMFBY was created to target 50% of all farmers in the country with the promise of compensation in case of crop loss.
The scheme aims at supporting sustainable production in the agriculture sector by way of providing financial support to farmers suffering crop loss/damage arising out of unforeseen events, stabilising the income of farmers to ensure their continuance in farming, encouraging farmers to adopt innovative practices, ensuring the flow of credit to the agriculture sector, crop diversification and enhancing growth and competitiveness of agriculture.
On paper, the scheme presents a farmer-friendly picture. But in reality, things are different. Farmers are facing many issues such as delays in receipt of settlement/claims and technical glitches.
Operational Guidelines
The new crop insurance scheme is supposed to be in line with the ‘one nation, one scheme’ theme. The salient features are:
•Cap on the premium rate has been removed so that farmers get a claim against the full sum insured without any reduction.
•Technology is to be used immensely. For example, smartphones are put to use for capturing and uploading data of crop cutting to reduce delays in claim payments to farmers. Remote sensing to reduce the number of crop cutting experiments is to be adopted.
• Farmers’ contribution to premium has been reduced significantly. No upper limit on government subsidy, even if the balance premium is 90%, it will be borne by the government.
• Multiple localised risks and post-harvest losses are taken into account to ensure no farmer is left alone in times of distress.
• The premium subsidy pattern for northeastern States has been revised from 50:50 to 90:10 between the Centre and State governments.
The models prior to PMFBY were claim-based insurance schemes. The old scheme (NAIS) was backed by the government-funded insurance company Agriculture Insurance Company of India, which collected premiums from farmers without any subsidy and then used the money to pay claims at the end of the season. On the other hand, the PMFBY allows subsidies in the premium-based system, which is implemented through a multi-agency framework of select insurance companies, Ministry of Agriculture and State governments in coordination with various financing banks.
Major Glitches
The PMFBY was touted as a panacea for farmers facing unpredictable monsoon, unseasonal rains, drought and other non-preventable risks. The scheme, which was once mandatory for loanee farmers, was changed in 2020 by the Centre to make it optional for all farmers (loanee as well as non-loanee). In February 2020, the Centre also decided to limit premium subsidy to 30% for unirrigated areas and 25% for irrigated ones (from the existing unlimited).
Certain States such as Telangana, Andhra Pradesh, Gujarat, Bihar, West Bengal and Jharkhand have opted out of the scheme after implementing it for some period due to financial constraints and low claims ratio during normal seasons. However, Andhra Pradesh has decided to rejoin the scheme following talks between the Centre and the State. Recently, Maharashtra threatened to withdraw from the scheme if certain changes suggested by it were not taken into consideration.
Using the ‘crop insurance app’ and making the process of reporting crop loss have become a nightmare for farmers. In addition to the above technical glitches, under the PMFBY, the onus is on the insured farmers to call up insurance firms within 72 hours to inform them about crop damage or else they lose the opportunity to get the benefit of crop insurance. It has been reported that public sector insurance companies settled nearly 90% of claims submitted whereas private sector firms are lagging behind very much in claims settlement, depriving farmers of their benefits.
The Road Ahead
While the PMFBY has improved upon its preceding schemes, it faces certain structural, logistical and financial obstacles. In terms of its adaptability and the achievement of the objective of ‘one nation, one scheme’, there is some uncertainty. An effective crop insurance system is crucial in cushioning income losses for farmers, financing inputs for agricultural production and increasing access to agricultural credit to boost productivity.
Many States still use crop cutting experiments for crop yield estimation at the local level which is susceptible to manipulation due to corruption, since insurance companies are profit-driven. The use of remote sensing drones, satellite imagery and digitalisation of land records should be urgently promoted for the effective implementation of the scheme.
Strict adherence to the timelines for claim settlement to ensure adequate and timely compensation is the need of the hour. Specific changes in the operational guidelines ensure faster settlement and quicker responses to the agrarian crisis, such as charging 2% per annum interest rate to the insurance company to be paid to farmers for a delay in settlement claims beyond a fortnight of the prescribed cut-off date.
Similarly, a 12% per annum interest rate should be paid by the State government for a delay in the release of the State share of subsidy beyond three months of the prescribed cut-off date of requisition set by insurance companies.
The provision of at least two or three insurance companies with a mix of both private and public sectors in a cluster of villages in one State will help farmers benefit from the competitive pricing for insurance products. This will avoid the monopoly practice of insurance companies at the grassroots level.
A study by the Centre has revealed that 42% of surveyed farmers were unaware of the option to report crop loss through a centralised toll-free number, toll-free number of the insurance company concerned or by visiting block-level agriculture departmental offices. Suitable awareness programmes on the benefits and procedural aspects of crop insurance must be developed and made available to farmers via radio, media, word-of-mouth, campaigns, farmers meetings, etc.
Delayed transmission of yield data, late release of their share in premium subsidy by some States, yield-related disputes between insurance companies and States, non-receipt of account details of farmers for transfer of claims and NEFT-related issues are some of the reasons for the delay in payment of claims. An effective grievance-redressal system must be put in place to help distressed farmers resolve these issues.