PM Fasal Bima Yojana

• The Pradhan Mantri Fasal Bima Yojana is the world’s largest crop insurance scheme in terms of farmer registrations.
• In 2022-23, the scheme has been allocated Rs 15,500 crore.
• This scheme was launched in February 2016.
• Under the scheme, all farmers including sharecroppers and tenant farmers growing “notified crops” in the “notified areas” are eligible for coverage.

Features

• Under the provisions of PMFBY, farmers pay a premium of 2% of the sum insured for all food grains and oilseeds crops of Kharif; 1.5% for all food grains and oilseeds crops of Rabi; and 5% for all horticultural crops.
• In the initial scheme, the difference between actuarial premium rate and the rate of insurance premium payable by farmers, which is called the rate of normal premium subsidy, was to be shared equally between the Centre and states.
• In February 2020, the Centre decided to restrict its premium subsidy to 30% for unirrigated areas and 25% for irrigated areas..
• Initially, the scheme was compulsory for loanee farmers; in February 2020, the Centre revised it to make it optional for all farmers.
• Immediate intimation (within 72 hours) by the insured farmer to Insurance Company through “Crop Insurance App” or any available channel of reporting.

Performance of PMFBY

• Six years after its launch and post multiple overhauls, Pradhan Mantri Fasal Bima Yojana (PMFBY) has largely failed to deliver on its objectives.
• An expert committee steered by Ashok Dalwai recently submitted a report showing that, between 2016 and 2021, PMFBY saw a decline in participating farmers (362 lakh to 248 lakh) and States (22 to 19), with shrinking coverage (474 to 387 lakh hectares), despite a sharp rise in premiums.
• According to official data, the claim ratio in 2020-21 stood at 62.3 percent of the gross premium.
• According to a September 2022 report prepared by National Rainfed Area Authority, the government, in its own words, admits that several gaps have been identified in the implementation of the scheme and that the scheme failed to reach the targeted insured area coverage to 50% by 2020.

Issues related to PMFBY

• Delays in settlement
• The Standing Committee (2021) recognised delays in settlement of insurance claims as one of the biggest challenges in implementation of the scheme.
• It recommended implementing a timeline for settlement of claims by insurance companies.
• In cases where delays are caused by failure of the state governments to pay subsidies, it suggested returning the premium with interest to farmers within a fixed time frame.
• Uneven Distribution
• The main grouse that States have with PMFBY is that while premiums are distributed evenly across participants, claims are cornered by a few.
• The expert committee has found some truth in this complaint. While the average claims realization ratio (claims-to-premium) of all States participating in PMFBY was just 12 per cent, a fifth of the districts realized claims of over 100 per cent.
• To resolve this, the committee suggests setting differential premiums based on actual yield variations across districts and crops.
• Assessment of losses
• The Standing Committee on Agriculture (2017) observed that states are not readily accepting and adopting the technologies used for assessing yield loss.
• The Standing Committee (2021) observed that yield-related disputes and delayed transmission of yield data are now a major reason for delays in settlement of claims.
• It recommended the adoption of smart sampling techniques by all states to address this.
• Grievance redressal
• The Standing Committee on Agriculture (2019) observed that farmers are facing issues in lodging complaints with the insurance companies due to the absence of local offices of the companies at the district and block-level.
• Under the revised scheme guidelines, states have to constitute grievance redressal committees at the district and state levels.
• However, in 2021, the Standing Committee on Agriculture noted that only 15 states and union territories have notified Grievance Redressal Committees at both the state and district level.
• It recommended ensuring the formulation of these Committees in all other states.
• Lack of Monitoring:
• The PMFBY is implemented by empanelled general insurance companies but since the onset of the scheme many farmers have leveled allegations against the government for not monitoring the implementation of the scheme and not taking action against the insurance companies who fraudulently pocket money from the farmers.
• Over the past five years, both the central government and the state governments have contributed almost Rs. 1.265 lakh crores to the scheme to benefit our farmers.
• It is shocking that, as per the available reports, only 87,320 crores have been paid to the farmers. This staggering data throws light on the handling of the funds of the Pradhan Mantri Fasal Bima Yojana.
• While public sector insurance companies settled 90 percent of farmers’ claims, private sector companies pocketed enormous profits of nearly Rs 39,201 crores without paying farmers their rightful dues.
• This is a scam of a wider magnitude heralded by the corporates.

Looking ahead

• A CAG audit must be initiated on this issue.
• All the defaulting private insurance companies must be blacklisted, and the government must ensure that the implementation of the PMFBY must be entrusted to public sector companies.
• Rationalizing all other agriculture related schemes such as subsidy and loan waivers etc and utilizing the savings to fund premiums for a crop insurance scheme run by a State-owned agency such as AIC, may make the PMFBY simpler and workable.
• It is very important to ensure that this scheme is pro-farmer and not pro-corporates.
• Union of agri-tech and rural insurance can be the magic formula for financial inclusion, enabling a trust in the scheme.
• State governments need to avoid inordinate delays in premium payments which hold up claims.
• The Centre may also need to re-assess the need for private participation in the scheme.

Therefore, there is a need to make “pro-farmer changes” to the Pradhan Mantri Fasal Bima Yojana to meet the issues related to its implementation and growing challenges of climate change and rapid technological advancement.