Pradhan Mantri Fasal Bima Yojana

News: Recently, Maharashtra has signaled that it may opt out of Pradhan Mantri Fasal Bima Yojana Scheme. Andhra Pradesh, Jharkhand, Telangana, Bihar, Gujarat, Punjab and West Bengal – all predominantly agriculture states – have already opted out of the scheme.

About the scheme:

  • Launched in 2016 and is being administered by the Ministry of Agriculture and Farmers Welfare.
  • It replaced the National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS). It aims to provide a comprehensive insurance cover against the failure of the crop thus helping in stabilising the income of the farmers.
  • All food & oilseed crops and annual commercial/horticultural crops for which past yield data is available.
  • The prescribed premium is 2% to be paid by farmers for all Kharif crops and 1.5% for all rabi crops. In the case of annual commercial and horticultural crops, the premium is 5%.
  • Premium cost over and above the farmer share was equally subsidized by States and GoI. However, GoI shared 90% of the premium subsidy for North Eastern States to promote the uptake in the region.
  • By empanelled general insurance companies. The selection of the Implementing Agency (IA) is done by the concerned State Government through bidding.
  • The revamped PMFBY is often called PMFBY 2.0, it has the following features:
    • Enrolment 100% voluntary for all farmers from 2020 Kharif. Earlier, it was compulsory for loanee farmers availing Crop Loan/Kisan Credit Card (KCC) account for notified crops.
    • The Centre has decided to limit the PMFBY premium rates – against which it would bear 50% of the subsidy – to a maximum of 30% in un-irrigated and 25% in irrigated areas.
    • The government has given the flexibility to states/UTs to implement PMFBY and given them the option to select any number of additional risk covers/features. Insurance companies have to now spend 0.5% of the total premium collected on Information, Education And Communication (IEC) activities.

Issues:

  • The financial constraints of the state governments and low claim ratio during normal seasons are the major reasons for non-implementation of the Scheme by these States. States are unable to deal with a situation where insurance companies compensate farmers less than the premium they have collected from them and the Centre. The State governments failed to release funds on time leading to delays in releasing insurance compensation. This defeats the very purpose of the scheme which is to provide timely financial assistance to the farming community.
  • Many farmers are dissatisfied with both the level of compensation and delays in settlement. The role and power of Insurance companies is significant. In many cases, it didn’t investigate losses due to a localised calamity and, therefore, did not pay the claims.
  • Insurance companies have shown no interest in bidding for clusters that are prone to crop loss. Further, it is in the nature of the insurance business for entities to make money when crop failures are low and vice-versa.
  • Currently the PMFBY scheme doesn’t distinguish between large and small farmers and thus raises the issue of identification. Small farmers are the most vulnerable class.