Launched on 18th February 2016, PMFBY is a crop insurance scheme by the Department of Agriculture, Cooperation, and Farmers’ Welfare, Ministry of Agriculture. PMFBY aims to provide financial protection to farmers against crop loss due to natural disasters (hail, drought, famine), pests, and diseases. PMFBY provides crop insurance at a cost-effective premium to all Indian farmers. It is implemented through a network of insurance companies and banks. Department of Agriculture, Cooperation & Farmers Welfare (DAC&FW), Ministry of Agriculture & Farmers Welfare (MoA&FW) and the concerned State are the implementing agencies.
Risk Coverage:
Natural Disasters: Includes floods, droughts, cyclones, hailstorms, landslides, and unseasonal rainfall.
Pest & Disease Coverage: Protects against pest attacks and crop diseases.
Post-Harvest Losses (Individual Farm Basis): Compensation for damage within 14 days of harvest, especially for crops kept in “cut and spread” condition.
Localised Calamities: The government provides compensation for localised calamities on an individual farm basis.
Prevented Sowing (on Notified Area Basis): If most insured farmers in a notified area are unable to sow due to adverse weather despite intent and incurred costs, they can claim up to 25% of the sum insured as indemnity.
Key Initiatives under PMFBY
DigiClaim: Under it all the claims are worked out through National Crop Insurance Portal (NCIP).
CROPIC (Collection of Real Time Observations and Photo of Crops).
Weather Information Network Data Systems (WINDS) portal.
Yield Estimation System, based on Technology (YES-TECH) Manual.
Door enrolment app AIDE/Sahayak.
Forecasting Agricultural output using Space, Agro- meteorology and Land based observations (FASAL) project.
National Agricultural Drought Assessment and Monitoring System (NADAMS).
ISRO’s Geo-platform, Bhuvan, provides data on plantation, pest surveillance and weather.
The Parliamentary Standing Committee on Agriculture had given several recommendations on reforming the Scheme. These include: (a) Using technology and the coordination of all institutional mechanisms to ensure faster claim settlement; (b) Implementing timeline for settlement of claims by insurance companies; (c) Uploading the contact details of official insurance companies on the insurance portal so that they are accessible to farmers; (d) Penalising defaulting insurance companies in a time-bound manner; (e) Ensure the formulation of GRCs in all States. Nominate local public representatives (including Members of Parliament) in the
Challenges
First, Fiscal Burden on States: The Scheme limits farmer’s share of actuarial premium to 1.5-5%. The rest was to be shared equally by the Union and State Governments. However, in 2020 the Government capped its share to 25%-30% (irrigated and unirrigated areas respectively). This has increased the fiscal burden of States. Consequently, many States have opted out.
Second, Delayed Pay-outs and Denial of Claims: There are frequent disputes related to compensation. Farmers complain the compensation paid by insurance companies is less than the losses. There are long delays in payments, sometimes up to 18 months. Yield-related disputes, delayed transmission of yield data and delay in release of their share in premium subsidy by State Governments are the major reasons for delays in settlement of claims.
Farmers claim that the private insurers are not following the assessment by the government officials based on Crop Cutting Experiments (CCEs) and rejecting many claims on the basis of their own assessment.
Third, Implementation Issues: Farmers face hurdles in uploading the documents and claiming damages as network connectivity is poor in rural areas.
Under the scheme, both Public and Private insurance companies bid their premium rates for a district in a State. The lowest bidder is awarded the contract to provide insurance under the scheme for one agricultural season only. This discouraged the companies from investing in that district in terms of awareness activities, assigning personnel or setting up offices. This led to farmer grievances.
In 2020, the Government has increased the contract duration to 3 years in one district (6 agriculture seasons). It is hoped that companies would set up help centres and employ more personnel to gather yield data and faster claim settlement.
Fourth, Absence of Grievance Redressal Committees (GRCs): Only 15 States and UTs have notified GRCs at both the State and District level, as mandated under the PMFBY scheme. Farmers are left with no resort in case of under-payment or delay in claim settlement.
Fifth, Opposition from States: Several states have demanded amendments in the scheme.
Sixth, Opposition from Farm Leaders: Farm leaders claim insurance companies have made windfall gains at the behest of the public exchequer and farmers. Data from Maharashtra show that Insurance companies often earn more in premiums than paid in claims. However, for some years the trend is opposite.
Way forward
Ensure timely release of premium subsidy: To maintain strict financial discipline, subsidy payment should be streamlined through an escrow account jointly administered by the State government and the Centre.
Also, all financial transactions (subsidy or claims) shall be routed through the National Crop Insurance Portal (NCIP).
Presence of insurance companies in every tehsil of the district: It will be crucial for farmers in order to mitigate the problems faced in availing the scheme benefits.
Penalties for companies: Effectively penalising defaulters in a time-bound manner.
Adoption of smart sampling techniques: By all states using technological interventions such as satellite data or the use of drones.
Corporate Social Responsibility (CSR): Insurance companies can plan to spend a share of their profits towards CSR in the districts from where profits are earned. Farm insurance is critical to provide income security to the farmers. The Union and State Governments must take appropriate steps to remove all the bottlenecks in the proper implementation of the scheme
