PMFBY was launched in Jan 2016 and in it debut, it covered the Kharif crop of summer 2016. It replaced 2 schemes of previous UPA government – National Agricultural Insurance Scheme and Modified National Agricultural Insurance Scheme. Other schemes launched for farm insurance in history have been Comprehensive Crop Insurance (1985), NAIS (1999), Weather based Crop Insurance (2007), MNAIS (2010). This scheme has been launched by Ministry of Agriculture & Farmers’ Welfare, Government of India for insuring crop failure and losses due weather-related reasons or natural calamities. It currently covers $$5 of 12 crore farmers in India and aims to increase the cover to 50% by 2018-19.
Main features –
- Covers all notified Rabi, Kharif, commercial and horticultural crops.
- Premiums for farmers are capped at 2% of sum insured for Kharif crops, 1.5% of sum insured for Rabi crops and 5% for other commercial crops. The balance premium amount is subsidised by tax payers’ via state and central govt.
- It covers all the risks like delayed or prevented sowing, loss of standing crops, post-harvest losses during warehousing etc. or other localised reasons.
- Actual losses are compensated, no capping on the loss amount.
State and district committees to use cutting edge technology like smart sensors, drones, smartphones etc to access losses for swift turnaround.
- Bids are invited from public and private insurance companies for competitive premium prices. States get to choose one company, the most competitive one, for the entire state.
- Compulsory for all farmers who have taken loans from the banks.
Execution – Banks are at the centre point of successful execution of this scheme. They are responsible to get the declaration re the details of crop sowed, when it is sowed, land size etc. Banks do not have the resources or skills to judge the authenticity of the claims made by farmers. Sometimes, this is done during the declaration of applying for Kisan Credit Card, which can be many years old. There have been cases where records of banks show a different crop to the one actually on the fields. District committees are responsible for accessing the losses with the help of modern technology, like drones and smartphones which is not made available to the officials.
Early successes – increase in coverage from 23% in 2013-14 to 47% in 2017. Uncapped amount of losses meaning farmers can now claim actual losses not subject to a maximum limit. Premiums are significantly lower for the farmers as the rest is subsidised by tax payer.
Performance of the scheme –
A total of Rs. 22338 crores of premiums were collected by insurance companies. This is fourfold increase in premiums paid by famers and tax payers. Claims worth Rs. 10257 crores were lodged by farmers and 4649 crores were disbursed by them, which is 45% of total claims. This mean Rs 12000 crores were transferred from farmers and tax payers to private and public insurance companies.
CAG conducted an audit of the scheme in 2017 in 9 states.
|State||Premium Collected||Claim Launched||Claim Paid|
Table 1: Comparison of scheme in various states as per CAG audit. All figures in crores
To put this in perspective against the previous schemes, sum insured in 2017 was Rs. 108055 crores, in 2015 Rs. 60773 crores, in 2003 it was Rs. 34749 crores.
As per CAG report, 67% of the farmers have not heard of an insurance scheme aimed at them, now this might sound shady for 60% of farmers are paying premiums. This is because banks auto deduct the premium amount from their loan accounts and they are not even aware of being covered. There is no education to farmers to understand the benefit of the scheme since they are not aware they do not lodge claims when the unfortunate strikes.
Analysis of the scheme – It is a very good scheme in spirit but like all other government schemes, the execution is dodgy, half-hearted and flawed. Right from assessment of crop losses to claim payment, there is red tape and tedious processes which delay claim payment.
No infrastructure for swift assessment of losses – District committees do not have the skills and resources to conduct large scale inspection and submit the report. The ‘cutting edge’ technology is on paper. Drones and smartphones are non-existent. This leads to delays in initiating the process of claims retrieval.
Delayed compensation – It is crucial for farmers to get the loss compensation on time. The next sowing season arrives soon and with no disposable money, sowing is delayed and the cycle continues. This pushes the farmers deeper in the loan cycle.
High premium – Actual premiums are quite high for tax payer. Even though, farmers pay meagre part of it, state and central government fund the difference from yours and mine pocket.
Insurance companies benefit – This scheme is infamously said – for the insurance company, to the insurance company and by the insurance company. As the data suggests, Rs. 12000 crores of general public’s money have been pocketed by insurance companies in 2016-17. They take seconds in deducting money for premium and take months to process claims. All the red tape in claims and compensation, paperwork, processes and procedures are too much for illiterate rural farmers. This means farmers almost never get a payout, inspite of paying premiums. Another useless expense on their pockets.
Let them insure their produce. Current, Pradhan Mantri Fasal Bima Yojna is ineffective in providing the shield. The primary beneficiaries of this scheme are the insurance companies rather than farmers themselves. This could have been a tool in stopping farmer suicides but alas, in its current shape and size, it is quite deficient in execution.