Govt to impose penalties on States, banks & firms

More than two years after its formal launch, the Centre has decided to impose financial penalties on State Governments, banks and insurance companies for delay in claim settlement under the Pradhan Mantri Fasal Bima Yojana (PMFBY). Insurance Companies and State Governments will have to repay with 12 per cent interest if they fail to clear claims of farmers for loss of crop loss within two months. The decision was taken by the Ministry of Agriculture after reports that insurance companies, banks are not settling claims of farmers for their crop loss despite insurance of crops.

Replying to a question, Union Agriculture Minister Radha Mohan Singh said in the Lok Sabha that insurance companies, which fail to clear claims of farmers for crop loss within two months, will have to repay with 12 per cent interest. This would also be applicable on the State Government if they fail to do so. “The Central Government has introduced the ‘Pradhan Mantri Fasal Bima Yojana’ (PMFBY) from Kharif 2016 to address risks associated with agriculture,” he said.

As per the Agriculture Ministry data, as many as 1.06 crore farmers availed benefit from the PMFBY against 4.02 crore insured farmers in 2016 during kharif season. Similarly, in Rabi season, out of the 1.70 crore insured farmers, 32.87 lakh were benefitted. In 2017,  as many as 3.4 crore farmers insured during kharif crop season 2017 and 1.05 crore benfitted. In other words, 37,977 farmers decline under the PMFBY this year.

The Minister said that the farmers will get full insurance cover as there is no capping of the sum insured and consequently the claim amount is not curtailed or reduced. This scheme provides insurance cover at all stages of the crop cycle including post harvest risks in specified instances. Singh said the PMFBY addresses all shortcomings in the earlier schemes and is available to farmers at a very low rate of premium.

PMFBY is an yield-based programme, where farmers are charged two per cent for all kharif crops, 1.5 per cent for all rabi crops and five per cent for commercial and horticulture crops. Almost 30 per cent or a third of the Agriculture Ministry’s Budget, is spent on premium for the PMFBY every year. The penalties on States could be in the form of a levy on the premium amount due or asking them to bear a higher share of the premium than the current 50:50 between Centre and States.

In the case of banks, the Government could lower the four per cent service charge it gives from farmers’ share of premium. And in the case of better performing banks, this might even be rattled.

For the 2017 kharif season, around Rs 194 billion has been collected as premium against admissible claims worth Rs 166 billion. Around Rs 110 billion worth of claims have been settled or are in the process of being settled. The largest chunk of these, around Rs 54 billion, has been settled in Madhya Pradesh alone, for crop damage in kharif 2017.

The State has polls in the next few months.

The Government also plans to give greater freedom to States under the scheme and make the use of technology and drones in some segments of PMFBY mandatory.