By Sandip Das
The Pradhan Mantri Fasal Bima Yojana (PMFBY), the crop insurance scheme jointly sponsored by the Centre and states, is facing the twin problems of many state governments ceasing to fund it and wheat farmers in many states losing interest in the scheme, as crop failures have become rarer due to improved irrigation.
While last kharif (2021) and rabi (2020-21) seasons saw a spurt in both the number of farmers and crop areas covered under the scheme, and also the sums insured due to the uncertainties caused by the pandemic, very low claim to premium ratios were reported in both the seasons – 17% (provisional) of summer crop and 40% for winter crop.
This has had a telling impact on the PMFBY cover for the rabi crop that has just been sown. With a number of states, including Gujarat, Bihar, Telangana and West Bengal, dropping out, the enrolment of farmers under PMFBY for rabi 2021-22 crop fell by 12% to around 1.7 crore compared to the previous winter crop. In terms of the sum insured, the drop has been much sharper at 52% – Rs 39,232 crore in 2021-22 rabi season against Rs 82,378 crore in the previous rabi season.
Sources say Gujarat’s exit and large sections of wheat farmers from Madhya Pradesh and Haryana opting out of the insurance cover are the prime reasons for the big decline in sums insured.
Correspondingly, cultivated areas covered under rabi crops, including wheat, millets, oilseed, pulses, etc, have dropped by more than 51% to close to 82 lakh hectare rabi 2021-22 compared to 167 lakh hectares covered in the previous year.
More than 88% of the farmers enrolled in PMFBY for rabi 2021-22 belong to five states – Rajasthan, Tamil Nadu, Madhya Pradesh, Maharashtra and Chhattisgarh. Currently, 18 states and Union Territories are implementing PMFBY.
Overall, farmers’ enrolment in 2021-22 season in both kharif and rabi seasons have risen marginally by 7% to 6.6 crore compared to 6.1 crore reported in 2020-21. In terms of value of sum insured, however, there was a drop of 60% in 2021-22 season to Rs 1.4 lakh crore in comparison to 2020-21 season.
According to the agriculture ministry estimates, there are around 14 crore farmer families in the country.
Sources said several states dropping out of the crop insurance scheme because of fiscal constraints and the government making the scheme voluntary for the farmers have led to a stagnation in PMFBY coverage.
An official associated with a leading crop insurance company said that farmers in the irrigated regions of Uttar Pradesh, Uttarakhand and some other states are not joining PMFBY as they perceive low risk to their crops from experiences in recent years.
Under the heavily subsidised PMFBY, the premium to be paid by farmers is fixed at just 1.5% of the sum insured for rabi crops and 2% for kharif crops, while it is 5% for cash crops. The balance premium is equally shared amongst the Centre and states and in case of North-Eastern states, the premium is split between the Centre and states in 9:1 ratio.
In February 2020, the government made the PMFBY voluntary for the farmers while previously it was mandatory for the farmers to take insurance cover under the scheme.
The Punjab government hasn’t adopted PMFBY’s since its 2016 launch, while states like Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal and Bihar exited the scheme, because of “higher cost of premium subsidy” to be borne by them. Many states have asked for capping of premium subsidies under PMFBY.
Last year, the government constituted a working group comprising officials from Centre, key crop-producing states and senior officials of the state-owned insurance companies to suggest ‘sustainable, financial and operational models,’ for PMFBY. The committee has conducted several meetings in the last couple of months.
The government has identified hardening of the premium market, lack of sufficient participation in tenders, inadequate underwriting capacity of insurers among factors preventing adoption of PMFBY on a large scale.
At present, there is no fixed premium rate under PMFBY implemented by states. The rates vary from area to area and from crop to crop. Actuarial premium rates levied by the insurance companies are determined through bidding conducted by the states.
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