*Sandip Das

In January earlier this year, in a move aimed at reducing the recurrence of agricultural distress without having to effect hefty hikes in the Minimum Support Prices (MSP), Narendra Modi led National Democratic Alliance government had announced a crop insurance scheme named Pradhan Mantri Fasal Bima Yojana (PMFBY).

Under the new scheme being implemented from Kharif season of 2016, the premium paid by farmers had been reduced to 2% of the insured value for the more rain-dependent kharif crop and 1.5% for the rabi season, compared with 3.5-8% charged for the two earlier schemes ---- National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS). In the case of horticultural crops, farmers’ premium burden will be 5% of the sum assured or 50% of the total premium.

NAIS and MNAIS have been discontinued from Kharif 2016, but the ongoing Weather Based Crop Insurance Scheme (WBCIS) and Coconut Palm Insurance Scheme would continue to operate while premium to be paid under WBCIS has been brought on a par with PMFBY.

Later while unveiling the operational guidelines for the PMFBY at a massive farmers' rally in Sehore in Madhya Pradesh in February this year, Prime Minister Modi had noted that new crop insurance scheme would provide a solution for the farmers problems, in times of difficulty. He said care had been taken to eliminate the shortcomings of previous crop insurance schemes, and create trust among farmers with regard to crop insurance. He said technology would be used extensively with this scheme to ensure early settlement of claims, and exhorted farmers to take benefit of this scheme.

Under the PMFBY, there would be no upper limit on government subsidy provided by centre and state governments. “Even if the balance premium (after farmers’ contribution) is 90%, it will be borne by the government,” according to an agriculture ministry statement.

In the earlier schemes, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. Officials said that this capping on premium was done to limit the government outgo on the premium subsidy. “This capping has now been removed and farmers will get claim against full sum insured without any reduction,” an official said.

This would ensure that farmers get the full sum insured without any reduction or hassles from the 11 designated insurance companies if natural calamities ravage their crops. Officials said that the following roll out of PMFBY, the crop insurance coverage is set to rise from 45 million hectares or 23% of the area under cultivation at present to 50% of the crop area by 2018-19.

Another benefit to farmers under the new crop insurance scheme is that losses incurred by them at any stage of the farming activity — from the sowing to the post-harvest season — would be covered. Earlier, only post-harvest losses can be offset by the insurance facility under the two existing schemes. Also, even those farmers who haven’t taken bank loans will be eligible for insurance cover under PMFBY.

“The new scheme will increase farmers’ income and resultant increase in rural demand,” an agriculture ministry official said. The subsidy would be borne by the Centre and the state government concerned equally. For PMFBY, finance minister Arun Jaitley had allocated  Rs 5,501 crore in 2016-17 while Rs 2,995 crore was allocated for various crop insurance schemes in the previous fiscal.

The biggest thrust of PMFBY has been the use of technology which would be encouraged to a great extent. “Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments,” an official said.

In the earlier schemes, only 20 million of an estimated 120 million farmers in the country — earning for a population four to five times as many — had crop insurance cover in 2014-15, even as the facility was just against the cost of cultivation and barely provided any income protection.

According to the agriculture ministry data, most of the farmers who earlier took crop insurance were in Rajasthan, Bihar, Uttar Pradesh, Maharashtra, Karnataka and Andhra Pradesh. In terms of the value of the farm output, the MNAIS and the Weather-based Crop Insurance Scheme — fared even more dismally, with a coverage of only around 5.5%.

Progress so far

Since the launch of  PMFBY in January, states such as Andhra Pradesh, Jharkhand, Odisha, West Bengal, Himachal Pradesh and Uttarkhand have already awarded contracts to empanelled insurance companies for providing crop insurance coverage to large number of farmers in forthcoming kharif season. 

However states like Punjab and Haryana are yet to decide on rolling out the new crop insurance scheme so far. “The Punjab government has decided not to implement PMFBY while the state government is still discussing about implementing Weather Based Crop Insurance Scheme (WBCIS) whose premium has been brought on a par with PMFBY,” an official.

In case of Haryana, the State Level Coordination Committee on Crop Insurance meetings were held recently and state government is yet to decide on rolling out mega crop insurance scheme. However, Maharashtra, which had received deficient rainfall during last couple of years leading to fall in crop output, the state cabinet recently gave a nod for implementation of PMFBY.

In Gujarat, Uttar Pradesh and Chhattisgarh, the bidding process of identifying insurance companies have been completed and notifications are expected to be out shortly. The roll out of crop insurance would commence in Tamil Nadu and Assam after the state elections.

The Agriculture ministry has empaneled state-owned Agriculture Insurance Company of India (AIC) and 10 private companies including ICICI-Lombard General Insurance, HDFC-ERGO General Insurance, IFFCO-Tokio General Insurance and SBI General Insurance, for implementation of the mega scheme.

“The expansion of the crop insurance scheme would depend on the number of farmers voluntarily opting for it. Lower premium rates might encourage more farmers to take up crop insurance,” Ajay Vir Jahkar, chairman, Bharat Krishak Samaj, said

Meanwhile, the government has decided to entrust more responsibility on banks for covering more number of farmers under the PMFBY, a senior Agriculture ministry officer has said.

“Banks will be squarely responsible. In case there is crop loss to a loanee farmer who is not insured, the bank will have to make good the losses. The onus is now on banks and insurance companies to deliver”, Ashish Kumar Bhutani, Joint Secretary, Agriculture ministry recently said. He said that the government is trying to bring non-loanee farmers such as share-croppers too within the PMFBY fold. "There is a separate committee of the government looking into the land leasing policy and we should be able to address the aspect of sharecropper also getting the benefit of crop insurance,” he noted.

Experts say that PMFBY if implemented properly across the country would mitigate farm distress to a large extent especially when the erratic climates have become a norm rather than exception. 

(*The author is a Delhi based journalist.)