Pradhan Mantri Fasal Bima Yojana

The Centre has allowed states to set up their own insurance companies for implementing Pradhan Mantri Fasal Bima Yojana (PMFBY). Presently, five public sector insurers and 13 private insurance companies are empanelled for implementation of the scheme.

The move comes after several requests from states as well as observations made by Comptroller and Auditor General (CAG) in its 2017 report that old crop insurances schemes which have now been merged with PMFBY, were poorly implemented during 2011-2016.

The PMFBY, launched in April 2016, compensates farmers for any losses in crop yield. In the event of a crop loss, the farmer will be paid based on the difference between the threshold yield and actual yield. The threshold yield is calculated based on average yield for the last seven years and the extent of compensation is set according to the degree of risk for the notified crop. The scheme is compulsory for farmers who have availed of institutional loans.

The scheme insures farmers against a wide range of external risks — droughts, dry spells, floods, inundation, pests and diseases, landslides, natural fire and lightning, hailstorms, cyclones, typhoons, tempests, hurricanes and tornadoes. The scheme also covers post-harvest losses up to a period of 14 days.

The Scheme covers all Food & Oilseeds crops and Annual Commercial/Horticultural Crops for which past yield data is available and for which requisite number of Crop Cutting Experiments (CCEs) are conducted being under General Crop Estimation Survey (GCES).

The scheme is implemented by empanelled general insurance companies. Selection of Implementing Agency (IA) is done by the concerned State Government through bidding. The scheme is compulsory for loanee farmers availing Crop Loan /KCC account for notified crops and voluntary for other others. The scheme is being administered by Ministry of Agriculture.

While the idea of insuring farmers against crop losses isn’t new, the PMFBY is an attempt to plug the holes in the older crop insurance schemes — the National Agriculture Insurance Scheme (NAIS) introduced in 1999 and the Modified NAIS (mNAIS) introduced in 2011.

These older schemes didn’t find too many takers among farmers, the main dampener being their limited risk coverage. In mNAIS, the premium was capped at 8 to 12 percent of the sum insured to limit the government’s subsidy outgo. Thus, for crops where actuarial rates were higher (that is, the premiums were steeper), insurance companies proportionally reduced the sum insured. Many a time, the ‘compensation’ fell way short of even the farmer’s cost of production.

The Fasal Bima Yojana has done away with this cap on premium. The sum insured per hectare for a farmer is now decided by the District Level Technical Committee and is pre-declared and notified by the State Level Coordination Committee on Crop Insurance.

The farmer also pays less — the premium he shells out is 2 percent of the sum insured for all kharif crops and 1.5 percent of it for all rabi crops. For horticulture and commercial crops, the premium is 5 percent of sum covered. The remaining premium is paid by the government.

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