Pradhan Mantri Fasal Bima Yojana : Analysis – UPSC GS2

Major Provisions of Pradhan Mantri Fasal Bima Yojana (PMFBY):
  • Launched in 2016 and is being administered by the Ministry of Agriculture and Farmers Welfare.
  • It replaced the National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS).
  • Aim: To provide a comprehensive insurance cover against the failure of the crop thus helping in stabilising the income of the farmers.
  • Scope: All food & oilseed crops and annual commercial/horticultural crops for which past yield data is available.
  • Premium:
    • The prescribed premium is 2% to be paid by farmers for all Kharif crops and 1.5% for all rabi crops. In the case of annual commercial and horticultural crops, the premium is 5%.
    • Premium cost over and above the farmer share was equally subsidized by States and GoI.
    • However, GoI shared 90% of the premium subsidy for North Eastern States to promote the uptake in the region.
  • Implementation: By empanelled general insurance companies. The selection of the Implementing Agency (IA) is done by the concerned State Government through bidding.
  • Revamped PMFBY: The revamped PMFBY is often called PMFBY 2.0, it has the following features:
    • Completely Voluntary:
      • Enrolment 100% voluntary for all farmers from 2020 Kharif.
      • Earlier, it was compulsory for loanee farmers availing Crop Loan/Kisan Credit Card (KCC) account for notified crops.
    • Limit to Central Subsidy: The Centre has decided to limit the PMFBY premium rates – against which it would bear 50% of the subsidy – to a maximum of 30% in un-irrigated and 25% in irrigated areas.
  • More Flexibility to States: The government has given the flexibility to states/UTs to implement PMFBY and given them the option to select any number of additional risk covers/features.
  • Investing in ICE Activities: Insurance companies have to now spend 0.5% of the total premium collected on Information, Education And Communication (IEC) activities.
  • Several states have opted out of the scheme like Maharashtra, Andhra Pradesh, Jharkhand, Telangana, Bihar, Gujarat, Punjab.
Issues in PMFBY:
  • Financial Constraints of States:
    • The financial constraints of the state governments and low claim ratio during normal seasons are the major reasons for non-implementation of the Scheme by these States.
    • States are unable to deal with a situation where insurance companies compensate farmers less than the premium they have collected from them and the Centre.
    • The State governments failed to release funds on time leading to delays in releasing insurance compensation.
    • This defeats the very purpose of the scheme which is to provide timely financial assistance to the farming community.
  • Claim Settlement Issues:
    • Many farmers are dissatisfied with both the level of compensation and delays in settlement.
    • The role and power of Insurance companies is significant. In many cases, it didn’t investigate losses due to a localised calamity and, therefore, did not pay the claims.
  • Implementation Issues:
    • Insurance companies have shown no interest in bidding for clusters that are prone to crop loss.
    • Further, it is in the nature of the insurance business for entities to make money when crop failures are low and vice-versa.
  • Identification Issues:
    • Currently the PMFBY scheme doesn’t distinguish between large and small farmers and thus raises the issue of identification. Small farmers are the most vulnerable class.
Way Forward:
  • Improving PMFBY:
    • If the farmer is not enthused by crop insurance despite the 95-98% subsidy on premium, it means that the product per se needs improvement.
    • In this context, Insurance companies should bid for a cluster for about three years, so that they get a better chance to handle both good and bad years.
    • The bids should be closed before the onset of the kharif/rabi season.
  • Adopting Beed Model: In Maharashtra ‘Beed model is being followed’, where a company assumes liability only up to 110% of the premium collected or shares gains in a good year with the State government.
  • This model can emerge as a way out from the current mess.
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