Crop Insurance Coverage Under Pradhan Mantri Fasal Bima Yojana

General Studies Paper -3

Context: General insurance companies reduced their exposure to crop insurance under the Pradhan Mantri Fasal Bima Yojana (PMFBY) during FY24 despite the government’s push to expand the insurance coverage in the farm sector.

About

• Gross direct premium underwritten by insurers declined by 4.17 per cent to Rs 30,677 crore during the fiscal as against Rs 32,011 crore in the previous year even as farmers faced crop losses due to floods, unseasonal rains and heatwaves.
• Crop insurance premium underwritten had risen by 8.66 per cent to Rs 29,465 crore in the previous fiscal (FY23).
• The decline is mainly due to the 32 per cent fall in premsium income underwritten by state-owned Agriculture Insurance Company (AIC) to Rs 9,890 crore during FY24 from Rs 14,619 crore a year ago,
  • Four government-controlled insurers — AIC, New India Assurance, Oriental Insurance and SBI General — reduced their exposure to crop insurance in FY24.

Pradhan Mantri Fasal Bima Yojana (PMFBY)

• It was launched in 2016, aims to provide a simple, affordable, and comprehensive crop insurance product to Indian farmers.
• Covered Crops – Food crops (Cereals, Millets and Pulses), Oilseeds, Annual Commercial / Annual Horticultural crops.

Key Features

• Coverage and Benefits: It covers all non-preventable natural risks from pre-sowing to post-harvest, ensuring financial support in the event of crop failure due to natural calamities, pests, or disease
  • It also covers individual farms nationwide for localized disasters like hailstorms, landslides, floods, and wildfires, as well as post-harvest losses from cyclones, heavy rain, and hail.
• Premium Rates: The premium rates for PMFBY are significantly subsidized, making the insurance affordable for farmers. The premium rates are fixed at 2% of the sum insured for all Kharif crops and 1.5% for all Rabi crops. For commercial and horticultural crops, the premium is 5%.
• Participation: The scheme is voluntary for farmers, but states are encouraged to achieve maximum coverage. It is mandatory for loanee farmers (those who have taken agricultural loans) to enroll in PMFBY.
• Sum Insured: The scheme ensures that farmers receive adequate compensation based on the area sown, type of crop, and extent of damage suffered. There is no upper limit on government subsidy, ensuring maximum benefits for the farmers.
• Technology Integration: PMFBY leverages technology for quicker assessment and settlement of claims. The use of smartphones, remote sensing, and satellite imagery helps in accurate estimation of crop losses, ensuring transparency and efficiency.

Benefits

• Financial Security: Farmers are assured of financial support in case of crop failure, reducing their vulnerability to economic distress.
• Risk-taking: Encouraging farmers to adopt innovative and modern agricultural practices
• Inclusive Growth: PMFBY promotes inclusive growth by covering small and marginal farmers who are often the most vulnerable to crop losses.
• Ease of Access: The simplified procedures and extensive use of technology make it easier for farmers to enroll and claim insurance.
• Ensuring flow of credit to the agriculture sector; which will contribute to food security, crop diversification and enhancing growth and competitiveness of the agriculture sector.

Challenges and the Way Forward

• PMFBY has been instrumental in providing relief to farmers, certain challenges persist.
  • Issues such as delayed claim settlements,
  • inadequate awareness among farmers
  • High financial liabilities in the States,
  • Unreliable loss & yield assessment.

Conclusion and Way Forward

• In a country where agriculture forms the backbone of the economy, safeguarding the interests of farmers becomes paramount.
• By offering a comprehensive and accessible insurance product, PMFBY empowers farmers, improves agricultural practices, and contributes to the overall growth and stability of the Indian agricultural sector.
• PMFBY represents a significant step towards ensuring the financial security of farmers across the nation.
• There is a need for greater coordination among stakeholders including insurance companies, banks, and state governments to ensure effective implementation of PMFBY.