The government’s much-vaunted crop insurance
scheme — the Pradhan Mantri Fasal Bima Yojana
(PMFBY) — seems to be losing the confidence of its stakeholders despite some recent demand-driven modifications in its format. As many as six states — West Bengal, Bihar, Jharkhand, Andhra Pradesh, Telangana, and Punjab — have opted out of it and some more, such as Rajasthan, Maharashtra, and Madhya Pradesh, are debating to do so. Telangana and Jharkhand quit the scheme after its revamp in February. The states generally reckon the premium quoted by the insurance companies as too high. A sizable part of their agriculture sector’s budget is consumed by this scheme. They, therefore, prefer to have their own systems for hedging the farmers’ production-related hazards. Besides, insurance companies, especially the private ones, are also not keen to operate the PMFBY. They find the dicey farm insurance business commercially unattractive and practically cumbersome. They also face problems in finding re-insurers for it. Consequently, many of them have abandoned this scheme. Only 10 of the 18 empanelled insurance firms are available for implementing the PMFBY during the current kharif season.
The farmers, on the other hand, feel that they do not gain much from crop insurance
despite the premium payable by them being just nominal — 1.5 per cent of the sum insured for rabi crops, 2 per cent for kharif crops, and 5 per cent for commercial and horticultural crops. The rest of the premium paid to the insurance companies on an actuarial basis is split equally between the Centre and the states, though the former has from now on lowered its payable share. The farmers’ indifference to the scheme is largely because the compensation for losses is usually too little, inordinately delayed, and often denied without ascribing any tenable reason. This has been corroborated by some surveys as well. The Comptroller and Auditor General of India, too, observed in a recent report that the farmers were relatively well off under the earlier farm insurance schemes. Hardly 35 per cent of the farmers, on average, insure their crops. Most of them are those who have taken bank loans and are, therefore, bound to take on insurance cover.
Some of the recent changes in the design of the scheme, though aimed prima facie at enhancing its appeal to the stakeholders, may prove counterproductive. For instance, the decision to make the farmers’ participation in the PMFBY voluntary, rather than compulsory for loanee farmers, even though on right lines, is likely to further curtail the number of farmers joining this scheme. Besides, capping the Centre’s share in the premium subsidy at 30 per cent for rainfed crops and 25 per cent for irrigated ones, instead of 50 per cent for all crops earlier, is likely to displease the states because it would inflate their financial burden. The Centre had initially expressed willingness to take on up to 90 per cent of the subsidy load of this flagship farmers’ welfare programme but reneged later on. With this being the ground reality, the government would be well-advised to revisit the PMFBY, involving all stakeholders in this exercise. The other option could be to leave it to the states to recompense the farmers for their losses. The Centre can provide the financial assistance that’s required, as is done for natural disasters.