Private insurers reap a windfall from crop cover scheme

Farmers’ distress is likely to cause yet more trouble to the government.

Contrary to Agricultural Minister Radha Mohan Singh’s claim that insurance companies, mostly in the private domain, have not unduly benefited from the Pradhan Mantri Fasal Bima Yojana (PMFBY), official data shows that they would have made a windfall of over ₹16,700 crore in 2016-17. Participating in a debate in the Lok Sabha on Wednesday on the farmers’ condition, many Opposition party leaders alleged that the crop insurance scheme had been designed in such a way that private insurance firms were favoured.

In fact, Singh admitted that there were shortcomings in the implementation of the scheme and that the government was learning from the experience to address the problems. Eleven general insurance firms have collected a total of ₹20,374 crore as crop insurance premium during the previous kharif and rabi seasons, but paid out only ₹3,655 crore to settle the claims, data tabled in Parliament on Tuesday showed. The States where most of the claims were settled were Maharashtra, Karnataka and Uttar Pradesh.

Under PMFBY, currently implemented in 14 States, farmers who are accessing institutional credit have to compulsorily have insurance cover for certain identified crops by paying part premium. The rest of the premium is paid by the Centre and the respective State governments.

“We have asked the States to set up their insurance companies. Punjab and Gujarat have decided to have their own companies. Other States should follow suit. If the States are keen to protect farmers from malpractices by private companies, they should take this step immediately,” said Singh.

During the 2016 kharif season, the total premium collected was ₹15,686 crore and claims paid was ₹3,655 crore. In the rabi season, on the other hand, the total premium receipt was ₹4,688 crore and claims settled were a mere ₹22 crore, according to a reply by Minister of State for Agriculture Parshottam Rupala.

During the kharif season, reported claims were ₹5,621 crore, of which ₹3,634 crore were settled. During the rabi season, claims so far received were for ₹29 crore, of which ₹22 crore worth were settled.

Vikas Rawal, professor of economics at the Jawaharlal Nehru University, said farmers were disinclined to take insurance cover for their crops because they were never designed to help them. They do not cover the real risk for farmers, he said, adding that they only help the banks who have given loans to farmers.

“Most of this claim money would have gone directly to the banks, rather than to farmers,” he said.

Siraj Hussain, former Agriculture Secretary and Visiting Fellow at the Indian Council for Research on International Economic Relations ini New Delhi, however, defended the involvement of private companies “because they bring in efficiency and transparency.”

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