Crop insurance. Are farmers reaping the benefit of PM Fasal Bima Yojana?

The Pradhan Mantri Fasal Bima Yojana (PMFBY) launched in 2016-17 is globally the largest crop insurance scheme in terms of farmer participation and the third largest in terms of the premium according to the Central government. Over 5.5 crore farmer applications are received on a year-on-year basis, and till date, the scheme has insured over 29.16 crore farmer applications. Over the period of five years, more than 8.3 crore farmer applications have benefited from the scheme.

A major chunk of smaller farmers, however, still remain out of the crop insurance network. The percentage of marginal farmers in the scheme has seen a decline from 18.08 per cent to 16.55 per cent for kharif between 2018 and 2020. The participation of small farmers in the scheme is between 63-68 per cent.

While the Central government wants to expand the scheme, farmers seem to be unhappy with its current format and execution.

Farmers in Maharashtra have intensified their agitation against insurance companies implementing PMFBY, alleging that the insurance firms are hand in glove with the government and that a majority of the farmers are being deprived of the benefits of the scheme. Many farmers here are still waiting for the insurance amount for the crop damaged in 2018. It is not just the farmers in Maharashtra who are up against PMFBY and implementing companies. Their counterparts in other States have been raising similar issues too.

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However, the insurance companies and the government have a different take on the scheme and its impact. The PMFBY is available for all States and farmers -- whether loanee, non-loanee, share cropper, or tenant farmers -- on a voluntary basis. The States notify the crops and areas under the scheme. One of the main aims of the scheme is to provide financial support to stabilise the income of farmers, especially in natural calamity hit seasons/years to ensure their continuance in agriculture.

Key numbers

From 2016-17 to 2019-20 (provisional figures) 2,307.4 lakh farmers’ applications have been insured under the PMFBY. Out of these applications, 772.1 lakh applications – that is 33.46 per cent of applications – have benefited from the scheme, according to the data presented by the Ministry of Agriculture to the Lok Sabha on July 27, 2021.

Farmers have to pay a maximum 2 per cent premium for kharif, 1.5 per cent for rabi food and oilseed crops, and 5 per cent for commercial/horticultural crops. The balance of actuarial/bidded premium is shared by the Central and State government on 50:50 basis (in the case of northeastern States, it is 90:10). In the four years (2016-17 to 2019-20), farmers across the States have paid ₹17,573 crore as their share of the premium that comes to 16 per cent of the gross premium of ₹1,07,449 crore. These figures include provisional figures for 2019-20 which the government is updating.

Are firms earning profits?

The Ministry of Agriculture told the Rajya Sabha on July 23, 2021, that all the five public sector general insurance companies and 14 private sector general insurance companies have been empanelled by the government of India for implementation of PMFBY in the country. However, the specific implementing insurance company is selected by the concerned State through a transparent bidding process.

The Ministry has provided the data on claims paid by 18 insurance companies. Agriculture Insurance Company of India Limited has paid the highest claims of ₹33,491 crore in four years. This amount is about 36 per cent of the total claims paid by all companies during this period. Out of the total gross premium of ₹1,07,449 crore collected by the companies in four years (2016-17 to 2019-20) about ₹92,426 crore – that is 86 per cent – has been paid to farmers to settle insurance claims.

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The data reveals that some private insurance companies have opted out of the scheme. In 2019-20, four companies didn’t participate in the scheme while Shriram General Insurance Company Ltd was part of the scheme only in 2016-17. Industry players complain that PMFBY is not benefiting their business.

In March this year, the Ministry of Agriculture told the Rajya Sabha that crop insurance is a major risk mitigation tool for the benefit of farmers. The Ministry added that the difference between premium collected and claims paid may not be the margin/profit for the insurance companies.

“The cost of reinsurance and administrative cost totalling 10 per cent to 12 per cent of gross premium also has to be borne by the insurance companies. Further, out of the total crop insurance business under the scheme, about 50 per cent is shared by the five public sector insurance companies including Agriculture Insurance Company of India Ltd.” the Ministry informed.

However, farmers disagree with the government’s explanation. “Many of the insurance companies don’t have any set up on the ground. Right from paying premiums to submitting insurance claims, farmers have to struggle a lot. The majority of the time, even helpline numbers of the companies are not working,” said Prashant Pawar, an agri-entrepreneur.

Why the long wait?

Farmer leader and former MP Raju Shetti said that farmers have not been receiving insurance claims for years and they have to turn to private money lenders to recover losses and make provisions for the next cropping season.

The outstanding amount is higher in Telangana followed by Jharkhand, Gujarat , Karnataka and Madhya Pradesh. Among these five States, Telangana, Karnataka and Madhya Pradesh are the regions which have witnessed the highest number of farmer suicides between 2014 -2018.

Maharashtra, which has reported highest farmer suicides (12,813) during this period, has outstanding insurance claims pending from 2018.

According to the Agriculture Ministry, as per provisions of PMFBY, admissible claims are generally paid by the insurance companies within two months of completion of crop cutting experiments/ harvesting period – subject to availability of yield data, subject to receipt of the total State share of premium subsidy from the concerned State government within time.

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“However, settlement of claims in some States get delayed due to reasons like delayed transmission of yield data; late release of their share in premium subsidy by some States, yield-related disputes between insurance companies and States, non-receipt of account details of some farmers for transfer of claims to the bank account of eligible farmers and NEFT related issues, etc.,” the Ministry stated last month in the Lok Sabha.

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