TN CM Stalin urges Modi to remove cap on central share of premium in PMFBY

Our Bureau Chennai | Updated on July 29, 2021

Chief Minister MK Stalin   -  PTI

State’s share of the premium subsidy has increased at a CAGR of 28.07 per cent in the last five years

Tamil Nadu Chief Minister MK Stalin has urged Prime Minister Narendra Modi to remove the capping of Central share of premium subsidy under Pradhan Mantri Fasal Bima Yojana (PMFBY) and revert to 49:49:2 (Central, State and farmer’s share, respectively) premium share for the welfare of the farming community.

In a letter to Modi on Thursday, Stalin said that Tamil Nadu has witnessed a huge growth in terms of area insured and farmers’ enrolment due to the sincere efforts and best practices adopted by the State under the scheme.

‘Steep increase’

However, the State’s share of the premium subsidy has increased at a CAGR of 28.07 per cent in the last five years. This has stymied the very purpose of the scheme as the Tamil Nadu government is finding it difficult to sustain the scheme due to increasing financial liability, that too during this pandemic period. Initially, the pattern of sharing in 2016-17 was 49:49:2. Now, the Central share has been capped at 25 per cent for irrigated area and 30 per cent for rain-fed area which leads to a large increase of the State share of premium subsidy by 12 per cent (totally 61 per cent). In money value, the State’s share of premium subsidy, which was only ₹566 crore in 2016-17 has mounted by 239 per cent to ₹1,918 crore during 2020-21 and to ₹2,500 Crore during 2021-22 due to exorbitant Actuarial Premium Rates (APR) quoted by the insurance companies empanelled by the Government of India he said.

The intention of capping the subsidy to bring down the APR has not happened in reality as the insurance companies are continuing to quote exorbitant APR citing reasons like high loss ratio, inadequate financial capacity and lack of support from re-insurers. The States are coerced to tweak the existing guidelines and adopt new co-insurance models increasing the risks to the States. Otherwise, the Insurance Companies refrain from bidding.

As the State is already reeling under severe financial crunch due to covid pandemic, the onus of bearing a huge State Share of Premium Subsidy under PMFBY is unaffordable. There is no doubt that the capping of Central share of the premium subsidy has been a major detrimental factor for implementation of PMFBY which has been introduced to ensure a social security for farmers, he said.

Published on July 29, 2021

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