Crop insurance woes

For perhaps the first time since its inception in February 2016, the Pradhan Mantri Fasal Bima Yojana (PMFBY) faces the prospect of claims far exceeding the premiums collected. Even as the extent of crop damage remains uncertain on the whole, reports of crop loss in Maharashtra range from 54 lakh hectares, acknowledged officially, to 90 lakh hectares, out of the 140 lakh hectares of cultivated area in the State. Heavy rain also impacted Gujarat, Telangana, Karnataka, Rajasthan and Madhya Pradesh, ravaging maize, pulses, paddy, cotton, soyabean, jowar, bajra, groundnut, sugarcane and horticulture crops.

In Maharashtra, farmers have protested paltry compensation for their losses, amidst a growing perception that the PMFBY is tilted towards insurance players (India File, BusinessLine, November 19). Meanwhile, it has been reported that four major private insurance players have not bid for the PMFBY this year, citing an unviable business model. This is not wholly convincing. Over the last three years of PMFBY, insurance companies have collected more by way of premiums than they have disbursed through claims. There is nothing wrong with this, if the claims themselves are low. However, if the compensation, yield estimates and premiums have been miscalculated, it is a serious issue. The industry has complained of issues in dealing with the local bureaucracy and political machinery. Overall, a host of implementation issues need to be fixed.

The PMFBY was meant to enhance risk cover for farmers. In 2018-19, 5.64 crore farmers enrolled under the scheme, covering a gross cropped area of 30 per cent. The challenge ahead is to ensure that premiums, assessments of loss and payment of compensation work satisfactorily and transparently for all stakeholders. Farmers must be aware of how their premiums are worked out, and their losses calculated. For instance, some farmers in Maharashtra are of the view that the average yield of a region, against which the actual yield is compared and the loss ascertained, is underestimated. Insurance officials, however, contend that farmers at times act in collusion with State government officials in manipulating the results of crop cutting experiments (CCEs), meant to estimate actual yields; these CCEs, they argue, exaggerate the losses. BusinessLine has earlier reported consistently high claims of damage in the case of groundnut in Gujarat, which were not borne out by mandi arrivals. These regions also fork out premiums as high as 50 per cent of the sum assured, against the nationwide norm of 18-20 per cent (with the States and the Centre bearing 98 per cent of the cost).

The IRDAI should look into irregularities in premium and compensation. Insurance firms should use their resources to conduct CCEs to their satisfaction. Crop insurance is a tricky business. Yet, it is indispensable for the future of agriculture.