Crop Insurance – PMFBY, etc.

Pradhan Mantri Fasal Bima Yojana (PMFBY)


From UPSC perspective, the following things are important :

Prelims level: PMFBY, Beed Model of Crop Insurance

Mains level: Crop insurance

Andhra Pradesh has decided to rejoin the crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) from the ongoing kharif season.

Why in news?

  • Andhra Pradesh was one of six states that have stopped the implementation of the scheme over the last four years.
  • The other five, which remain out, are Bihar, Jharkhand, West Bengal, Jharkhand, and Telangana.

What is PMFBY?

  • The PMFBY was launched in February 2016. It is being administered by Ministry of Agriculture.
  • It provides a comprehensive insurance cover against failure of the crop thus helping in stabilising the income of the farmers.
  • It is implemented by general insurance companies.

Its functioning

  • PMFBY insures farmers against all non-preventable natural risks from pre-sowing to post-harvest.
  • Farmers have to pay a maximum of 2 per cent of the total premium of the insured amount for kharif crops, 1.5 per cent for rabi food crops and oilseeds as well as 5 per cent for commercial / horticultural crops.
  • The balance premium is shared by the Union and state governments on a 50:50 basis and on a 90:10 basis in the case of northeastern states.

Farmers covered

  • All farmers growing notified crops in a notified area during the season who have insurable interest in the crop are eligible.
  • Earlier to Kharif 2020, the enrolment under the scheme was compulsory for following categories of farmers:
  1. Farmers in the notified area who possess a Crop Loan account/KCC account (called as Loanee Farmers) to whom credit limit is sanctioned/renewed for the notified crop during the crop season. and
  2. Such other farmers whom the Government may decide to include from time to time.

Risks covered under the scheme

  • Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as Natural Fire and Lightning, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado.
  • Risks due to Flood, Inundation and Landslide, Drought, Dry spells, Pests/ Diseases also will be covered.
  • Post-harvest losses coverage will be available up to a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field.
  • For certain localized problems such as loss/damage resulting from the occurrence of identified localized risks like hailstorm, landslide, and Inundation affecting isolated farms in the notified area would also be covered.

Why many states has opted out?

The opting-out states had mentioned several reasons:

  • The scheme should be voluntary.
  • States should be given options to choose the risks covered and the scheme should be universal.
  • State should be given option to use their own database of E-crop, an application used by the state government to collect information about crops.
  • Many state government wanted zero premium for farmers (meaning the entire premium should be paid by the government.
  • The non-payment of the State Share of premium subsidy within the prescribed timelines as defined in the seasonality discipline lea to the disqualification of the State Government.
  • The reason for West Bengal not implementing the PMFBY is purely “political” as it wants to implement the scheme without mentioning Pradhan Mantri in the name.

How was the scheme structured, and what has changed since?

  • Initially, the scheme was compulsory for loanee farmers; in February 2020, the Centre revised it to make it optional for all farmers.
  • Now states and UTs are free to extend additional subsidy over and above the normal subsidy from their budgets.
  • In February 2020, the Centre decided to restrict its premium subsidy to 30% for unirrigated areas and 25% for irrigated areas (from the existing unlimited). Earlier, there was no upper limit.
  • Food crops (cereals, millets and pulses); oilseeds; and annual commercial / annual horticultural crops are broadly covered under the scheme.


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