Crop Insurance – PMFBY, etc.

Enrolment under PMFBY crop insurance scheme sees steep decline


Mains Paper 3: Agriculture | Issues related to direct & indirect farm subsidies & minimum support prices

From UPSC perspective, the following things are important:

Prelims level: PMFBY

Mains level: Ensuring better implementation of PMFBY through additional provisions.


Falling Enrollment in PMFBY

  1. Data from the agriculture ministry shows that enrolment (during the rain-fed kharif season) rose from 30.9 million farmers in 2015 to 40.3 million in 2016, an impressive 30% jump.
  2. However, the enrolment fell to 34.8 million in 2017 and further plunged to 33.3 million in kharif 2018.

What led this?

  • Part of the decline was also because fewer farmers accessed fresh credit (due to a spate of farm loan waivers since mid-2017) since enrolment under crop insurance scheme is mandatory for farmers availing crop loans.

I. Insurance procedures

  1. To begin with, insurance companies are selling the product piggy backing on the banking infrastructure.
  2. For farmers availing crop loans, banks deduct the premium amount from the loan without even issuing a receipt.
  3. Farmers are never asked if they want insurance, and the product has became an easy way for banks to insure their loans.
  4. Further, in the event of any crop damage, farmers are at a loss as to whom to reach out to since most companies have not set up field offices to attend to customer complaints.

II. Assessment     

  1. Delayed assessment of crop loss and settlement of claims took six to nine months to complete led to farmers losing interest.
  2. Assessment is often delayed due to a paucity of local staff.
  3. Lack of trained outsourced agencies, scope of corruption during implementation and the non-utilisation of technologies like smart phones and drones to improve reliability of such sampling are some of the reasons.

III. Issue of Premiums

  1. A reason why insurance companies charge high actuarial premiums is that cut-off dates for enrolment are frequently extended by states, often beyond the forecast and onset dates of the annual monsoon.
  2. The litmus test of any crop insurance programme is quick assessment of crop damages and payment of claims into farmers’ accounts directly.

IV. Inadequate and delayed claim payment

  • Insurance companies, in many cases, did not investigate losses due to a localised calamity and, therefore, did not pay claims.

V.  Massive profits for insurance companies

  • CSE’s analysis indicates that during kharif 2016, companies made close to Rs 10,000 crore as ‘gross profits’.

VI. Coverage only for loanee farmers

  1. PMFBY remains a scheme for loanee farmers – farmers who take loans from banks are mandatorily required to take insurance.
  2. The percentage of non-loanee farmers availing insurance remained less than 5 per cent during kharif 2016 and 2015.
  3. Like previous crop insurance schemes, PMFBY fails to cover sharecropper and tenant farmers.

VII. Institutional Bottlenecks

  1. There has been no concerted effort by the state governments and insurance companies to build awareness of farmers on PMFBY.
  2. Insurance companies have failed to set-up infrastructure for proper implementation of PMFBY.
  3. There is still no direct linkage between insurance companies and farmers. Insured farmers receive no insurance policy document or receipt.

What needs to be done?

A New Delhi based non-profit Centre for Science and Environment has released series of recommendations to improve implementation of the insurance scheme:

  • Coverage of tenant and sharecropper farmers should increase.
  • Coverage of all important crops should be covered under crop insurance
  • Instead of threshold yield, ‘Potential yield’ should be used for crops
  • Damage caused by wild animals, fire, cold waves and frost to crops should also be considered at the individual level.
  • Damage caused by unforeseen weather events like hailstorms should also be included in the category of post-harvest losses.
  • Farmers must be informed before deducting crop insurance premium. They must be given a proper insurance policy document, with all relevant details.
  • Panchayati Raj Institutions and farmers need to be involved at different stages of implementation.
  • Sum insured should not be less than scale of finance and/or cost of production.
  • Incorporating technology such as remote sensing, drones and online transmission of data.
  • All PMFBY related data related to farmers must be available in the public domain and shared openly with farmers.
  • Robust scheme monitoring and grievance redressal mechanism should be in place.

Way Forward

  1. In an era of climate change, a universal, subsidised agriculture insurance is crucial to safeguard the lives and livelihoods of farmers.
  2. But we need a farmer-friendly, fair and transparent agriculture insurance.
  3. An agriculture insurance driven by profit-motives will do more harm than good.
  4. Policymakers should improve the provisions and implementation of PMFBY and make it a truly effective scheme.

With inputs from: Down to Earth

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