Crop Insurance – PMFBY, etc.

Maharashtra may become 8th state to opt out of PMFBY


From UPSC perspective, the following things are important :

Prelims level : PMFBY, Beed Model of Crop Insurance

Mains level : Issues with PMFBY

Maharashtra may follow several other big states and opt-out Pradhan Mantri Fasal Bima Yojana (PMFBY), the government’s much-highlighted crop insurance scheme.

Why do many states want to opt-out?

  • The major reasons are denial and delay of claims along with a huge subsidy burden on state governments.
  • The farmers are facing a problem with timely claim settlement.
  • Maharashtra is studying the Beed Model for insurance settlement.

Who else has stepped out?

  • Andhra Pradesh, Jharkhand, Telangana, Bihar, Gujarat (PM’s home state), Punjab and West Bengal — all predominantly agriculture states — have already opted out of the scheme.
  • Some of these states have their own insurance schemes.

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 empanelled general insurance companies.
  • The scheme is compulsory for loanee farmers availing Crop Loan /KCC account for notified crops and voluntary for other others.

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.
  • To address the demand of farmers, the scheme has been made voluntary for all farmers from Kharif 2020.
  • 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.
  • In 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, 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.

Back2Basics: Beed Model

  • The model of crop insurance in place in Maharashtra’s Beed district is being studied by a central government panel set up to suggest suitable working models for PMFBY.
  • In the Beed model, there is a cap on the profit of the insurance companies.
  • If the claims exceed the insurance cover, the state government pays the bridge amount.
  • If the claims are less than the premium collected, the insurance company keeps 20 per cent of the amount as handling charges and reimburses the rest to the state government.
  • This is expected to reduce burden of subsidies from state.


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