Crop Insurance – PMFBY, etc.

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.


UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Crop Insurance – PMFBY, etc.

Beed Model of Crop Insurance in Maharashtra


From UPSC perspective, the following things are important :

Prelims level : Crop Insurance Scheme

Mains level : PMFBY succes and failures

Maharashtra CM has urged the Prime Minister for state-wide implementation of the ‘Beed model’ of the crop insurance scheme Pradhan Mantri Fasal Bhima Yojana (PMFBY).

Consider this question:

Q.Payouts released often exceed the premium collected in PMFBY. Discuss this limitation of the PMFBY where insurance firms refuse to bid in drought prone regions.

What is PMFBY?

  • Launched in 2016, the flagship PMFBY insures farm losses against inclement weather events.
  • Farmers pay 1.5-2% of the premium with the rest borne by the state and central governments.
  • It is a central scheme implemented by state agriculture departments as per central guidelines.
  • For farmers, the low rate of premium and relatively decent coverage make the scheme attractive.
  • Prior to 2020, the scheme was optional for farmers who did not have loans pending, but mandatory for loanee farmers.
  • Since 2020, it has been optional for all farmers. In Maharashtra, over the years, more non-loanee farmers have enrolled, although it was optional for them.

Issues faced in Maharashtra

  • Voices were raised in Maharashtra about the need to change the scheme.
  • Delay in claim settlement, failure to recognize localized weather events, and stringent conditions for claims were among the concerns. Another complaint was about alleged profiteering by insurance companies.
  • For Maharashtra, where farmers predominantly depend of monsoon rains to water their crops, the scheme soon turned out to be non-profitable for insurance companies given the high payments they had to make.
  • Payouts were close to or exceeded the premium collected in some years, leading to losses to insurance companies.

What is Beed model the state government wants implemented?

  • Located in the drought-prone Marathwada region, the district of Beed presents a challenge for any insurance company.
  • During the 2020 kharif season, tenders for implementation did not attract any bids. So, the state Agriculture Department decided to tweak the guidelines for the district.
  • The state-run Indian Agricultural Insurance Company implemented the scheme.
  • Under the new guidelines, the insurance company provided a cover of 110% of the premium collected, with caveats.
  • If the compensation exceeded the cover provided, the state government would pay the bridge amount.
  • If the compensation was less than the premium collected, the insurance company would keep 20% of the amount as handling charges and reimburse the rest to the state government.

Greater role for States

  • In a normal season where farmers report minimal losses, the state government is expected to get back money that can form a corpus to fund the scheme for the following year.
  • However, the state government would have to bear the financial liability in case of losses due to extreme weather events.

Why is the government pushing for it for the entire state?

  • The reason why Maharashtra is pushing for this scheme is that in most years, the claims-to-premium ratio is low with the premium being paid to the company.
  • In the Beed model, the profit of the company is expected to reduce and the state government would access another source of funds.
  • The reimbursed amount can lead to lower provisioning by the state for the following year, or help in financing the paying the bridge amount in case of a year of crop loss.
  • For farmers, however, this model does not have any direct benefit.

Challenges ahead

  • The chances of the model being implemented for the present Kharif season appear slim.
  • Questions remain on how the state government is going to raise the excess amount, and how the reimbursed amount would be administered.

Crop Insurance – PMFBY, etc.

PM Fasal Bima Yojana (PMFBY) completes 5 Years of operations


From UPSC perspective, the following things are important :

Prelims level : PMFBY

Mains level : Success of PMFBY

The Pradhan Mantri Fasal Bima Yojana (PMFBY) has completed 5 Years of successful operations.

It has become vital these days to remember and recognize every detail of government schemes.

What is PMFBY?

  • 5 years ago, on 13th January 2016, the GoI took a historic step towards strengthening risk coverage of crops for farmers of India and approved the flagship crop insurance scheme – the PMFBY.
  • The scheme was conceived as a milestone initiative to provide a comprehensive risk solution at the lowest uniform premium across the country for farmers.
  • Premium cost over and above the farmer share is equally subsidized by States and GoI.
  • However, GoI shares 90% of the premium subsidy for the North Eastern States to promote the uptake in the region.
  • The average sum insured per hectare has increased from ₹15,100 during the pre-PMFBY Schemes to ₹40,700 under PMFBY.

Coverage of Risks and Exclusions:

Following stages of the crop and risks leading to crop loss are covered under the scheme.

  • Prevented Sowing/ Planting Risk: The insured area is prevented from sowing/ planting due to deficit rainfall or adverse seasonal conditions
  • Standing Crop (Sowing to Harvesting): Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, viz. Drought, Dry spells, Flood, Inundation, Pests and Diseases, Landslides, Natural Fire and Lightening, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane and Tornado.
  • Post-Harvest Losses: Coverage is available only up to a maximum period of two weeks from harvesting for those crops which are allowed to dry in cut and spread condition in the field after harvesting against specific perils of a cyclone and cyclonic rains and unseasonal rains.
  • Localized Calamities: Loss/ damage resulting from the occurrence of identified localized risks of hailstorm, landslide, and Inundation affecting isolated farms in the notified area.

Try this question from CSP 2020:

Q.Under the Kisan Credit Card Scheme, short-term credit support is given to farmers for which of the following purposes? (CSP 2020)

  1. Working capital for maintenance of farm assets
  2. Purchase of combine harvesters, tractors and mini trucks
  3. Consumption requirements of farm households
  4. Construction of family house and setting up of village cold storage facility
  5. Construction of family house and setting up of village cold storage facility

Select the correct answer using the code given below:

(a) 1,2 and 5 only

(b) 1,3 and 4 only

(c) 2,3,4 and 5 only

(d) 1, 2, 3 and 4

Progress till date

  • The Scheme covers over 5.5 crore farmer applications year on year.
  • Till date, claims worth Rs 90,000 crores have already been paid out under the Scheme.
  • Aadhar seeding has helped in speedy claim settlement directly into the farmer accounts.
  • Even during COVID lockdown period, nearly 70 lakh farmers benefitted and claims worth Rs. 8741.30 crores were transferred to the beneficiaries.

Crop Insurance – PMFBY, etc.

Changes in Crop Insurance Scheme


From UPSC perspective, the following things are important :

Prelims level : Crop insurrance schemes in India

Mains level : Impacts of the said changes

The Centre has decided to restrict its premium subsidy in its flagship crop insurance schemes to 30% for unirrigated areas and 25% for irrigated areas (from the existing unlimited), and to make enrolment of farmers in the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Restructured Weather Based Crop Insurance Scheme (RWBCIS) voluntary from the 2020 Kharif season.

 Other changes in crop insurance schemes

  • The government has given flexibility to states/UTs to implement PMFBY and RWBCIS, and given them the option to select any number of additional risk covers/features like prevented sowing, localised calamity, mid-season adversity, and post-harvest losses.
  • Earlier, these risk covers were mandatory.

Why such a move?

By capping the subsidy for premium rates up to 30%, the Centre wants to dis-incentivize certain crops in such areas where growing these crops involve high risks in terms of crop insurance premiums.

What were the schemes?

  • At present, under PMFBY and RWBCIS, farmers pay a premium of 2% of the sum insured for all foodgrains and oilseeds crops of Kharif; 1.5% for all foodgrains and oilseeds crops of Rabi; and 5% for all horticultural crops.
  • The difference between actual premium rate and the rate of insurance premium payable by farmers, which is called the Rate of Normal Premium Subsidy, is shared equally between the Centre and the states.
  • However, states and UTs are free to extend additional subsidy over and above the normal subsidy from their budgets.
  • Until now, there was no upper limit for the central subsidy.
  • The Cabinet decided to cap the Centre’s premium subsidy under these schemes for premium rates up to 30% for unirrigated areas/crops and 25% for irrigated areas/crops.

How many farmers are covered under these two schemes?

  • During 2018-19, about 5.64 crore farmers are enrolled with PMFBY for an insured sum of Rs 2,35,277 crore, and 30% of the gross cropped is insured.
  • When the government approved PMFBY four years ago, it was described as a path-breaking scheme for farmers’ welfare” under which there was no upper limit on government subsidy.
  • Even if balance premium was 90%, it was to be borne by the Government
  • While PMFBY is based on yield, RWBCIS is based on proxies and farmers are provided insurance protection against adverse weather conditions such as excess rainfall, wind and temperature.
  • The number of insured farmers under RWBCIS is relatively low.

Impact of the move

This change will have two main implications.

  • First, it may bring down the rates of overall premium as the state governments now will not be required to invite bids factoring these risks.
  • Second, it will make these schemes less attractive for farmers.
  • However, states/UTs can offer specific single peril risk/insurance covers like hailstorm etc under PMFBY.

Burden of premium

  • One interpretation of this decision is that the burden of premium subsidy will go up for the states.
  • Example: In the old regime, if a farmer’s Kharif crop was insured for Rs 1,00,000 and the rate of actuarial premium was 40%, then the premium paid by the farmer was 2% (Rs 2,000), and the remaining premium was shared by the Centre and the state equally (19% or Rs 19,000).
  • In the new regime, for the same sum insured (Rs 1,00,000) and the same rate of premium (40%), the Centre will give subsidy for premium rates up to 30%.
  • This means that from the Kharif 2020 season , the Centre will have to pay premium at the rate of 14% (out of 30%, the farmer’s share is 2%, and the Centre’s and state’s 14% each).
  • The state has to bear the entire burden of the premium subsidy in cases where the rate of premium goes beyond the threshold of 30%.

No insurance of certain crops

  • Another interpretation is that the Centre may stop supporting insurance of certain crops in certain areas where the rate of premium is more than 30%.
  • The Department of Agriculture, Cooperation and Farmers Welfare in consultation with other stakeholders/agencies will have to prepare State specific, alternative risk mitigation programme for crops/areas having high rate of premium.
  • While the average premium rate under PMFBY and RWBCIS at the national level was 12.32% for 2018-19, for some crops in certain districts, the rate of premium has been higher than 30% in recent years.
  • For instance, the rate of premium for Kharif groundnut has reached 49% in Rajkot of Gujarat, and the rate for Rabi paddy crop Ramnathapuram (Tamil Nadu) has reached 42%.

Impact on states

  • The states are already defaulting on their share, and the Centre’s new cap will put an additional financial burden on them.
  • Madhya Pradesh has not paid its share of premium even for Kharif 2018, which comes to Rs 1,500 crore. As a result, farmers have not got their claims.
  • In fact, most states have delayed the payment of their share of premium.
  • Sources said that in some states, the expenditure on premium of PMFBY is more than 50% of their budget for agriculture.

Immediate implications

  • That move will lead to a rise in the rates of premium, as the area covered under insurance and the number of enrolled farmers is expected to come down significantly.
  • As of now the schemes are compulsory for all loanee farmers and optional for other farmers.
  • Non-loanee farmers under the crop insurance schemes are much fewer than loanee farmers.
  • If the latter opt out of the schemes, the number of insured farmers will drastically come down.
  • In such a scenario the rate of premium of certain crops in some areas may go beyond 30%.


Pradhan Mantri Fasal Bima Yojana – Min Premium, Max Insurance

Crop Insurance – PMFBY, etc.

[pib] Fall Army Worm


From UPSC perspective, the following things are important :

Prelims level : Fall Army Worm

Mains level : New threats leading to crop failure

  • The Union Government is considering several steps to control the spread of Fall Army Worm in many states.


  • Fall armyworm, first detected in maize fields in India last year, can wreak havoc across crops without timely government action.
  • Its moths were totally different from oriental armyworm.
  • This pest was known to strike once every 10-12 years.

Fall Armyworm

  • Native to the Americas, FAW has, since 2016, been aggressively moving eastwards, infesting Africa and making landfall in India last summer.
  • It propagates similar to an army that “marches” slowly forward and consumes any foliage on the way.
  • Unlike oriental armyworm, FAW isn’t a cyclical pest that comes intermittently.
  • Instead, it is a continuous pest that is nearly always present and can build permanent populations.
  • Not only is it a far more serious threat, but the measures to control the pest are also ad hoc.
  • Within India, FAW attacks have already been reported from even Maharashtra, Andhra Pradesh, Telangana, Tamil Nadu, Madhya Pradesh, Chhattisgarh and West Bengal, while causing damage to the maize, jowar (sorghum) and, to a limited extent, sugarcane crops in these states.

Why FAW are more dangerous?

  • Both oriental armyworm and FAW are polyphagous; their larvae feed on a range of host crop plants.
  • The former, though, does not spread very fast, which is why the damage from it in 2017 and even 2018 was largely confined to Karnataka.
  • The adult FAW moth, in contrast, can fly up to 100 km distance every night, allowing it to invade new geographies very quickly.
  • Besides, an adult female can lay 1,500-2,000 eggs during her entire life cycle of 45 days, as against 100-200 eggs by the oriental armyworm.

How to identify them?

  • Pheromones are natural compounds emitted by female FAW moths to attract males for mating.
  • Pheromone traps basically use synthetic versions of these compounds to attract and catch male moths, which can, then, be counted to detect any significant FAW presence.

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

Notify of
Newest Most Voted
Inline Feedbacks
View all comments