PRADHAN MANTRI FASAL BIMA YOJANA SCHEME

• Recently, Maharashtra has signaled that it may opt out of Pradhan MantriFasalBimaYojana Scheme.
• Andhra Pradesh, Jharkhand, Telangana, Bihar, Gujarat, Punjab and West Bengal – all predominantly agriculture states – have already opted out of the scheme.
• Launched in 2016 and is being administered by the Ministry of Agriculture and Farmers Welfare.
• It replaced the National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS).
• To provide a comprehensive insurance cover against the failure of the crop thus helping in stabilising the income of the farmers.
• All food & oilseed crops and annual commercial/horticultural crops for which past yield data is available.
• The prescribed premium is 2% to be paid by farmers for all Kharif crops and 1.5% for all rabi crops. In the case of annual commercial and horticultural crops, the premium is 5%.
• Premium cost over and above the farmer share was equally subsidized by States and GoI.
• However, GoI shared 90% of the premium subsidy for North Eastern States to promote the uptake in the region.
• By empanelled general insurance companies. The selection of the Implementing Agency (IA) is done by the concerned State Government through bidding.
• Revamped PMFBY: The revamped PMFBY is often called PMFBY 2.0 it has the following features:
• Completely Voluntary: Enrolment 100% voluntary for all farmers from 2020 Kharif.
• Earlier, it was compulsory for loanee farmers availing Crop Loan/Kisan Credit Card (KCC) account for notified crops.
• The Centre has decided to limit the PMFBY premium rates – against which it would bear 50% of the subsidy – to a maximum of 30% in un-irrigated and 25% in irrigated areas.
• The government has given the flexibility to states/UTs to implement PMFBY and given them the option to select any number of additional risk covers/features.
• Insurance companies have to now spend 0.5% of the total premium collected on Information, Education And Communication (IEC) activities. 

Issues in PMFBY

• The financial constraints of the state governments and low claim ratio during normal seasons are the major reasons for non-implementation of the Scheme by these States.
• States are unable to deal with a situation where insurance companies compensate farmers less than the premium they have collected from them and the Centre.
• The State governments failed to release funds on time leading to delays in releasing insurance compensation.
• This defeats the very purpose of the scheme which is to provide timely financial assistance to the farming community.
• Many farmers are dissatisfied with both the level of compensation and delays in settlement.
• The role and power of Insurance companies is significant. In many cases, it didn’t investigate losses due to a localised calamity and, therefore, did not pay the claims.
• Insurance companies have shown no interest in bidding for clusters that are prone to crop loss.
• Further, it is in the nature of the insurance business for entities to make money when crop failures are low and vice-versa.
• Currently the PMFBY scheme doesn’t distinguish between large and small farmers and thus raises the issue of identification. Small farmers are the most vulnerable class.

Way Forward

• If the farmer is not enthused by crop insurance despite the 95-98% subsidy on premium, it means that the product per se needs improvement.
• In this context, Insurance companies should bid for a cluster for about three years, so that they get a better chance to handle both good and bad years.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT