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Revamping of Pradhan Mantri Fasal Bima Yojana

  • 19 Oct 2021

Aiming to roll out an overhauled Pradhan Mantri Fasal Bima Yojana (PMFBY) from kharif 2022, the government has constituted a working group comprising officials from Centre, key crop-producing states and top executives of public sector insurance companies to suggest “sustainable, financial and operational models.”

Need

  • The move comes after many states quit the scheme, defeating the objective of protecting farmers’ income.

Aim

  • With a view to achieving sustainable underwriting capacities of insurers and rationalised premium pricing to cut subsidy burden on the government, the working group is expected to address the demand of an alternative model.

Issues with the Scheme

Premium

  • The Centre has identified a hardening of premium market, lack of sufficient participation in tenders, inadequate underwriting capacity of insurers as major issues that adversely impacted PMFBY during implementation of the scheme.
  • The premium to be paid by farmers is fixed at 1.5% of the sum insured for rabi crops and 2% for Kharif crops, while it is 5% for cash crops under PMFBY. The balance premium is split equally between the Centre and states. Many states have demanded their share of the premium subsidy be capped at 30% while some others demand the Centre to bear the entire subsidy.

Fall in Enrollment

  • According to provisional data of 19 states (excluding Karnataka), there is over 10% fall in enrollment of farmers under crop insurance during Kharif 2021 from last season’s 1.68 crore. (Karnataka is not included since this year’s Kharif data of the state is yet to be uploaded in the central portal).
  • Among major producing states namely Chhattisgarh, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, Tamil Nadu and Uttar Pradesh the fall in enrollment is in the range of 2-75%.

Low Coverage

  • It is a concern as less than 12% of 14.6 crore land owning farmers are covered under crop insurance during kharif despite the fact that 52% of the country’s farm land does not have assured irrigation facility and depends on monsoon.

Current Status of the Scheme in some States

  • Exits: Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal and Bihar exited the scheme, citing the cost of the premium subsidy to be borne by them.
  • Never Implemented: The state of Punjab has not implemented crop insurance scheme.
  • States with their own Schemes: Bihar, West Bengal and Andhra Pradesh have their schemes under which farmers do not pay any premium, but they receive a fixed amount of compensation in case of crop failure.

Why Revival of the Scheme is Important?

  • No other scheme than PMFBY will ensure a stable income during calamities.
  • It will also be a big setback for government’s target to double farmers’ income.

What will the Working Group do?

  • Work on Premium: The working group will find out reasons for high premium rates and suggest mechanism to rationalize them including the option of creating a risk pool.
  • Define Role of States: It will define role of state governments, as they are the implementing agencies.
  • Settlement of Claims: Other issues to be looked into by the group also include a detailed study on the feasibility to adopt suitable technology-based approaches for early settlement of claims by modifying traditional methodology of Crop Cutting Experiments (CCEs) for loss estimation.

About the Group

  • The newly formed group, headed by CEO of PMFBY (Ritesh Chauhan), will have principal secretaries (agriculture) of Maharashtra, Madhya Pradesh, Rajasthan, Gujarat, Assam, Tamil Nadu, Uttar Pradesh and Odisha as members.

(Source: Financial Express)