Part-1: What is the Pradhan Mantri Fasal Bima Yojana (PMFBY)?
Sai Krishna Muthyanolla
October 7, 2019
In a three-part series,
we look at the Pradhan Mantri Fasal Bima Yojana (PMFBY) in detail. In the first
part, we look at the scheme, its similarities & differences with the
earlier insurance schemes.
With the objective to provide comprehensiveinsurance coverage and financial support to the farmers at the time of cropfailure due to natural calamity or pest attack, the Government of India launchedthe Pradhan Mantri Fasal Bima Yojana (PMFBY) in February 2016. But what are the salient features of the scheme? Howdoes it differ from its predecessors and what is the current status ofimplementation? Here is a three-part series that looks into the various aspectsof the PMFBY.
PMFBY was launched in Kharif 2016 in place of NAIS and MNAIS
Currently, the Government of India isimplementing four crop insurance schemes. These are Pradhan Mantri Fasal Bima Yojana (PMFBY), Restructured-Weather Based Crop Insurance Scheme (RWBCIS), Unified Package Insurance Scheme(UPIS) and Coconut Palm Insurance Scheme (CPIS). PMFBY was launched by the NDA Governmentin Kharif season of 2016 after reviewing the erstwhile agricultural insuranceschemes of National Agriculture Insurance Scheme (NAIS), Weather-based CropInsurance scheme (WBCIS) and Modified National Agricultural Insurance Scheme(MNAIS). PMFBY replaced National Agriculture Insurance Scheme (NAIS) andModified National Agricultural Insurance Scheme (MNAIS). While PMFBY is basedon yields, the weather index based Restructured Weather Based Crop InsuranceScheme (RWBCIS) was also launched in 2016. The RWBCIS is a restructured versionof the erstwhile WBCIS.
What is the objective of PMFBY?
The PMFBY has been launched withthe aim to provide risk cover for crops of farmers against all the natural riskswhich cannot be prevented, from pre-sowing to post-harvest period. Some of the non-preventablenatural risks include natural fire, lightning, storm, floods, cyclone, droughtand landslides. Further, the scheme also aims to provide farmers with adequateclaim amount and timely settlement of the same. The objectives of the schemealso include stabilisation of farmers’ income in order to ensure that theycontinue farming and also ensure flow of credit to the sector. Through thisscheme, the government also aims to encourage farmers to adopt new andinnovative agricultural techniques.
It has to be noted that most of the features of PMFBY are taken fromthose of the erstwhile schemes like the NAIS and MNAIS. While the insuranceunit for former MNAIS scheme was reduced to village or village panchayat levelfor all crops, under PMFBY the unit area of insurance for major crops is at thevillage or village panchayat level and that for other crops was higher such asblock and taluka. Another major difference lies in the premium rate. UnderPMFBY, the premium rates have been brought down considerably.
Farmers have to pay a premium between 1.5% to 5% depending on the type
of crop
The farmers across the country will have topay a premium at 2% of sum insuredfor all Kharif food and oilseed crops and 1.5% of sum insured for Rabi food andoilseed crops. For annual commercial crops and horticulture, premium borne byfarmers will be 5% of the sum insured. The remaining amount of premium will beequally split and paid by the Central and State governments. The role of state governments is to determine the crops and areas where scheme has to be implemented.They are also responsible for selecting insurance companies through bidding,determining the cluster of districts and furnishing the past set of yield dataand other data for insurance companies, premium rates, release their share ofpremium subsidy and monitoring the scheme along with other responsibilities.
PMFBY has features similar to its predecessor schemes under UPA
Unlike in the case of NAIS, empanelledprivate insurance companies were also considered eligible to be appointed as‘Implementing Agencies’ at district level on the lowest premium quoted underthe MNAIS of the UPA. The same is being continued under PMFBY.
In the case of PMFBY, digital innovationsuch as smartphone applications have also been added for yield estimation. ThusPMFBY can be considered a modified version of the erstwhile crop insuranceschemes. Also, under PMFBY,  it ismandatory for farmers who have availed crop loans from financial institutionsto get enrolled under PMFBY.
RWBCIS was also launched in Kharif 2016
RWBCIS is the improvisedversion of WBCIS scheme that was already being implemented in India since 2007.Under this scheme, farmers are provided with insurance protection againstadverse weather incidents such as deficit or excess rainfall, temperaturedifference, moisture and others which have a significant impact on cropproduction. RWBCIS is a revised version of the earlier WBCIS scheme, underwhich, the premium rates have been made on par with that under PMFBY. Underthis scheme, plans have been devised to set up more ‘Automatic Weather Stations(AWS)’ in the country.
About 20 States have opted for PMFBY
Kharif crops are usuallygrown from June to September in India (during the Monsoons) and Rabi crops aregrown from October of one year to March of the following year. Very littlesowing happens in the Zaid season between April and June and hence is notcovered under the insurance schemes.
Insurance coverage is provided for Kharifand Rabi separately. In the following chart, the number of
applications of loanee and non-loaneefarmers for Kharif 2019 and Rabi 2018-19 is given. The number of states whichhad opted for PMFBY in Kharif (2019) is 20 states while that for RWBCIS is 11.For Rabi (2018-19), 18 states had opted for RWBCIS and 21 states had opted forPMFBY.
The scheme has been criticised that it benefits the private insurance companies and not the farmers. Further, delay in payment of premiums by state and central governments is another reason for the criticism. There have also been complaints that farmers do not receive claim payments on time. In Parts 2 & 3 of this series, we analyse the numbers related to PMFBY to understand if there is any merit in the criticism.