— The new Crop Insurance Scheme is in line with the One Nation – One Scheme theme. 

— The PMFBY intends to replace the existing two schemes National Agricultural Insurance Scheme (NAIS) as well as the Modified NAIS.

OBJECTIVES:

— To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crops as a result of natural calamities, pests & diseases.

— To ensure the flow of credit to the agriculture sector.

HIGHLIGHTS OF THE SCHEME:

— There will be a uniform premium of 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 to be paid by farmers will be 5%.

— Balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.

— Premium cost over and above the farmer share will be equally subsidized by the States and the Centre (50:50 ratio).

— However, the Centre will share 90% of the premium subsidy for the North Eastern States to promote the uptake in the region.

— There is no upper limit on Government subsidy. Even if the balance premium is 90%, it will be borne by the Government – both the Centre and the States.

WHAT ALL IS COVERED:

— Yield Losses due to non-preventable risks, such as Natural Fire and Lightning, Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood, Inundation, Landslide, Drought, Dry spells, Pests/ Diseases 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 localised risks like Hailstorm, Landslide, and Inundation affecting isolated farms in the notified area would also be covered.

PMFBY 2.0:

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

— 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.

SOME ANALYSIS:

— As many as six states — West Bengal, Bihar, Jharkhand, Andhra Pradesh, Telangana, and Punjab — have opted out of it and some more, such as Rajasthan, Maharashtra, and Madhya Pradesh, are debating to do so.

— The scheme’s implementation has been plagued by delays in payouts.

— There is a growing level of dissatisfaction. For. eg. In Maharashtra’s Beed cluster, farmers are up against the State government and insurance companies for not settling earlier claims. It is in the nature of the insurance businesses to make money when crop failures are low and vice-versa.

— But, due to a variety of crops,  even within a cluster, the small size of farms, differences in farming practices, the uncertainty of the weather, and budgetary constraints of State governments, it is becoming difficult to administer this scheme.

— The claims paid by insurance companies are less than the gross premium received by them. This results in unjust enrichment.

— 50 percent of farmers’ insurance dues being funneled into less than 50 districts, raising questions on whether the scheme is being gamed by a few. This tends to bend towards crony capitalism and money moving around a few insurance companies.

— The assessment of crop losses is done through a large number of crop cutting experiments (CCEs) conducted by State governments. Not only are these CCEs quite time-consuming, but they are also not reliable enough.

— It is considered a scam by many because most of the farmers had not received any receipt for signing up for the scheme and therefore did not know the terms of their contract. In a way, most of them had been duped into paying “premiums” to fraudsters who had simply disappeared with their money. The subscribers are thus fooled into paying premiums with no real benefits.

— The major beneficiaries had been a few corporates. The 2017-18 annual report of the Insurance Regulatory and Development Authority of India revealed that 11 private insurance companies had earned a profit of Rs 3,074 crore from crop insurance schemes. These companies received Rs 1,26,521 crore in premium payments and paid Rs 87,320 crore to farmers in loss claims — a cumulative savings of approximately 31 percent.

— For. eg. in 2017-18, Bharti AXA joined the Pradhan Mantri Fasal Bima Yojna. In the next three years, it received Rs 1,575.42 crore in premiums and paid Rs 438.80 crore in claims. That means the corporation made a 72.14 percent profit.  In four years, Reliance General Insurance Corporation Ltd earned Rs 6,150.22 crore in premiums and paid farmers Rs 2,580.56 crore. That is, the corporation made a 59 percent profit from the scheme. Similarly, Future Generali India Insurance gained 60.91 percent, IFFCO 52 percent, HDFC Agro about 32 percent.

WAY AHEAD FOR INDIA:

— The government has capped the Central government’s liability in the premium at 30% for unirrigated areas or crops and 25% for irrigated areas or crops. The Centre can take greater responsibility for the pay-out, instead of passing the burden onto the States. This will prevent the States from withdrawing from the scheme.

— Insurance companies should bid for a cluster for about 3-4 years at least, so that they get a better chance to handle both good and bad years.

— The bids should be closed before the onset of the Kharif/ Rabi season.

— For this, the inputs can be taken from the Indian Meteorological Dept about the onset of monsoons, collaborating with the PWD Dept and scientists well-versed with Soil Health, to analyse and predict yield in a particular season. Research institutes, both public and private, can play a role in bringing technology and innovation in Crop Assessment. This can reduce dependence on crop cutting experiments.

— Greater liability should lie with the insurance companies and their banking correspondents should cater to remote and small-marginal farmers, rather than benefitting a few and at a few places.

— Poor farmers, especially those not experienced in economics, finance, banking, insurance, will be skeptical towards such schemes if they are not made aware of all the aspects of the scheme and taught from the basics. There are too many conditions and too many complicated legal terms such as ‘post-harvest losses’, ‘notified crops’, ‘notified area’, ‘premium’ – something that all the farmers of India will not be well-versed with. Educating them in the right direction has to be taken up on a priority basis, before imposing anything on them.

— Farmers deserve a better option of some kind of regular monthly Direct Benefit Transfer (DBT), instead of insurance schemes, to meet the specifics of each crop, soil and region.

— BY YOGITA KADU