Inadequate cover

Five years on, PMFBY still suffers from multiple flaws

The government’s flagship scheme for crop insurance, the Pradhan Mantri Fasal Bima Yojana (PMFBY), is yet to overcome hiccups despite having completed five years of existence and undergone a thorough revamp in February 2020. It continues to suffer from multiple structural and operational flaws that undermine its utility for the farmers, regardless of its several unique features. The most noteworthy among these is its comprehensive coverage of risks, right from prevented sowing to post-harvest loss of the produce, at a nominal premium of 1.5 per cent of the sum insured for rabi crops and 2 per cent for kharif crops. The rest of the premium payable to the insurance companies is borne by the Centre and state governments as subsidy. No farm insurance package in the world matches the PMFBY in this respect. Its promotion as essentially a farmers’ welfare measure in the league of the PM-Kisan scheme under which every landholder gets Rs 6,000 a year in three instalments has not helped to woo farmers.

But there is considerable merit to the widespread concern that the compensation paid under the PMFBY is usually too little and too late. The root cause for this is the states’ inability to meet their obligations in running this scheme. They often release their share of premium subsidy with a considerable time lag and in instalments, thereby, denting the insurance companies’ ability to make timely payments to the farmers. Generation of yield-loss data through crop cutting experiments and validated through remote sensing and satellite imaging techniques, which is the responsibility of the states, is often delayed inordinately, holding up the process of claims settlement. Though the insurance companies have been allowed under the revamped PMFBY to settle the claims according to the space technology-based yield assessment, this is not happening to the extent it should. Besides, the farmers are required to report the losses to the insurance companies within 72 hours. That is usually the time the farmers need to spend in their fields after natural calamities to tend the affected crops and try to salvage whatever they possibly can. This apart, the farmers usually have to deal with different insurance companies for different crops every year. This not only disallows establishment of the much-needed rapport between the insurers and the clients but also breeds distrust that is harmful for insurance business.

These issues may, prima facie, seem minor but they add up to cause unease of doing business for both insurance firms and farmers. Many companies, which had originally opted to participate in the implementation of this scheme, lured by the hefty government subsidy, subsequently withdrew from it. These issues, obviously, need to be addressed suitably to enhance the PMFBY’s appeal to the farmers as an efficient and cost-effective means of hedging the risks, which abound in farming. The reality that cannot be disregarded is that while the Indian agriculture is gradually becoming more hazardous due to climate change-driven factors, the farmers’ risk-bearing capacity is waning owing to steady shrinkage in the size of land holdings. A truly farmer-friendly PMFBY would, therefore, be a boon for them.