PM Fasal Bima Yojana is suffering from low coverage since the last 2 years

PM Fasal Bima Yojana is suffering from low coverage since the last 2 years


The budgetary allocation for Pradhan Mantri Fasal Bima Yojana (PMFBY) as a proportion of total budgetary expenditure has been reduced marginally during the Interim Budget 2019-20. It may have happened because the coverage of gross cropped area under the scheme could not keep pace with the target that was set during the last two years.

The Status of Implementation of Budget Announcements 2017-18, which was presented during the Union Budget 2018-19, clearly states that the coverage of the PMFBY would be increased from 30 percent of gross cropped area in 2016-17 to 40 percent in 2017-18, and further to 50 percent in the year 2018-19.

Yet when a reply by the Minister of State in the Ministry of Agriculture and Farmers' Welfare dated 7th August, 2018 to an unstarred question (question no. 3398) in the Lok Sabha is consulted, it is learned that the proportion of gross sown area covered under various crop insurance schemes was 29.0 percent in 2016-17, which fell to 25.0 percent in 2017-18. In absolute terms, the area insured under the PMFBY declined from nearly 5.63 crore hectare in 2016-17 to roughly 4.90 crore hectare in 2017-18. In some states the decline in the proportion of gross sown area under crop insurance between 2016-17 and 2017-18 was quite sharp. For example, in Rajasthan the proportion of gross cropped area insured came down to 29.0 percent in 2017-18 from 44.0 percent in 2016-17. Please check table-1 for details.

Table 1: State-wise details of area insured (in hectare) and proportion of gross cropped area (GCA) covered under various crop insurance schemes from 2014-15 onwards
 

Table 1 State-wise details of Area Insured in hectare and percentage of Area Insured as compared to Gross Cropped Area GCA under various Crop Insurance Scheme from 2014-15 onwards
Source: Lok Sabha Unstarred Question No. 3398 for reply on 7th August, 2018, please click here to access
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Table-2 shows that the total number of farmers covered under various crop insurance schemes went down from nearly 5.72 crore in 2016-17 to roughly 4.88 crore in 2017-18. In Maharashtra the total number of farmers enrolled under the PMFBY went down from roughly 1.20 crore in 2016-17 to about 1.00 crore in 2017-18. In Uttar Pradesh the total number of farmers enrolled under the scheme declined from nearly 67.7 lakh in 2016-17 to around 52.9 lakh in 2017-18.

Table 2: State-wise/ year-wise details of farmers covered and total claims under various crop insurance schemes from 2014-15 onwards

Table 2 State-wise year-wise details of farmers covered and total claims under various crop insurance schemes from 2014-15 onwards
Source: Lok Sabha Unstarred Question No. 3398 for reply on 7th August, 2018, please click here to access
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A reply by the Minister of State in the Ministry of Agriculture and Farmers' Welfare dated 11th December, 2018 to a starred question (question no. 17) in the Lok Sabha gives the recent figure related to the number of farmers covered under the PMFBY. Table-3 shows that the total number of farmers enrolled under PMFBY during kharif 2018 was roughly 3.33 crores (provisional figure). It may be noted that the total number of farmers enrolled under PMFBY during kharif 2017 was around 3.48 crores.
 
Table 3: State-wise details of coverage during kharif 2018 season


Table 3 State wise details of coverage during Kharif 2018 season
* The figure of farmer enrolment for kharif 2018 is provisional and data from few states viz., Rajasthan, Madhya Pradesh, etc. are still awaited. Enrolment during kharif 2018 is likely to be higher than kharif 2017.

Source: Lok Sabha starred Question no. 17, to be answered on 11th December, 2018, please click here to access
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The enrolment of farmers during kharif 2018 under the PMFBY is provisional and data from a few states viz., Rajasthan, Madhya Pradesh, etc. are yet to arrive. So, it was cautioned by the Minister of Agriculture Shri Radha Mohan Singh in his reply (to Starred question no. 17) dated 11th December, 2018 in the Lok Sabha that the enrolment of farmers under the PMFBY during kharif 2018 is likely to be higher than kharif 2017.
 
From table-3, if enrolment of farmers under the PMFBY in kharif 2017 and in rabi 2017-18 are added together, one gets that the gross enrolment under the scheme was 5.18 crore in 2017-18. However, from table-2 it could be observed that the total number of farmers covered under various crop insurance schemes was roughly 4.88 crore in 2017-18.  

An analysis published in The Economic Times by G Seetharaman (dated 28th October, 2018), says that the Central government might miss the target (viz. 50 percent of gross cropped area), which was set for PMFBY during 2018-19, given the fact that in 2017-18 the reported coverage was only 24 percent, which was lesser than 30 percent in 2016-17. The number of farmers covered under the crop insurance scheme also worsened from 57.25 million in 2016-17 to 48.75 million in 2017-18, according to that analysis.

In an interview given to The Hindu Business Line (dated 15th February, 2019), Shri G Srinivasan, who is the Director of National Insurance Academy (NIA) in Pune, said that nearly 35 percent of Indian farmers are covered presently under crop insurance and the Central government wants to raise it to 50 percent by 2020.
 
In their article (dated 14th May, 2018), Ashok Gulati & Siraj Hussain say that in China 70 percent of gross cropped area is insured and in case of United States almost 90 percent of gross cropped area is insured. However, in India the corresponding figure is just 30 percent.

It should be mentioned here that the manifesto of the Bharatiya Janata Party (BJP) promised to "implement a farm insurance scheme to take care of crop loss due to unforeseen natural calamities".

Budgetary allocation for PMFBY


The budgetary allocation for PMFBY has been raised in the recent Interim Budget from Rs. 13,000 crores to Rs. 14,000 crores between 2018-19 (B.E.) and 2019-20 (B.E.). However, expenditure on crop insurance scheme as a proportion of total budgetary spending has fallen slightly from 0.53 percent in 2018-19 (B.E.) to 0.50 percent 2019-20 (B.E.). The expenditure on crop insurance as a proportion of Gross Domestic Product (GDP) has remained stagnant at 0.07 percent between 2018-19 (B.E.) and 2019-20 (B.E.). Please see table-4.

Table 4: Budgetary allocation for PM Fasal Bima Yojana (in Rs. Crore)
 
Table 4 Budgetary allocation on PM Fasal Bima Yojana in Rs. Crore 
 
Source: @ Expenditure of Major Items, presented in Interim Budget 2019-20, please click here to access
@@ Outlay on Major Schemes, presented in Interim Budget 2019-20, please click here to access
* Press Note on First Advance Estimate of National Income 2018-19, released on 7th January, 2019, MoSPI, please click here to access  
** Budget at a Glance 2018-19, please click here to access   
*** Budget at a Glance 2019-20, please click here to access 

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Although the expenditure on 'agriculture and allied activities' has grown by 134.9 percent between 2018-19 (B.E.) and 2019-20 (B.E.), expenditure on crop insurance increased by 7.7 percent during these two years. The expenditure on 'agriculture and allied activities' may have skyrocketed between 2018-19 (B.E.) and 2019-20 (B.E.) because of the introduction of Pradhan Mantri Kisan Samman Nidhi Yojana recently.

Premiums paid and claims made: Is the data correct?

The reply to the Lok Sabha Starred question no. 17, dated 11th December, 2018 reveals that against the premium of amount Rs. 4,216.04 crore collected from farmers (gross premium received by the insurance companies was Rs. 22,345.51 crore) in 2016-17, claims of Rs. 16,279.25 crore was paid to them. Similarly, total claims amounting Rs. 16,967.92 crore was paid during 2017-18 (kharif 2017) against the premium of Rs. 3,038.70 crore that was collected from farmers (gross premium received by the insurance companies was Rs. 19,767.46 crore). Please check table-5.

Table 5: Claims made and premiums paid under PMFBY (in Rs. crore)

Table 5 Claims made and premiums paid under PMFBY in Rs. Crore
 
Source: Lok Sabha Starred Question no. 17, to be answered on 11th December, 2018, please click here to access
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As per the official website of PMFBY (https://pmfby.gov.in/stateWiseDataPage) the figures pertaining to the total claims paid during 2016-17 and kharif 2017 are Rs. 16,177.72 crore (sum of Rs. 10,496.34 crore in kharif 2016 and Rs. 5,681.38 crore in rabi 2016-17) and Rs. 17,209.94 crore, respectively. These figures do not match with the figures that are given in table-5. There is, however, no difference in data on gross premium received by insurance companies for the years 2016-17 as well as kharif 2017 when the data sourced from PMFBY website and the Lok Sabha reply are compared. The same could be said in the case of farmers’ contribution in gross premium.

Challenges faced by PMFBY

The PMFBY is facing several challenges, some of which are as follows:

In his article (dated 27th January, 2019), Santosh Verma has pointed out that presently there is a dearth of well managed land records in the country. Apart from that, deployment of highly mechanized remote sensing technology in agriculture so as to collect information in the pre or post natural calamity or in a yield loss situation is lacking. For the success of PMFBY, they are considered as essential steps.
 
Experts have said that farm loan waivers announced in various states affected the coverage of PMFBY. Apart from that, compulsory seeding of Aadhaar with crop insurance and issues like delays in notification of the crop covered under the PMFBY have also resulted in lower enrolment of farmers. The falling coverage under the PMFBY indicates that more farmers are vulnerable to natural disasters/ crop damage.
 
• Crop insurance is compulsory for loanee farmers. By linking crop insurance with short-term/ working capital crop loans, a policy is currently being pursued so as to generate interest among farmers about insurance. Such an arrangement is expected to help maintain creditworthiness of farmers and work as an incentive for banks to provide advances to the farmers in the next cropping cycle, according to Subhankar Mukherjee & Parthapratim Pal. However, instead of protection against their crop loss, farmers perceive crop insurance as an insurance against their loans. So, expectation of farm loan waiver acts as a substitute to crop insurance on account of which farmers stop further payment of existing farm debts. They also stop purchasing crop insurance for the approaching cropping season. Due to non-payment of existing farm debt, banks stop providing further advance for the next cropping cycle. Enrolment of farmers under crop insurance has fallen as a sum of both these effects.
 
In his article (dated 20th November, 2018), Nilesh Jain has mentioned that the scheme did not cover some critical and growing risks like damage caused by stray and wild animals. The new and much appreciated feature of the village as the unit of damage assessment has been expanded only to the 'major' crops. For other crops, the unit of insurance would be of size above the level of village/ village panchayat. Thus, cultivators of other crops are susceptible to natural calamity (despite having crop insurance) unless the entire tehsil or district is affected. The performance of PMFBY has suffered mostly on account of failure in implementation, collusion between government agencies and private insurance companies and the lack of political will to honour the interests of farmers. There exists a low awareness among majority of farmers about how they can enrol themselves under the PMFBY, the terms of insurance, the details of premiums to be paid and the existence of crop insurance itself. Several times the insured farmers are not provided a policy document from the bank confirming the insurance.
 
• A news report by Kabir Agarwal and Dheeraj Mishra (dated 27th November 2018) has found using the Right to Information Act that claims worth Rs 2,282 crore was yet to be paid to farmers for the 2017-18 season and Rs 546 crore was yet to be paid to farmers for the 2016-17 season. The PMFBY guidelines clearly says that the claims need to be settled within two months of harvest. Quoting a study by Ashok Gulati, Prerna Terway and Siraj Hussain (2018), the journalists say that claims settlement gets delayed due to frequent extension of cut off dates; delayed submission of yield data of crop cutting experiments; and delayed payment of premium subsidy to insurance companies.
 
A reply to the unstarred question No. 956 (dated 24th July, 2018) in the Lok Sabha reveals that the claims paid as a proportion of approved claims was 79.2 percent (provisional) in kharif 2017. Similarly, claims paid as a proportion of approved claims was 78.4 percent (provisional) in rabi 2017-18.
 
About the PMFBY

The PMFBY aims to insure farmers against crop yield losses. According to Santosh Verma, the calculation of yield loss for a particular crop is done by finding the difference between threshold yield (average yield for last seven years) and actual yield for a crop in that season. The compensation is fixed based on the above said difference (degree of risk) for a particular notified crop. Comprehensive risk insurance is provided in cases of yield losses caused by natural fire and lightening, storm, hailstorm, cyclone, typhoon, tempest, hurricane, tornado. risks due to flood, inundation and landslide, drought, dry spells and pests/ diseases.  

Apart from yield losses, in cases where majority of the insured farmers of a notified area, having intent to sow/ plant and incurred expenditure for the purpose, are prevented from sowing/ planting the insured crop as a result of adverse weather conditions, shall be eligible for indemnity claims up to a maximum of 25 percent of the sum-insured.

In cases of 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 or damage resulting from occurrence of identified localized risks like hailstorm, landslide, and Inundation affecting isolated farms in the notified area would also be covered under the PMFBY.

It may be noted that the PMFBY is compulsory for loanee farmers (viz. those who avail the Kisan Credit Card/ Crop Loan for notified crops), although it is voluntary for others (viz. non-loanee farmers).

Insured farmers under the PMFBY usually pay between 1.5 percent to 5 percent of the total premium expected. The rest is paid equally by the Union government and the state governments. The gross premium, which is collected (from farmers, Union government and states) goes into the coffers of the insurance companies. In case of loss of crops as a result of natural calamities, the farmer is given compensation by the insurance company from the gross premium that it had collected.

It is worth noting that the Central government launched the PMFBY in the kharif season of 2016 so as to help farmers cope with crop losses on account of unseasonal and extreme weather. The scheme came into operation with effect from 1st April, 2016. It replaced the National Agricultural Insurance Scheme (NAIS) and the Modified National Agricultural Insurance Scheme (MNAIS). The Weather-Based Crop Insurance Scheme (WBCIS) remains in place, though its premium rates have been made the same as in PMFBY, according to a report by the Centre for Science and Environment, which was released on 21st July, 2017. The onus is on a state whether it wants PMFBY or WBCIS or both.

References

Outlay on Major Schemes, presented in Interim Budget 2019-20, please click here to access
 
Expenditure of Major Items, presented in Interim Budget 2019-20, please click here to access

Budget at a Glance 2019-20, please click here to access

Budget at a Glance 2018-19, please click here to access

Status of Implementation of Budget Announcements 2017-18, presented during Union Budget 2018-19, please click here to access 

Lok Sabha starred Question no. 17, to be answered on 11th December, 2018, please click here to access 
 
Lok Sabha Unstarred Question No. 3398 for reply on 7th August, 2018, please click here to access  

Lok Sabha Unstarred Question No. 956 for reply on 24th July, 2018, please click here to access 
 
Pradhan Mantri Fasal Bima Yojana: An Assessment from the Centre for Science and Environment, released on 21 July, 2017, please click here to access

Press Note on First Advance Estimate of National Income 2018-19, released on 7th January, 2019, MoSPI, please click here to access
 
State-wise Farmer Details under PMFBY during Kharif 2017, please click here to access

State-wise Farmer Details under PMFBY during Rabi 2016-17, please click here to access

State-wise Farmer Details under PMFBY during Kharif 2016, please click here to access

Pradhan Mantri Fasal Bima Yojana, please click here to access

Crop Insurance in India: Key Issues and Way Forward -Ashok Gulati, Prerna Terway and Siraj Hussain, February, 2018, Working Paper No. 352, Indian Council for Research on International Economic Relations (ICRIER), please click here to access 

2014 Bharatiya Janata Party Election Manifesto, please click here to access 

When cover for farmers came a cropper -Rajalakshmi Nirmal, The Hindu Business Line, 17 February, 2019, please click here to access 
 
G Srinivasan, Director of National Insurance Academy (NIA), Pune, interviewed by Radheshyam Jadhav, The Hindu Business Line, 15th February, 2019, please click here to access  

The Modi Years: Do farmers have better protection against crop losses? -Mridula Chari, Scroll.in, 14 February, 2019, please click here to access 

The Pradhan Mantri Fasal Bima Yojana (PMFBY) -- Lesser than a Solution -Santosh Verma, Vikalp.ind.in, 27 January, 2019, please click here to access 

Enrolment under PMFBY crop insurance scheme sees steep decline -Sayantan Bera, Livemint.com, 9 January, 2019, please click here to access 

Fasal Bima Yojana: Farmers' Distress is Source of Profit for Companies -Subodh Varma, Newsclick.in, 27 December, 2018, please click here to access
 
Under Modi's Crop Insurance Scheme, Companies Owe Farmers a Whopping Rs 2,800 Crore -Kabir Agarwal and Dheeraj Mishra, TheWire.in, 27 November, 2018, please click here to access 

Farm loan waivers lead to fewer crop insurance policies -Prabhudatta Mishra & Prasanta Sahu, Financial Express, 21 November, 2018, please click here to access 

The BJP government's crop insurance scheme costs more and works less -Nilesh Jain, The Telegraph, 20 November, 2018, please click here to access 

Crop insurance under a cloud, The Tribune, 16 November, 2018, please click here to access 

Firms earned Rs 15,795 crore in 2 years of Fasal Bima Yojana -Deepender Deswal, The Tribune, 14 November, 2018, please click here to access 

Will underwhelming agriculture growth become a liability for BJP in 2019? - G Seetharaman, 28 October, 2018, please click here to access 
 
Loan waivers derail Fasal Bima Yojana -Subhankar Mukherjee & Parthapratim Pal, The Hindu Business Line, 24 October, 2018, please click here to access

PMFBY -- Insurance Companies Make Super Profits, Farmers Suffer -Subodh Varma, Newsclick.in, 6 August, 2018, please click here to access 

Crop Insurance: Another dressed up scheme -CP Chandrasekhar, Macroscan.org/ Frontline.in, 2 August, 2018, please click here to access
 
Why firms love crop insurance more than farmers, The Times of India, 19 July, 2018, please click here to access 

Modi's Flagship Crop Insurance Scheme Wavering as Farmers Continue to Suffer -Bani Bedi, TheWire.in, 17 July, 2018, please click here to access 

PMFBY: Modi govt's crop insurance scheme sees decline in farmers' enrolment -Namrata Acharya, Business Standard, 6 June, 2018, please click here to access
 
Premium delayed, farmer denied -Ashok Gulati & Siraj Hussain, The Indian Express, 14 May, 2018, please click here to access

The weakest link in crop insurance -Harish Damodaran, The Indian Express, 26 April, 2018, please click here to access 
 
Image Courtesy: Himanshu Joshi



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