Are Farmers Reaping Profits From Prime Minister Fasal Bima Yojana?

The Pradhan Mantri Fasal Bima Yojana (PMFBY) launched in 2016-17 is the world’s largest crop insurance scheme in terms of farmer participation and the third in terms of premium according to the central government. Over 5.5 crore of farmer inquiries are received year on year, and to date the program has secured over 29.16 crore of farmer inquiries. Over the five-year period, more than 8.3 million farmer applications benefited from the program.

However, a large part of small farmers still remain outside the crop insurance network. The percentage of marginal farmers in the program decreased from 18.08% to 16.55% for kharif between 2018 and 2020. The participation of small farmers in the program is between 63 and 68%.

While the central government is keen to expand the program, farmers seem unhappy with its current format and delivery.

Maharashtra farmers have stepped up their agitation against insurance companies implementing the PMFBY, alleging that insurance companies are hand in hand with the government and a majority of farmers are deprived of the benefits of the program. Many farmers here are still waiting for the amount of insurance for the damaged crop in 2018. It is not just the farmers of Maharashtra who oppose the PMFBY and the executing companies. Their counterparts in other states have also raised similar questions.

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However, insurance companies and the government have different views on the plan and its impact. The PMFBY is available to all states and farmers – whether loaned, non-loaned, sharecroppers, or farmers – on a voluntary basis. States notify crops and areas under regime. One of the main objectives of the program is to provide financial support to stabilize farmers’ incomes, especially during seasons / years of natural disaster, in order to ensure their maintenance in agriculture.

Key figures

From 2016-17 to 2019-20 (provisional figures), 2,307.4 lakh farmer claims were insured under the PMFBY. Of those requests, 772.1 lakh requests – or 33.46% of requests – benefited from the program, according to data presented by the Ministry of Agriculture to the Lok Sabha on July 27, 2021.

Farmers must pay a maximum premium of 2 percent for kharif, 1.5 percent for rabi and oil crops, and 5 percent for cash / horticultural crops. The actuarial premium / supply balance is shared by central government and state government on a 50:50 basis (in the case of the northeastern states it is 90:10). Over the four years (2016-17 to 2019-20), US farmers paid 17,573 crore as a share of the premium which is 16% of the gross premium of ₹ 1,07,449 crore. These figures include provisional figures for 2019-2020 which the government is updating.

Are companies making a profit?

The Ministry of Agriculture told the Rajya Sabha on July 23, 2021 that the five general insurance companies in the public sector and 14 general insurance companies in the private sector had been mandated by the Indian government for the implementation of the PMFBY in the country. However, the specific implementing insurance company is selected by the relevant state through a transparent tendering process.

The ministry provided data on claims paid by 18 insurance companies. Agriculture Insurance Company of India Limited paid the highest claims of 33,491 crore in four years. This amount represents approximately 36 percent of the total claims paid by all businesses during this period. Of the total gross premium of 1,07,449 crore collected by companies over four years (2016-2017 to 2019-2020), around 92,426 crore – or 86% – was paid to farmers to settle insurance claims.

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The data shows that some private insurance companies have opted out of the scheme. In 2019-2020, four companies did not participate in the program, while Shriram General Insurance Company Ltd was only included in 2016-2017. Industry players complain that PMFBY is not benefiting their business.

In March of this year, the Ministry of Agriculture told the Rajya Sabha that crop insurance is a major risk mitigation tool for the benefit of farmers. The ministry added that the difference between premiums collected and claims paid may not be the margin / profit for insurance companies.

“The cost of reinsurance and administrative costs totaling 10 to 12% of the gross premium must also be borne by the insurance companies. In addition, of the total crop insurance activity under the program, approximately 50 percent is shared by the five public sector insurance companies, including Agriculture Insurance Company of India Ltd. informed the ministry.

However, farmers do not agree with the government’s explanation. “A lot of insurance companies don’t have any in the field. From paying premiums to submitting insurance claims, farmers struggle a lot. Most of the time, even business phone helplines don’t work, ”said Agro-entrepreneur Prashant Pawar.

Why this long wait?

Farmer chief and former MP Raju Shetti said farmers had not received insurance claims for years and had to look to private lenders to recoup losses and make arrangements for the next campaign. agricultural.

The outstanding amount is highest in Telangana followed by Jharkhand, Gujarat, Karnataka and Madhya Pradesh. Among these five states, Telangana, Karnataka and Madhya Pradesh are the regions that saw the highest number of farmer suicides between 2014 and 2018.

Maharashtra, which recorded the highest number of farmer suicides (12,813) during this period, has outstanding insurance claims since 2018.

According to the Ministry of Agriculture, in accordance with the provisions of the PMFBY, admissible claims are generally paid by insurance companies within two months of the end of cutting / harvesting experiments – subject to the availability of data from yield, subject to receipt of the state’s total share of premiums subsidy from the relevant state government on time.

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“However, the resolution of claims in some states is delayed for reasons such as delayed transmission of performance data; late release of their share of premium subsidy by some states, performance disputes between insurance companies and states, non-receipt of bank details of some farmers for transfer of claims to the bank account of eligible farmers and problems related to NEFT, etc., ”the ministry said last month in Lok Sabha.