Be Mains Ready

Approach

• Examine the reasons for which PMFBY was launched.
• Examine its advantages over previous crop insurance schemes
• Highlight its shortcomings and challenges in meeting its aims along with a way forward

Introduction

In recent years, indebtedness, crop failures, non-remunerative prices and poor returns have led to agrarian distress, pushing many farmers to despair; about 39 percent of the cases of farmer suicides in 2015 were attributed to bankruptcy and indebtedness.

• To address agricultural distress and protect farmers from such vagaries the government launched Pradhan Mantri Fasal Bima Yojana (PMFBY) as crop insurance scheme, replacing the previous National Agricultural Insurance Scheme.
• Under the scheme a uniform premium of 2% needs to be paid by farmers for Kharif crops, and 1.5% for Rabi crops. For commercial and horticultural crops premium is 5%.

Body

PMFBY has more farmer-friendly provisions than its predecessors due to the following reasons:

• It had simplified provisions and reduced premium for farmers which resulted in both increased awareness among farmers and increase in coverage of area and crops.
• The farmers premium has been reduced for all food and oilseeds crops and kept at a maximum of 1.5% for Rabi, 2% for Kharif and 5% for annual horticultural/commercial crops.The scheme is mandatory for farmers who have taken institutional loans from banks.
• It promoted use of advanced technologies to estimate losses accurately and accelerate payments to farmers.
• Due to capping of premium under erstwhile schemes, the sum insured was consequently reduced, as a result of which the farmers were denied the expected benefits and complete compensation for their crop loss.
  
  • However, under PMFBY, in order to provide maximum risk coverage to farmers, sum insured has been equated to Scale of Finance (SOF). As a result the farmers now get timely settlement of claims for entire sum insured, without any deduction and are being compensated for entire crop loss.

However, despite its superior performance, PMFBY suffers from the following:

• Inadequate and delayed claim payment: Insurance companies, in many cases, did not investigate losses due to a localised calamity and, therefore, did not pay claims.
• Inadequate crop coverage: Only main crops, like kharif and rabi, were brought under insurance scheme, leaving many crops out, promoting monoculture.
• Coverage only for loanee farmers: PMFBY remains a scheme for loanee farmers. Like previous crop insurance schemes, PMFBY fails to cover sharecropper and tenant farmers.
• Poor capacity to deliver: There has been no concerted effort by the state government and insurance companies to build awareness of farmers on PMFBY. Insurance companies have failed to set-up infrastructure for proper implementation of PMFBY.
• Failure in climate vulnerable regions: For farmers in vulnerable regions such as Bundelkhand and Marathwada, factors like low indemnity levels, low threshold yields, low sum insured and default on loans make PMFBY a poor scheme to safeguard against extreme weather events.
• No grievance redressal mechanism for farmers.

Way Forward

To ensure that benefits of PMFBY reach its claimants, following recommendations need to be implemented:

• Coverage of tenant and sharecropper farmers should increase.
• All important crops should be covered under crop insurance. Diversification of crops and mixed farming should be promoted.
• Damage caused by wild animals, fire, cold waves and frost to crops should also be considered at the individual level. Damage caused by unforeseen weather events like hailstorms should also be included in the category of post-harvest losses.
• PMFBY timelines from insurance coverage to claim payment should be strictly adhered to.
• Robust assessment of crop loss should be done through capacity building of state governments, involvement of PRIs and farmers in loss assessment, auditing and multi-level checking to ensure credibility of data and testing incorporating technology such as remote sensing, drones and online transmission of data.
• All PMFBY related data related to farmers must be available in the public domain and shared openly with farmers.
• Robust scheme monitoring and grievance redressal mechanism should be in place.

With these recommendations in place PMFBY can be a revolutionary scheme that would minimise agricultural risks related to weather and market, enable farmers to better invest his capital and may prove an important step in releasing governments’ goal of doubling farmers’ income by 2022