Context:

• Recently, the government has suo motu offered to make pro-farmer changes in its flagship crop-insurance scheme — the Pradhan Mantri Fasal Bima Yojana (PMFBY)  in view of the climate change-induced escalated hazards in farming. 

About PMFBY

• PMFBY launched in 2016, provides a comprehensive insurance cover against crop damage or loss arising out of unforeseen events thus helping in stabilising the income of the farmers and encouraging them for adoption of innovative practices. 
• The scheme is administered by the Ministry of Agriculture and Farmers’ Welfare.
• Crops covered : Oilseed crops; all food crops; Annual commercial/horticultural crops
• Premium : There will be a uniform premium of 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. For annual commercial and horticultural crops, the premium to be paid by farmers will be 5%.
• Coverage : It aims at covering the losses suffered by farmers such as pre-sowing losses, post-harvest losses due to cyclonic rains and losses due to unseasonal rainfall in India. It also covers losses due to localized calamities such as inundation, hailstorm and landslide risks.
• Exclusions : The losses arising out of war and nuclear risks, malicious damage and other preventable risks are not covered under this scheme.
• The scheme is implemented by empanelled general insurance companies. The funds for the scheme come from the Krishi Kalyan Kosh.
  • Krishi Kalyan Kosh (farmers’ welfare fund) is an emergency fund to support farmers when they incur losses due to low rates of produce, crop damage due to natural disasters, and to assist them when there is a delay in payment of minimum support price (MSP) by the Centre.

Major Changes in 2020

• In 2020, the Union Cabinet approved the revamp of the Pradhan Mantri Fasal Bima Yojana to enable quick and accurate yield estimation thus leading to faster claims settlement.
• The enrolment in the scheme has been made voluntary for all farmers, including those with existing crop loans. 
• The Centre has reduced its share of the premium subsidy under PMFBY from 50% to 25% in irrigated areas and 30% for unirrigated areas from the kharif season of 2020. Districts having 50 per cent or more irrigated area will be considered as irrigated area/district.
• Central share in premium subsidy is increased to 90 per cent for north eastern states from the existing sharing pattern of 50:50.
• Technology solutions like Smart Sampling Technique (SST) to be adopted during assessment exercises.
• The Centre has given states/UTs the option to select any number of additional risk covers/features like prevented sowing, localised calamity, mid-season adversity, and post-harvest losses. Earlier, these risk covers were mandatory. 

Why are reforms needed in PMFBY?

• The scheme has failed to meet the expectations of the state governments and farmers despite the reforms carried out in 2018 and 2020. Therefore
  • The number of states implementing the PMFBY has declined from 22 in 2018 to 19 now
  • The number of cultivators opting for the insurance cover has dropped from 21.6 million to 15.38 million. 
• Most state governments find it hard to pay their share of subsidies involved in running this scheme.
• Issue of delayed settlement of claims and inadequate reimbursement of the losses.
• Some insurance companies stopped offering farm insurance cover stating that farm insurance is an innately low-profit business because of the high risk involved in an outdoor activity like agriculture. 
• Though it is a Central-sector scheme, half its cost is required to be shared by the states, and implementation is in the hands of public-sector and private companies. 
•  Though the time frame and the norms for staking claims by the farmers, as also for the disbursement of compensation by the insurance firms, have been spelt out clearly under the PMFBY, these are often disregarded.

Way forward

Center or states entirely: 

• Making it either a wholly Central scheme, with all expenses borne by the Union government, or leaving it entirely to the states, given that agriculture is a state subject under the Constitution. 

Better role for states: 

• The states can either choose to pay compensation to farmers in the aftermath of natural calamities, or offer situation-specific insurance models acceptable to the farmers. 
• The states are in a better position to gauge farm risks and the resultant crop damage, which varies in accordance with local agro-ecological conditions.

Utilization of technology: 

• Application of modern technology, such as digital apps for reporting crop damage, satellite imagery for verifying claims, and direct-benefit-transfer mode for paying compensation can be adopted to avoid delay in compensation.

Conclusion

• It is necessary to carry out some judicious structural and procedural modifications to the PMFBY to make it viable for insurance firms and financially gainful for farmers.