The Central Government has approved a cheaper crop insurance scheme named Pradhan Mantri Fasal Bima Yojana (PMFBY) on 13th January 2016. The government’s move came in an attempt to check the problem of rising cases of suicide by the farmers. The premium rates to be paid by the farmers have been brought down substantially so as to enable more farmers to avail insurance cover against crop loss on account of natural calamities. The scheme will come into effect for the upcoming Kharif Season June 2016.
As per the data released by Ministry of Agriculture, over 3000 farmers committed suicides in last three years due to the crop failure in the country. Maharashtra followed by Telangana, Karnataka, Andhra Pradesh and Kerala among the badly affected states of India accounted for 3301 farmer suicides alone. The Centre’s move to bring down and cap these interest rates is being viewed as a major government policy outreach towards the farmers.
HISTORY OF CROP INSURANCE IN INDIA
A crop insurance scheme linking institutional credit (crop loan based on area approach) was suggested by Prof. Dandekar in 1976 and this scheme called as Comprehensive Crop Insurance Scheme was implemented from Kharif 1985 on an all-India level. The objectives of the scheme were:
- financial support to farmers in the event of crop failure - as a result of drought, floods.
- credit eligibility of farmers after a crop failure for the next crop season.
- CCIS was operated for almost one and a half decades, before being replaced by the National Agricultural Insurance Scheme (NAIS) in 1999.
- NAIS was conceptualized to address operational problems experienced during the implementation of CCIS.
Since NAIS brought forth its own problems, modified NAIS (MNAIS) was formulated and implemented on a pilot basis in 50 districts from the Rabi-Season of 2010–11. Meanwhile, public-and private-sector insurance companies also launched weather based crop insurance products on a pilot basis, as part of GoI’s crop insurance programme in 2007–08.
Why Agricultural Insurance is required
The Agriculture insurance is an important component in the wake of the changing monsoon cycles due to the global climate change. The Agriculture is one of the main focal points in WTO Talks and the Bilateral Agreements to increase the Productivity of the Agriculture. Farmers Suicide is the main reason behind these types of Insurance Schemes.
- To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
- To stabilise the income of farmers to ensure their continuance in farming.
- To encourage farmers to adopt innovative and modern agricultural practices.
- To ensure the flow of credit to the agriculture sector.
- The Department of Agriculture, Cooperation & Farmers Welfare (DAC&FW), Ministry of Agriculture & Farmers Welfare (MoA&FW), Government of India (GOI) and the concerned State in co-ordination with various other agencies;
Important features and advantages of the new scheme
- The Scheme shall be implemented on an ‘Area Approach basis’ i.e., Defined Areas for each notified crop for widespread calamities with the assumption that all the insured farmers, in a Unit of Insurance, to be defined as, Notified Area‟ for a crop, face similar risk exposures, incur to a large extent, identical cost of production per hectare, earn comparable farm income per hectare, and experience similar extent of crop loss due to the operation of an insured peril, in the notified area.
- The Scheme can cover all the Crops for which past yield data is available
The enrolment under the scheme, subject to possession of insurable interest on the cultivation of the notified crop in the notified area, shall be compulsory for following categories of farmers:
- Farmers in the notified area who possess a Crop Loan account/KCC account (called as Loanee Farmers) to whom credit limit is sanctioned/renewed for the notified crop during the crop season.
- Such other farmers whom the Government may decide to include from time to time.
- Voluntary coverage, including Crop KCC/Crop Loan Account holders whose credit limit is not renewed. The total of Rs 17,600-crore has to be allocated for the Pradhan Mantri Fasal Bima Yojana (PMFBY).
RISKS: Following risks leading to crop loss are to be covered under the scheme
YIELD LOSSES (standing crops, on notified area basis):
- Natural Fire and Lightning
- Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
- Flood, Inundation and Landslide
- Drought, Dry spells
- Pests/ Diseases etc
PREVENTED SOWING (on notified area basis):-
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 due to adverse weather conditions, shall be eligible for indemnity claims upto a maximum of 25% of the sum-insured
EXCLUSIONS: Risks and Losses arising out of following perils shall be excluded:-
War & kindred perils, nuclear risks, riots, malicious damage, theft, act of enmity, grazed and/or destroyed by domestic and/or wild animals, In case of Post–Harvest losses the harvested crop bundled and heaped at a place before threshing, other preventable risks.
Other Important Features
- Under the scheme the Central Government will provide a matching contribution while the farmers have to pay as per the uniform rate of only 2% of the premium fixed by the insurance company for Kharif crops; 1.5% for Rabi crops and 5% for Commercial/horticulture crops.
Kharif Crops: The crops which are grown during the monsoon (rainy season) are called kharif crops. Such as Paddy, maize, millet and cotton crops
Rabi crops (winter crops): Crops which are grown during the winter season (October-March) are called Rabi crops. Seeds of these crops are sown in the beginning of the winter season such as Wheat, Gram and Mustard.
- The earlier provision of capping the premium rate has been removed which means that in case of crop failure, the farmers will get full amount of compensation without any deduction in the sum insured.
- The farmers will get the maximum amount of claim out of the total sum insured under the existing schemes like National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS).
- Under the new scheme there is a provision that at least 25% of the total settled amount to be transfer directly into the farmer’s bank account.
- Under the existing schemes there was a mandatory condition for the loanee farmer to take insurance cover but under the new scheme there is no such mandate conditions for the farmers.
- Each state will have only one insurance company for the farm-level assessment of losses for localised risks and post harvest losses.
- The smart phones will be used to capture and upload data on crop cutting (to estimate loss in yield) to reduce delays in settling claims, remote sensing will be used to reduce the number of crop-cutting experiments.
Earlier the Government had launched such schemes also but due to the visionary lags in such schemes they were discontinued. The schemes like Comprehensive Crop Insurance Scheme (CCIS) which was effective from 1985 to 1999 and the Experimental Crop Insurance Scheme was launched in 1997-98 and stopped at 1999. The existing scheme like National Agricultural Insurance Scheme (NAIS) which was launched in 1999-00 but none of schemes succeeded to wipe out the distress of the famers.
Under PMFBY, there will no upper limit on government subsidy and even if balance premium is 90 per cent, it will be borne by the government. “Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers.
- Low Premium Rates
- Easy Assessment through the use of Smart Phone
- High Coverage
- No Cap on the Insurance Amount
- Localised Risk Coverage
- Insurance Payment in case of Prevented Sowing
- Voluntary Coverage
- Direct Money transfer in the farmer’s Account
- Large Government Subsidy
- Only one Assessment company in the area will induce monopoly and imprudent
- Lack of the regulatory body on the insurance company assessment
- Exclusion of Nuclear Risks is a concern
- Use of Technology is mandatory but it is very difficult
- Money Spend in increasing the awareness through the publicity is going unnoticed
- Capacity building at the local level will be required
What More can be done
On the Basis of a Report of the Committee to Review the Implementation of Crop Insurance Schemes in India, which submitted its report in May 2014, following more can be done
- A new Web Portal should be made with the collaboration of National Informatic Center and IMD to make data concerning land records available to financial institutions.
- The Web portal would enable financial institutions to link each farmer’s existing loan account to the unique land account, facilitating detection of multiple loans taken on the same land.
- It is necessary to put in place a regulatory mechanism for AWSs. A system of accreditation, certification and quality monitoring of Automatic Weather Stations should be set up.
- RBI and NABARD should effectively monitor the compliance of their circulars regarding crop insurance for loanee farmers with respect to notified crops in identified areas.
- A programme of creating awareness and insurance literacy among farmers should be prepared by insurance companies and banks, in collaboration with the concerned State governments.
- The Central Government, in the Ministries of Home and Agriculture, should take measures to integrate crop insurance schemes with, or link them to, disaster mitigation activities
- An atlas of critical weather elements, which trigger crop-yield losses in different crop growth periods, should be developed for different agro-climatic regions, to be used by governments and industry as benchmarks.