Delayed claim settlement mars govt’s crop insurance scheme

The Narendra Modi-led central government’s ambitious Pradhan Mantri Fasal Bima Yojana (PMFBY), in the first two years of its operations, has been set back by issues like low coverage among non-loanee farmers and delayed or nonpayment of claims, a highpowered panel has found.

If the issues with PMFBY are not addressed in time, they could impact the government’s official target of covering 50 per cent of the gross cropped area (GCA) under insurance by 2019, the panel has said.

“Though all complaints, particularly with regards to non-payment, might not be correct, it only demonstrates the need for a robust process backed by technology. That will assure farmers that their genuine claims are being settled in time. Any deviation in this regard will prove to be discouraging and affect the volumes in the long run,” the official panel on Doubling Farmers’ Income (DFI) has said in the chapter on ‘Risk Management in Agriculture' in its report.

PMFBY, meant to provide a comprehensive crop insurance for farmers at a low premium, was started in 2016. It replaced all other existing insurance schemes except the Restructured WeatherBased Crop Insurance Scheme (WBCIS).

An area-yield based programme where farmers are charged a uniform low premium rate of 2 per cent for all kharif crops, 1.5 per cent for all rabi crops, and 5 per cent for commercial and horticulture crops, PMFBY has been one of the most ambitious programmes of the National Democratic

Alliance (NDA) government.

The difference between the premium paid by the farmer and the actuarial fair premium (APR) is subsidised by the government (shared by central and state governments on 50:50 basis). Under PMFBY, according to the panel, over 57 million hectares of GCA was covered during 2016-17 for a sum insured of ~2,050 billion with a premium volume of ~215 billion ($ 3.3 billion).

In 2017-18, the corresponding figures were a coverage of 47.52 million hectares of GCA for a sum insured amount of ~1916.34 billion and a premium volume of ~243.51 billion. By 2018-19, there could potentially be a coverage of over ~3,500 billion of sum insured, requiring over ~300 billion premium subsidy, the panel estimated.

However, since its inception, the scheme has been mired in controversies over delayed payment of claims and actual claims far exceeding the premium paid. On this, the panel has said that normally in a cycle of 5 years the good and bad (monsoon) years are split in a ratio of 3:2. “It would, therefore, be more appropriate to evaluate the effectiveness and resilience of PMFBY over a period of 5 years,” according to the panel.

However, on coverage of non-loanee farmers, to escalate the target of covering 50 per cent of GCA by 2019, bringing more non-loanee farmers within the fold of PMFBY is absolutely essential, the report added.

This can be done through an increase in institutional credit to as many farmers as possible, with a particular focus on small and marginal farmers; by updating and digitising land records and making lessees, share-cropper, etc, eligible for loans, promoting the concept of Joint Liability Groups (JLGs), which can be made eligible for loans and insurance cover simultaneously and quicker computerisation of all PACSs (Primary Agriculture Cooperative Societies) so that small and marginal farmers can be monitored for pushing up credit coverage.

Among the other challenges that the panel found in the first two years of PMFBY, premium rates in droughtprone and rainfed areas was as high as 25 per cent due to a relatively less number of bidders. “In fact, the intensity of vulnerability is higher in rainfed systems, and it is the farmers here that deserve risk cover on priority,” the panel said.

Also, in the last two years, states were notifying select crops for PMFBY depriving all crops of risk cover, which could also impact the target of increasing area coverage, it added. The awareness level about PMFBY was low among farmers.

If the issues with PMFBY are not addressed in time, they could impact the government’s official target of covering 50 per cent of the gross cropped area under insurance by 2019, the panel has said