Dear Readers,

The government’s
newly-launched crop insurance scheme was recently in the news and could be
important for your exams.

The NDA
Government launched the Pradhan Mantri Fasal Bima Yojana on January 13, 2016 in
order to provide affordable insurance coverage to support farmers in case of
crop failures. As per the scheme, there will be new rebated premium rates on
the principal amount insured. In this article, we will look at the background,
key features and possible challenges of this scheme.

Background

·
The programme is a remodelled
version of the Comprehensive Crop Insurance Scheme (1985), which was later
replaced by National Agricultural Insurance Scheme.

·
This programme is much needed
because the earlier scheme did not cover all possible risks. Though the premium
rates were not much different than the ones proposed under the new scheme, the
coverage was capped i.e. it enabled farmers to only recover a small percentage
of their losses.

·
Due to bad monsoon, India is
facing drought for the second consecutive year and this is the government’s attempt
to protect farmers from possible losses.

Key Features

·
The total budget allotted for
its implementation is Rs.17,600 crores.

·
The premium paid by farmers
will be significantly lowered – 1.5% on rabi crops, 2% on kharif crops and 5 %
on commercial or horticultural crops. There will also be a reduction in delays
and leakages in payments of compensation through direct transfers into farmers’
bank accounts.

·
The insurance plan will cover half
of India’s cropped area in the next three years, rising from the current level
of 23%. To achieve this, the centre has significantly boosted the crop
insurance budget from Rs.2,823 crore in 2015-16 to Rs.7,750 crore in 2018-19.

·
The Agriculture Ministry has
stated that the premium rates are nominal, and the government is contributing
five times the premium paid by the farmer. To make the farmers fully insured,
the government will pay the balance premium.

·
Unlike the previous plans wherein
farmers did not get the full amount during claim settlement, the PMFBY will ensure
that the government bears the cost, regardless of how high the premium is. The
government liability on premium subsidy will be equally split between the Centre
and states.

·
No cap will be placed on
premium rates in order to ensure that farmers receive a higher claim against
the full insured amount. Thus, the farmers’ bank accounts will be settled for
at least 25% of the likely claim.

·
The scheme will also cover for local-level
calamities like landslides and hail storms. It will also insure farmers if they
are unable to sow crops due to unfavourable weather. Other factors covered include
post-harvest losses and localised risks like inundation.

·
One insurance company will be
set up for the whole state, which will carry out loss assessment for localised
risks and post-harvest losses. The plan will be implemented by private
insurance firms, in collaboration with the Agriculture Insurance Company of India
Ltd.

·
A major improvement in the new
plan would be the use of advanced technological methods like remote sensing to
make accurate and quicker estimations of yields and losses.

Some Possible Challenges

·
Volatility has significantly affected
farm output because of sudden climate changes. This often leads to lower yields
or destruction of crops, owing to factors like excessive rainfall, and the
burden ultimately falls on the banks.

·
The presence of financial
frauds is another problem. To conduct checks of fair and unfair practices will again
consume time and resources from the concerned parties, including banks.

·
The insurance companies
associated with this scheme will have similar challenges. While their level of business
will increase substantially, their profit percentage could be affected due to
the payouts.

·
An important factor would be
awareness; farmers will have to be well-informed about the design of this
scheme. To achieve this, two things are crucial: (i) simple layout, and (ii) properly
constructed outreach programmes to promote awareness.

·
The scheme does not consider the
distinction between small and large farmers, and thus, the need to reach out to
small farmers has not been addressed properly.

·
Insurance companies will have
to develop a functional and well-planned structure to be ready for possible
transactions as the amounts involved will be substantial in volume.

·
To minimise the overall risks, access
to comprehensive weather data is pivotal. As the Indian Meteorological
Department does not have enough of this data, a collaboration between IMD and
private bodies is needed so that all the concerned parties can be better
prepared.

These are the
major points to be remembered about the Pradhan Mantri Fasal Bima Yojana. If
you can understand these well, you can easily answer questions pertaining to
this.

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