Pradhan Mantri Fasal Bima Yojana | PMFBY Scheme
This scheme has been initiated by the government to ease the burden of premiums on loans taken by farmers for agriculture; it also aims to indemnify farmers for losses sustained due to bad weather. The scheme also proposes to make the process of settling insurance claims speedy and effective, and most importantly hassle free for the farmers, so that they do not have to suffer needlessly due to bureaucratic red tape. The scheme shall be implemented on a pan India basis under the aegis of the Ministry of Agriculture and Farmer’s Welfare in conjunction with the respective State Governments.
The main objectives of PMFBY
- Crops are susceptible to a lot of things, some of the main ones are natural calamities, pestilence, disease epidemics etc. When any of these things occur, they affect the farmers badly. Thus through this scheme the government aims to provide the affected farmers insurance cover and other financial support to help them tide over their losses. However this scheme is applicable only for crops that are notified under the scheme document in areas that are notified in the scheme document.
- Since agriculture is subject to the vagaries nature, farmers cannot be sure of their income from one season to the next. This uncertainty is making farmers give up agriculture and look for steady employment elsewhere. This does not bode well for our country; because if farmers stop growing crops how can we expect to be fed? Thus another major aim of this scheme is to provide assurance to farmers by ensuring a steady and consistent income.
- In most parts of India agriculture is practised as per traditions that are centuries old, including the equipment that is used, which have remained unchanged for ages. So there is an immediate need to bring in modern innovations and techniques as these are much more efficient and produce much higher yields as compared to the old methods.
- The agricultural sector is often neglected and enjoys much less financial support and incentives as compared to other sectors. Thus another aim of the scheme is to bring in liquidity to this traditionally cash starved sector so that farmers can obtain financial assistance easily and have a degree of stability in their occupation.
The Key features of the PM Fasal Bima Yojana
The key features of this scheme are:
- Since this is an agricultural scheme, the subsidies have been declared as per the classification of crops. Thus farmers will have to pay 1.5%, 2% or 5% of the actual premium depending on the kind of crops and the seasons in which they are grown.
- The low premiums paid by the farmers do not imply that their coverage under the insurance policy shall also be partial. For a change in spite of paying partial premiums, the farmers shall be paid the entire amount guaranteed under the insurance policy as the amount of premium left unpaid by them shall be paid by the government.
- All previous schemes had a common affliction in the form of a cap on the subsidies. These caps prevented the farmers from really being able to expand their business as they received financial support only to a limited extent. However in this scheme there is no cap, thus the extent of financial support that a farmer can get is technically unlimited.
- The scheme aims to usher in a modern era for Indian agriculture by introducing cutting edge technology and tools including remote sensing drones, Global positioning systems, integration with smartphones etc. Implementation of all these technologies shall also enable recording of data related to crops and thus shall facilitate faster processing of funds.
- The Pradhan Mantri Fasal Bima Yojana shall replace the previous agro insurance schemes that were in force in the country, namely, the National Agricultural Insurance Scheme or the NAIS and the Modified National Agricultural Insurance Scheme or MNAIS. PM Fasal Bima Yojana has also been exempted from the provisions of service tax, thus no service tax has to be paid under this scheme.
The eligibility criterion for this scheme has been kept extremely simple, with no complex classifications and segregations. This is to provide benefits under this scheme for the maximum possible number of farmers. It does not matter whether the land on which cultivation is being done is actually owned by the farmer or not, all farmers are included under this scheme even if they are tenant farmers or sharecroppers. However, the farmers who have not taken any agricultural loans are termed non loanee farmers, and these non loanee farmers need to submit evidence of the land records on which they grow crops, they also need to furnish documentary evidence regarding their contracts and agreement details along with all other documents that are declared as necessary by the State Government.
Coverage of farmers, crops under the scheme
Farmers:The scheme aims to cover all farmers eventually, however there is a compulsory and a voluntary aspect to this scheme. These components are described below:
Compulsory Component: The farmers who fall under this category are without exception included in this scheme. The farmers who fall under this category are those who have taken loans for cultivation of seasonal crops, also called SAO loans.
Voluntary Component: For the rest of the farmers who do not fall in the aforementioned bracket opting for this scheme is voluntary. Thus those who do not want to be part of the scheme and are not loanee farmers, as described in the scheme, are free to do so.
Other than the above measures, extra efforts shall also be made to include as many farmers as possible who belong to the Scheduled Castes or Scheduled Tribes or those who are women. The funds allocated to each region shall be in proportion to the land holdings of the SC/ST/General and women farmers. The Panchayat Raj Institutions or PRIs of these regions shall also be brought in to implement the scheme at the grass root level. These PRIs shall also perform the additional duty of obtaining feedback from farmers and their opinions on the agro insurance schemes.
Crops:The crops that are covered under this scheme are food crops such as cereals like wheat and rice, millets and pulses, oilseeds such as groundnut, linseed, castor etc. and annual commercial or horticultural crops such as cashew nut, mango, banana, guava etc.
The coverage of Risk under the scheme:
The various stages of agriculture and the associated risks that shall be accepted under the scheme are:
- Prevented Sowing or Planting Risk: This is the risk of farmers not being able to plant or so in an area that has been insured under this scheme due to lack of rainfall or other prevailing conditions that shall affect the crops adversely.
- Standing Crop Risk: The Standing Crop stage signifies all the stages right from sowing till the time the crops are ready for harvesting. The insurance shall cover all losses in the yield of such crops due to factors that are beyond human control, i.e. factors such as droughts, floods, pestilence, diseases, landslides or mudslides, forest fires, storms and lightning, hailstorms, hurricanes etc. So basically all kinds of natural disasters are covered.
- Post Harvest Loss Risk: After the harvesting is complete, some crops are still eligible for insurance coverage if these crops require drying out in the fields in either cut or spread conditions. The cover however is only provided for a limited number of disasters such as out of season rainfall or rains and storms caused by cyclonic developments and also the cover shall be provided for a period of not more than two weeks after harvesting the crops.
- Localized Calamities: Often inclement weather or natural disasters may strike extremely specific or localized regions, while the greater area may remain unaffected. The insurance under this scheme also covers these instances where crops are lost or damaged due to hailstorms, landslides, flooding etc. that affect only some farms in a notified region.
Risks that are not covered by the Scheme:
The risks covered under the scheme are extensive and are bound to help the farmers, however there are some risks that are not covered under the scheme and the farmers would do well to know about them.
The scheme shall not provide any coverage if the crops are damaged or destroyed due to wars or any other action associated with it, failure of crops due to any nuclear fallout, damage or loss due to rioting or done maliciously. Theft of crops or damage or destruction due to enmity is also excluded from the scope of this scheme, lastly the destruction or damage to crops caused by domesticated or wild animals through grazing or any other means is also beyond the scope of this scheme.
Premium rates and the mode of payment under this scheme
The premium rates that the farmers are required to pay under the scheme are called the Actuarial Premium Rate or APR. The Department of Agriculture, Cooperation & Farmers Welfare (DAC&FW) and the State Governments shall oversee the premium rates in conjunction with the Loss Cost (LC). The Loss Cost is the measurement of total claims as a percentage of the total sum insured in any notified area in relation to notified crops of that area for at least the previous 10 years that had similar crop seasons (either Kharif or Rabi). This number shall also be adjusted to include miscellaneous costs such as capital costs, insurers margin etc.
Farmers who grow crops like rice, wheat, millets, oilseeds etc. in the Kharif season, they shall pay premium to the tune of 2% or the actuarial rate so determined, whichever is lower.
However for the same crops a farmer shall have to pay a maximum of 1.5% of the sum insured or the actuarial rate whichever is lower, if the crops are grown in the Rabi season.
Similarly for crops that are classified as commercial and/or horticultural, the premium to be paid is the lower of 5% or the actuarial rate, irrespective of the season.
Web portal and mobile apps for this scheme
To be eligible for this scheme a farmer only has to grow any of the crops notified under the scheme in the region that falls under the purview of the scheme. All that the eligible farmers have to do is visit the webpage and apply through the portal at http://www.agri-insurance.gov.in/Login.aspx.
This website is not only an application portal but it also provides detailed and relevant information on various aspects of the scheme. To make the entire process more transparent and allow easier access to information the government has also launched a mobile application for the android operating system, called the ‘Crop Insurance App’. This app is available for download from the website of the Department of Agriculture Cooperation and Farmers Welfare and runs on any smartphone which has an android operating system.
How to apply online
The online application process is fairly simple, all a person needs to do is follow the steps given below:
- Any farmer who wishes to enroll under this scheme needs to visit the website mentioned above and apply through the application portal provided on the webpage.
- The farmers have to choose the option ‘apply as farmers’, following which they have to fill in all the details that have been asked for.
- These details include items such as their names, their complete addresses including their district, block, gram panchayat and village name along with the State.
- These basic details apart the farmers will have to provide details of their bank accounts so that their PM Fasal Bima policy amounts can be transferred directly to those accounts. The details of their land holdings also need to be provided.
How to claim the policy amount
Under this scheme the farmers can obtain insurance cover either through banks or through insurance intermediaries other than banks who have been authorised to be included in this scheme.
If the insurance cover has been obtained through banks, then the banks shall automatically credit the separate accounts of each farmer when the funds are released to the banks. After crediting the amount in each individual account the banks shall publish a list of the number of beneficiaries with details.
However, for insurance covers that are provided by insurance intermediaries other than the banks, the claim amounts shall be transferred electronically to the farmers’ individual bank accounts.
Loans under this scheme
The Pradhan Mantri Fasal Bima Yojana is primarily an agro insurance scheme which seeks to indemnify farmers from the vagaries of nature and make agriculture a profitable venture for them. Whether inclusion in the scheme is optional or compulsory is dependent on the fact that the farmer has an agricultural loan or not. A loanee farmer is compulsorily included in this scheme.
Farmers can change crop name in the scheme
Farmers plan for the coming agricultural season by deciding on what crops to grow and accordingly take insurance. However it may sometimes happen that the original plan is scrapped and the farmers decide on growing a different crop than the one on which insurance was taken, thus in such situations the PM Fasal Bima Yojana provides the option of changing the crop name provided the same is informed to the insurers at least 30 days prior to the cutoff date for buying or sowing the seeds.
If the premium for the new crop is more than the premium already paid, in that case the farmers have to pay the balance amount, while if the premium is less, then the balance is refunded by the insurer in the individual bank accounts of the farmers.
The implementation and monitoring of the scheme
Since the scope of the scheme is very wide, it shall be implemented through multiple parties including insurance companies. The scheme is under the joint control of the Government of India, Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW), Ministry of Agriculture and Farmers Welfare (MoAFW) and the respective State Governments. They are the main guiding bodies of this scheme and they shall implement the scheme by roping in other agencies such as commercial banks, cooperative banks, RRBs or Regional Rural Banks etc., Government departments related to agriculture, technology, horticulture etc.
At present, the DAC&FW has included the Agriculture Insurance Company of India and based on parameters such as financial power, extensive infrastructure, sufficient manpower accompanied by requisite expertise, some private operators have also been roped in to participate in the scheme. The private players so chosen include big names like ICICI-Lombard, HDFC-ERGO General Insurance Company Ltd., IFFCO-Tokio, Cholamandalam MS General Insurance, Bajaj Allianz General Insurance Company Ltd., Reliance
General Insurance Company Ltd., Future Generali India Insurance Company Ltd., Tata-AIG General Insurance Company Ltd., SBI General Insurance Company Ltd. etc.
The State Governments shall be at liberty to analyse the proposals of these chosen insurers and then choose the ones most suited in their opinion to be implementation agents for their respective states These ‘Implementation Agents’ shall be responsible for implementing the scheme at the grass root level.
Already there exist committees such as the State Level Co-ordination Committee on Crop Insurance (SLCCCI) and the District Level Monitoring Committee (DLMC) who are managing the old agro insurance schemes such as the National Agricultural Insurance Scheme (NAIS), the Weather Based Crop Insurance Scheme(WBCIS), the Modified National Agricultural Insurance Scheme(MNAIS) and the Coconut Palm Insurance Scheme(CPIS). With their experience in managing these kinds of schemes they shall now be responsible for the proper management of the Pradhan Mantri Fasal Bima Yojana too and they are expected to actively include the implementing agencies for the purpose.
Use of technology in the scheme
In a bid to modernise the agro sector and to accurately estimate the crop yields, the scheme has a fixed number of crop cutting experiments or CCEs that need to be implemented by each State government in the notified areas. The CCEs are intended to provide estimates of yield which will then be used to estimate crop production and crop insurance.
However this ambitious plan has not met with much success, mainly due to issues pertaining to the reliability of the data from CCEs and the speed at which those data are obtained. These issues are the main causes that hamper claim settlements under this scheme. For the CCEs to be a success there has to be a way to obtain high quality data which is reliable, on a timely basis, and this can be obtained by applying technology, as evidenced by the measures that have been proposed to combat this problem.
The solution so proposed is capturing videos or pictures of the various stages of growth of the crops using smartphone cameras and transmitting the same alongwith relevant CCE data on a real time basis.
The transmission is done using cellular communication lines and the images or videos are time stamped through GPS, thereby greatly increasing the authenticity of the data. These data are then used by the insurers during claim settlements.
The implementation of these measures shall cost a fair bit, thus it has been decided that the cost of implementing the CCEs shall be borne by the Central Government and the respective State or Union Territories on an equal basis i.e both shall bear half of the cost.
The various benefits under the scheme
The numerous benefits under this scheme are listed below:
- The primary benefit of this scheme is the massive reduction in the premiums that farmers have to pay for the insurance cover. With farmers having to pay only 1.5% of the premium for Rabi crops and 2% of the premium for Kharif crops, the burden of insurance has steeply reduced for them, making agriculture commercially viable and providing a measure of security against natural disasters.
- Many government schemes are criticized for not being too helpful due to unreasonable caps that are levied on subsidies, which prevent them from being actually helpful to the intended beneficiaries. However this scheme avoids the same pitfalls by eliminating any caps on the subsidy provided by the government. Thus technically the government shall subsidise the eligible farmers, regardless of the quantum of subsidy being actually paid.
- Under previous insurance schemes, the farmers who paid partial premiums were paid some percentage of the total amount claimed, the full amount wasn’t paid to them. Under this scheme the farmers are assured the full amount, irrespective of the fact that the pay only a single digit percentage of the actual premium.
- In another first, the Pradhan Mantri Fasal Bima Yojana has recognised inundation of crops as a loss for which compensation has to be provided. This is something that the previous agro insurance schemes completely overlooked. In addition to this the scheme also covers losses, which occur due to cyclones or unseasonal rainfall, after the crops have been harvested, this is another measure that has been pioneered by this scheme and shall benefit a lot of farmers.
- The scheme puts special emphasis on speedy processing of payments to the farmers so that they do not have to be cash strapped in times of adversity. To make this a reality a lot of cutting edge technology is being introduced into the sector. Once crop loss is verified, 25% of the total claimed amount is instantly credited to the accounts of the farmers, it should be noted that these accounts should be linked to the Aadhar numbers of the farmers.
Allocation of funds to this scheme in the Union Budget
The scheme was launched in 2016-17 with an aim to cover 30% of all land under cultivation and it had a corpus of Rs. 5500 crores. For the year 2017-18 the coverage of this scheme is being increased to at least 40% of the area under cultivation and it is being estimated that the same will increase by another 10% in the year 2018-19, taking the total coverage of cultivated land under this scheme to 50%. To fulfill this purpose another 9000 crore rupees has been allotted to this project in the current Union Budget.