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Fasal Bima Yojana

 

Introduction
Launched in 2016, the Pradhan Mantri Fasal Bima Yojana (PMFBY) is a large-scale crop subsidy insurance scheme that was aimed to safeguard farmers. This flagship scheme was designed in line with the One Nation–One Scheme and replaces three older initiatives—Modified National Agricultural Insurance Scheme (MNAIS), Weather-based Crop Insurance Scheme and the National Agricultural Insurance Scheme (NAIS)—by incorporating their best features and removing inherent shortcomings to improve insurance services available to farmers. This scheme is being administered by the Department of Agriculture, Cooperation and Farmers’ Welfare under the Ministry of Agriculture, along with empanelled general insurance companies.

The scheme provides coverage for the entire cropping cycle from pre-sowing to post-harvest and midseason adversities. It extends coverage against financial losses incurred by farmers due to unforeseeable events such as crop failure due to localised risk, post-harvest losses, natural calamities, unseasonal rainfall, crop diseases and pest infestations. The primary goal of the initiative is to reduce the burden of insurance premiums on farmers and ensure early settlement of claims.

Objectives
The PM Fasal Bima Yojana operates under the ‘One Nation, One Crop, One Premium’ motto and aims to achieve the following goals:

  • Provide affordable comprehensive insurance cover against crop failure, damage, and loss.
  • Expand penetration of crop insurance with a primary focus on covering the total sown area.
  • Stabilise farmer incomes and ensure sustainability in agricultural production.
  • Ensure flow of credit to the agriculture sector.
  • Encourage farmers to adopt innovative and modern agricultural practices.
  • Stimulate competition in the agriculture sector.
  • Protect farmers from production risks.
  • Offer goods and services tax exemption to farmers.

Pradhan Mantri Fasal Bima Yojana Details

Insurance Coverage under the PMFBY Scheme

Under this scheme, the insurance cover is limited to specific crops and agricultural risks related to the crop yield. The list of notified crops includes food crops (i.e., cereals, millets, and pulses), oilseeds, annual commercial crops, and annual horticultural crops.

It also covers all stages of the crop production cycle. The inclusions and exclusions of insurance cover provided are as follows:

  • Initial Stage – Risk of sowing, planting and germination failure
    Wherein, the insured area is prevented from successful sowing, planting, or germination due to low rainfall or adverse weather conditions
  • Growth Stage – Risk of standing crop failure
    In this scenario, planted crops are damaged due to non-preventable risks. Insurance cover is provided to cover yield losses against drought, dry spells, floods, inundation, pest infestations, crop diseases, landslides, natural fires, lightning, hailstorms, and cyclones.
  • Harvest Stage – Risk of post-harvest losses
    This is applicable to only those crops that are required to be dried in cut-and-spread or small bundles after harvesting. Insurance coverage is provided up to a maximum period of two weeks from harvesting these crops and extended for losses due to hailstorms, cyclones, cyclonic rains and unseasonal rains.
  • Protection against calamities – Loss or damage to notified insured crops due to identified localised risks of hailstorms, landslides, cloud bursts and natural fires is provided.
  • Exclusions – Loss or damage to notified insured crops due to war, nuclear risks, malicious damage and other preventable risks is excluded from the scope of coverage.

The insurance claim size is based on the proportion of shortfall from the threshold yield multiplied by the sum insured. The sum insured is calculated over the scale of finance provided to farmers and the threshold crop yield is calculated based on seven-year data and indemnity levels.

Premiums under the PMFBY Scheme

To avail insurance benefits under this scheme, farmers are required to pay a nominal share of actuarial premiums—Kharif crops (2%), Rabi crops (1.5%), Commercial crops (5%) and Horticultural crops (5%). However, 95-98.5% actuarial premium is fulfilled by the state and central governments and shared on a 1:1 ratio. For example, if a farmer has a sum of Rs. 35,000 (US$ 477) and one hectare of land insured, the actuarial premium charged by insurance companies is Rs. 4,000 (US$ 54.5). In this scenario, if the farmer grows Kharif crops on the insured land, then he is required to only pay 2% of the actuarial premium, i.e., Rs. 800 (US$ 10.9), while the remaining amount of Rs. 1,600 (US$ 21.8) each will be paidby state and central governments.

Beneficiaries of the PMFBY Scheme

According to the government, under this scheme, all farmers (including sharecroppers and tenant farmers) growing notified crops in the notified areas are eligible for coverage, if they have insurable interest for the insured crops.

The eligible farmers can be broadly classified into two categories:

Categories

Description

Loanee Farmers

  • All farmers who have been sanctioned loans from financial institutions (FIs) for seasonal agricultural operations (SAO)
  • Insurance premiums to be paid by farmers are deducted from SAO crop loans
  • Crop loans sanctioned against other collateral securities, such as fixed deposits, gold or jewel loans and mortgage loans, which do not include insurable interest on the insurable land are not covered
  • All loanee farmers are required to enrol under the PMFBY

Non-Loanee Farmers

  • All farmers who have opted for non-standard Kisan Credit Card (KCC) scheme-linked crop loans
  • All farmers who have not taken any crop loans
  • All loanee farmers can voluntarily enrol under the PMFBY to mitigate risk and claim insurance benefits

When the scheme was launched in 2016, a total of 5.8 crore farmers were insured, wherein 75% farmers received mandatory coverage as per the SAO loan allocations and 25% farmers voluntarily opted for insurance.

The table provides details of the number of farmers enrolled for insurance, the total crop sown area covered under insurance and the number of farmers who benefitted from the insurance programme.

Financial Year

Farmers Insured

(in lakh)

Area Insured

(in lakh hectare)

Farmers Benefitted

(in lakh)

2016-17

583.7

567.3

156.4

2017-18

533.0

508.3

170.4

2018-19

576.9

523.0

220.5

2019-2020

422.0

328.0

184.9

* Information is based on declarations received from implementing insurance companies pending verification by the Department of Agriculture, Cooperation and Farmers’ Welfare, government of India with state governments.

Insurance Companies participating in the PMFBY Scheme

This scheme was implemented by 18 insurance companies that became empanelled partners by successfully completing the L1 bidding process and are listed as follows:

  • Agriculture Insurance Company
  • Bajaj Allianz General Insurance Co. Ltd.
  • Bharti Axa General Insurance Company Ltd.
  • Cholamandalam MS General Insurance Company Ltd.
  • Future Generali India Insurance Co. Ltd.
  • HDFC Ergo General Insurance Co. Ltd.
  • ICICI Lombard General Insurance Co. Ltd.
  • IIFCO Tokio General Insurance Co. Ltd.
  • National Insurance Company Ltd.
  • New India Assurance Company
  • Oriental Insurance
  • Reliance General Insurance Co. Ltd.
  • Royal Sundaram General Insurance Co. Ltd.
  • SBI General Insurance
  • Shriram General Insurance Co. Ltd.
  • Tata AIG General Insurance Co. Ltd.
  • United India Insurance Co.
  • Universal Sompo General Insurance Company

Progress
As per the data released by the Department of Agriculture, Cooperation and Farmers’ Welfare under the Ministry of Agriculture, the annual breakdown of value of insurance packages, share in premiums, claims filed, and claims settled are as follows:

Financial Year

Amount Insured
(Rs. crore)

Farmers’ Share in Premium
(Rs. crore)

Govt.’s Share in Premium
(Rs. crore)

Claims Filed
(Rs. crore)

Claims Paid
(Rs. crore)

2016-17

203,120

4,042

17,531

16,773

16,759

2017-18

202,267

4,189

20,463

22,118

22,114

2018-19

230,061

4,853

24,504

28,941

28,004

2019-2020^

142,969

3,018

20,524

20,975

20,090

Note: Some claim settlements are pending due to issues such as payment failure, pending state subsidy, discrepancies in yield data, etc.
^2019 Kharif crop cycle only, 2020 Rabi crop cycle data is yet to be published

With this scheme, the government digitised land records and integrated required documents into the PMFBY portal by implementing various technology solutions. It developed the PMFBY crop insurance app to enable enrolments and report crop losses. The app also linked to the farmer’s bank account and thus, facilitated the claims settlement processes. Between 2016 and 2020, the average sum insured per hectare of land increased from Rs. 15,000 (US$ 204.4) under the previous initiatives to Rs. 40,700 (US$ 554.7) under the PMFBY.

The Way Forward…
Overall, the PMFBY scheme is a milestone initiative to provide a comprehensive risk solution with low, uniform premium rates to farmers across the country. Between 2016 and 2020, the Ministry of Agriculture & Farmers’ Welfare worked extensively to revise the PMFBY scheme by engaging with stakeholders and addressing their challenges. Following this, the ministry released the revised operational guidelines for the PMFBY with the Rabi 2019 crop cycle.

As of 2021, the PMFBY is deemed to be the largest crop insurance scheme in the world in terms of farmer enrolments; and the third-largest scheme in terms of insurance premiums. Under the FY 2021–22 budget, the Union Government allocated Rs. 16,000 crore (US$ 2,180 million) for the PMFBY initiative. This represented a budgetary increase of Rs. 305 crore (US$ 41.5 million) compared with the previous fiscal year. In the coming years, the government plans to leverage technology to improve crop outcomes for farmers with solutions such as satellite imagery, remote-sensing systems, drones, artificial intelligence, and machine learning to predict challenges that disrupt crop yields.