Agriculture production and farm incomes in India are frequently affected by natural disasters such as droughts, floods, cyclones, storms, landslides, earthquakes etc. Susceptibility of agriculture to these disasters is compounded by the outbreak of epidemics and man-made disasters such as fire, sale of spurious seeds, fertilizers and pesticides, price crashes etc. All these events severely affect farmers through loss in production and farm income, and they are beyond the control of the farmers. With the growing commercialization of agriculture, the magnitude of loss due to unfavorable eventualities is increasing. The question is how to protect farmers by minimizing such losses.For a section of farming community, the minimum support prices (MSP) for certain crops provide a measure of income stability. But most of the crops and in most of the states, MSP is not implemented. In recent times, mechanisms like contract farming and futures trading have been established which are expected to provide some insurance against price fluctuations directly or indirectly. But agricultural insurance is considered an important mechanism to effectively address the risk to output and income resulting from various natural and manmade events. Agricultural Insurance is a means of protecting the agriculturist against financial losses due to uncertainties that may arise agricultural losses arising from named or all unforeseen perils beyond their control India is the land of farmers where the maximum proportion of rural population depends on agriculture. Hon’ble Prime Minister Shri Narendra Modi launched the new scheme Pradhan Mantri Fasal Bima Yojana (PMFBY) on 13th January2016. This scheme will help in decreasing the burden of premiums on farmers who take loans for their cultivation and will also safeguard them against the inclement weather. It has also been decided to make the settlement process of the insurance claim, fast and easy so that the farmers do not face any trouble regarding the crop insurance plan. This scheme will be implemented in every state of India, in association with respective State Governments. The scheme will be administered under the Ministry of Agriculture and Farmers Welfare, Government.

Overview of Crop Insurance Schemes

Despite of implementing several crop insurance schemes, farmers are yet to get enough protection from risks in farming. The reason for thousands of farmers killing themselves every year is not just because of climatic factors; it is also due to the protection from risks, in terms of crop insurance, is not reaching them when they need it the most.In 1985, the Rajiv Gandhi government had first launched a crop insurance scheme in India called Comprehensive Crop Insurance scheme (CCIS). In 1997. In 1999, the NDA government launched National Agricultural Insurance Scheme (NAIS) to protect the farmers against losses suffered by them due to crop failures on account of natural calamities like; floods, drought, hailstorms, cyclone, pests etc.Previously, only Agriculture Insurance Company (AIC) of India was allowed to implement the scheme but now, private insurers were also allowed to implement the modified scheme. Further, the unit area was reduced to be the Gram Panchayat. The key problems of this scheme was that – it covered risks partially, it had higher premium rates (3.5% for Kharif Crops and 1.5% for Rabi Crops), On 13th January 2016 Prime Minister Shri Narendra Modi in BJP government launched the new scheme Pradhan Mantri Fasal Bima Yojana (PMFBY).This scheme will help in decreasing the burden of premiums on farmers who take loans for their cultivation and will also safeguard them against the inclement weather

Highlights of PMFMY

  • There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid will be only 5%
  • The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss in any natural calamities.
  • There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.
  • The use of technology will be encouraged to a great extent. Smart phones, Remote sensing drone and GPS technologies will be used to capture and upload data of crop cutting to reduce the delays in the claim payment.
  • The insurance plan will be handled under a single insurance company, Agriculture Insurance Company of India (AIC).
  • PMFBY is a replacement scheme of National Agriculture Insurance Scheme (NAIS) and Modified National Agriculture Insurance Scheme (MNAIS) and hence exempted from the service tax.

Objectives of the Scheme

  • 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 stabiles the income of farmers to ensure their continuous process in farming.
  • To encourage farmers to adopt innovative and modern agricultural practices.
  • To ensure flow of credit to the agriculture sector

Coverage of the farmers

All farmers including sharecroppers and tenant farmers growing the notified crops in the notified areas are eligible for coverage. The non-loanee farmers are required to submit necessary documentary evidence of land records prevailing in the State Records of Right (RoR), Land possession Certificate (LPC) etc. moreover, applicable contract, agreement details, other documents notified permitted by concerned State Government.

  • Compulsory Component - All farmers availing Seasonal Agricultural Operations (SAO) loans from Financial Institutions (i.e. loanee farmers) for the notified crops would be covered compulsorily
  • Special efforts shall be made to ensure maximum coverage of SC/ ST/ Women farmers under the scheme.
  • The Scheme shall be implemented on an ‘Area Approach Basis’ (i.e., Defined Areas) for each notified crop for widespread calamities.
  • For Risks of Localized calamities and Post-Harvest losses on account of defined peril, the Unit of Insurance for loss assessment shall be the affected insured field of the individual farmer.

Implementing Agency

 The overall control on implementation of insurance companies will be under Ministry of Agriculture & Framers Welfare. The Ministry designated empanelled AIC and some private insurance companies presently to participate in the Government sponsored agriculture, crop insurance schemes. The choice of which private company is left to the states. There will be one insurance company for the whole state.

Management and Monitoring of the Scheme

The existing State Level Co-ordination Committee on Crop Insurance (SLCCCI), of the concerned State will be responsible for monitoring of the schemes programme in their state. However, a National Level Monitoring Committee (NLMC) under the chairmanship of Joint Secretary (Credit), Department of Agriculture cooperation and farmers welfare (DAC & FW) will monitor the scheme at the national level.

It is proposed to take following monitoring measures for effective implementation during each crop season to ensure maximum benefits to the farmers:

  • The Nodal Banks intermediaries may collect the list of individual insured farmers (both loanee and nonloanee) with requisite details like name, fathers’ name, Bank Account number, village, categories Small and Marginal group, Women, insured holding, insured crops, sum insured, premium collected, Government subsidy etc from concerned branch in soft copy for further reconciliation. This will be done online once the E platform is put in the place.
  • After receiving the claims amount from the concerned Insurance Companies, the financial institutions/banks should remit/transfer the claim amount to the account of beneficiaries within a week. This will be transferred online directly by the Insurance company into the accounts of farmers. • The list of the beneficiaries (bank-wise and insured area-wise) may also be uploaded on the crop insurance portal and website of the concerned insurance companies.
  • About 5% of the beneficiaries may be verified by the Regional Offices/ Local level Offices of Insurance Companies who will send the feed back to concerned District Level Monitoring Committee (DLMC) and State Government/ State Level Coordination Committee on Crop Insurance (SLCCCI).
  • At least 10% of the beneficiaries verified by the insurance company may be cross verified by the concerned District Level Monitoring Committee (DLMC) and they should send the feed back to State Government.
  • 1 to 2% of the beneficiaries may be verified by theHead Offices of the insurance company/ Independent Agencies appointed by the Central Government/ National Level Monitoring Committee and they should send the necessary feed back to Central Government.

Exclusive web portal and mobile app

The Government of India has recently launched an Insurance portal for better administration, coordination, proper dissemination of the information and transparency for the framers. An android based “Crop Insurance App” has also been launched which could be downloaded from the website of Crop Insurance, Department of Agriculture cooperation and farmers welfare (DAC & FW).

Losses covered

Apart from yield loss, the new scheme will cover post-harvest losses also. It will also provide farm level assessment for localised calamities including hailstorms, unseasonal rains, landslides etc

Critical Appraisal

New crop insurance scheme (PMFMY)has the potential to deal with the vagaries of nature on Indian farming. The premium to be paid by the farmers is kept low when compared with earlier crop insurance schemes. However, the scheme will increase the financial burden on the government and necessary budget allocations should be made.Some states may face financial constraints in encouraging famers to take up crop insurance.The scheme also does not address the demand of farmers to cover the risks and losses inflicted by wild animals.Besides, losses from nuclear risks, riots, malicious damage, theft, and act of enmity, are all categorized under ‘exclusions’ in the new scheme.

Challenges in Implementation

Success of any government scheme depends on its sincere implementation. The key problems such as poor land records, flawed land titles, corruption etc. are common challenges any crop insurance scheme in India faces. Further, the success of the scheme depends on how sincerely it is implemented by the insurance companies. Further, we need to wait and watch as to how the scheme is monitored and supervised.



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