The country couldn’t possibly have, at least on paper, a better agricultural crop insurance scheme than the Pradhan Mantri Fasal Bima Yojana (PMFBY). For farmers, a uniform 2 per cent premium rate on sum insured (SI) for all kharif or monsoon season foodgrains and oilseeds, while 1.5 per cent for rabi winter crops and 5 per cent for annual commercial and horticultural crops, is the lowest they can hope for. The SI – the maximum amount insurance would pay in the event of damage – is equal to the “scale of finance” or loan limit fixed by banks for the crop concerned covering its estimated production cost. This again is reasonable compared to the previous schemes, which set the SI artificially low so as to limit claims and, in turn, made it unattractive for farmers to take insurance protection. Apart from low premiums (the gap vis-à-vis the higher actuarial rates based on statistical risk assessment payable to insurance companies is to be met by government subsidy) and production cost-linked SI, the PMFBY also promises speedy claim settlements through use of technology: Remote sensing/satellite imagery and drones for generating crop yield estimates and GPS handheld devices/smartphones for capturing field of images and transmission of data on real time basis.
If the actual yield of an insured crop in a particular village falls below a ‘threshold’ – the average for the past seven years excluding calamity years – it entitles all farmers in that area to a claim, equal to the difference divided by the threshold yield and multiplied by the SI. And the processing, approval and payment of final claims is to happen within three weeks from the receipt of yield data, which shall be available within a month from harvest.
But like all well-conceived schemes, the real test lies in implementation on the ground. And there, the story isn’t particularly inspiring.
The accompanying tables show the latest available data on premiums collected by insurance companies and claims paid to farmers under PMFBY for 2016-17, both in the kharif and rabi seasons. Gross premium receipts in what was the scheme’s very first year aggregated Rs 22,345 crore, of which roughly Rs 4,000 crore was shelled out by farmers and the balance coming as subsidy from the Centre and state governments. On the other hand, payment of claims totalled just Rs 5,876 crore.
Now, the mere fact of claims being just over a quarter of premiums cannot be held against the PMFBY. 2016 was a normal monsoon year unlike the preceding two ones, with the rains really failing only in southern and coastal Karnataka, Kerala, Tamil Nadu and mainland Gujarat. In a year that saw no widespread drought, or even unseasonal rain/hailstorm events such as in March 2015, crop damage/loss claims were bound to be lower. To that extent, insurance companies cannot be charged with “profiteering”. They are expected to make money in normal years and lose when claims exceed premiums, which may well have happened had PMFBY been launched in 2015.
The above argument has some basis if one looks at Tamil Nadu (TN), which suffered one of its worst droughts last year. Claims paid to farmers there for rabi — which is also the state’s main agricultural season — amounted to Rs 1,213 crore, more than the Rs 976 crore of premium collected. The Agriculture Ministry has, likewise, cited cases of claims being as much as 4-6 times of premiums in select drought-affected districts of Chitradurga, Mandya and Mysore in southern Karnataka. “These validate the rationale of the scheme’s overall framework,” it has said.
But then, it is equally pertinent to compare the actual claims paid to both approved as well estimated claims. In most states — be it Tamil Nadu; the BJP-ruled Madhya Pradesh, Gujarat and Rajasthan; or the likes of Bihar, West Bengal, Andhra Pradesh and Telangana — farmers have received only a fraction of the estimated crop damage claims. And this, when we are already now in kharif 2017; so much for quick and easy processing of claims!
“PMFBY has proved to be a scheme most efficient when it comes to collection of premium, but not at all so in payment of claims. They say that the scheme has helped substantially increase insurance cover, but what is the point having it if the insurance company doesn’t pay when my crop has failed?” points out V.M. Singh, farmer leader and convenor of the Rashtriya Kisan Mazdoor Sangathan.
The delay in reimbursement of claims has to do with two major design flaws in PMFBY.
The first is its not being a fully Centrally-funded scheme. Although bearing the prime minister’s name, 50 per cent of the premium subsidy is borne by the states that are also responsible for conducting the requisite number of crop cutting experiments (CCE) at the village level for submitting to the insurance company. Such a skewed incentive structure — wherein the states put in more than half of the money and hard work, but the Centre hogs all the credit — is intrinsically prone to implementation failure. States have in many cases delayed issuing of the necessary notifications well before the sowing season, while doing the same with paying their part of the subsidy and submitting CCE-based yield data. The ultimate casualty of all this has been the farmer unable to avail claims for prevented sowing or not receiving payment from the insurance company in time.
If the Centre can pay 100 per cent of subsidy for fertilisers, what stops it from taking complete ownership of a scheme that is certainly more deserving of support? The best way to force states to implement PMFBY properly is to bear the entire premium subsidy and link its release to adherence to prescribed operational schedules. That would also justify lending the prime minister’s name to the scheme. The second flaw that needs rectification is to make PMFBY a scheme of insurance companies rather than banks. Right now, farmers have no direct connection with insurance companies, who do not even maintain landholding-wise or crop-wise databases of their supposed clients. As a recent ground-based assessment by the Centre for Science and Environment has shown, “farmers receive no insurance policy document or receipt”. The premiums are deducted by banks against crop loans extended by them without even their consent. Low farmer awareness, coupled with irregular funding that gives insurance companies all the more reason not to expedite claim payments, is a sure-shot formula for bringing discredit to a well-intended scheme. The collateral political damage from it may not be small.
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