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Remove cap on central share of premium subsidy under Fasal Bima Yojana, TN CM Stalin urges PM Modi

The Fasal Bima Yojana is successfully implemented and Tamil Nadu has witnessed a huge growth in terms of area insured and farmers' enrolment due to sincere efforts and best practices adopted by the state, Stalin said in a letter to Modi.

By: PTI | Chennai |
July 29, 2021 5:38:43 pm
Tamil Nadu Chief Minister M K Stalin. (File Photo)

Urgent action should be taken to remove capping of Central share of premium subsidy under the Pradhan Mantri Fasal Bima Yojana, Tamil Nadu Chief Minister M K Stalin requested Prime Minister Narendra Modi on Thursday.

The Fasal Bima Yojana is successfully implemented and Tamil Nadu has witnessed a huge growth in terms of area insured and farmers’ enrolment due to sincere efforts and best practices adopted by the state, Stalin said in a letter to Modi.

However, the state’s share of premium subsidy has increased at a compound annual growth rate of 28.07 per cent in the last five years.

“This has stymied the very purpose of the scheme as the government of Tamil Nadu is finding it difficult to sustain the continuance of the scheme due to increasing financial liability, that too during this pandemic period.”

Initially, the pattern of sharing (2016-17) was 49:49:2 (Central, state and farmer’s share respectively). Now, the Central share has been capped at 25 per cent for irrigated area and 30 per cent for rain-fed area which leads to a large increase of state share of premium subsidy by 12 per cent.

In money value, the state share of premium subsidy which was only Rs 566 crore in 2016-17 has mounted by 239 per cent to Rs.1,918 crore during 2020-21, after the capping of Central share of premium subsidy.

“This has further increased to Rs.2,500 crore during 2021-22 due to exorbitant Actuarial Premium Rates (APR) quoted by the insurance companies empanelled by government of India,” Stalin said and emphasised that the financial implications on the state was causing a lot of concern.

PMFBY, launched with the noble intention of mitigating the economic losses of farmers during natural calamities has become a heavy liability to the states over the years, the Tamil Nadu CM said.

The intention of capping the subsidy to bring down the APR has not happened in reality as the insurance companies are continuing to quote exorbitant APR citing reasons like high loss ratio, inadequate financial capacity and lack of support from reinsurers.

The states are coerced to tweak the existing guidelines and adopt new co-insurance models increasing the risks to the states. Otherwise, the insurance companies refrain from bidding.

As the state is already reeling under severe financial crunch due to coronavirus pandemic, the onus of bearing a huge state share of premium subsidy under PMFBY is unaffordable.

There was no doubt that the capping of Central share of the premium subsidy has been a major detrimental factor for implementation of PMFBY, introduced to ensure social security for farmers, Stalin said.

“I, therefore, request you to take necessary action urgently to remove the capping of Central share of premium subsidy under PMFBY and revert to 49:49:2 ratio premium share for the welfare of the farming community in the state.”

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