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Saturday, December 07, 2019

Plough’s share

Subsidy for crop insurance is preferable to fertiliser, power or farm credit. But Centre should bear the full cost for the scheme.

By: Editorial | Published: January 21, 2019 1:41:35 am
Pradhan Mantri Fasal Bima Yojana, pmfby, farm distress, agri distress, farm waivers, farmers subsidies, agriculture india PMFBY’s flaw lies in the premium subsidy under the scheme being borne equally by the Centre and the states.

A well-conceived and pro-farmer crop insurance scheme — the Pradhan Mantri Fasal Bima Yojana (PMFBY) — is faced with the prospect of going the fertiliser subsidy way. Just as in the latter’s case, the benefits from subsidy on crop premiums, too, seems to be going primarily to the industry rather than the farmers. In the 2016-17 crop year, gross premium collections of insurance companies under PMFBY amounted to Rs 22,345.51 crore, which included Rs 18,129.46 crore of subsidy from the Centre and state governments. As against this, the total claims paid out were only Rs 16,177.72 crore. In the 2017 kharif season also, the industry’s premium collections of Rs 19,767.64 crore (inclusive of Rs 16,728.95 crore subsidy) exceeded the claims paid of Rs 17,209.94 crore, with a single state — Madhya Pradesh, where Assembly elections were held recently — accounting for Rs 5,428.31 crore. A report in this newspaper has, moreover, shown that 11 private insurers alone raked in profits of Rs 3,074 crore during the year ended March 31, 2018.

Now, there’s nothing wrong per se in insurance firms making money. Also, 2016-17 and 2017-18 being normal monsoon years, one can expect claim payouts to have been low. But the fact that the public sector Agricultural Insurance Company of India lost almost Rs 4,450 crore — even as private insurers profited — and disproportionately high payouts went to one poll-bound state raises serious questions of transparency in implementation. PMFBY’s flaw lies in the premium subsidy under the scheme being borne equally by the Centre and the states. The states are slow in not only releasing their subsidy share, but also in conducting the requisite number of crop cutting experiments (CCE) for assessing yield losses and submitting this data to the insurance companies.

The right fix to the above problem is to convert PMFBY into a fully Centre-funded scheme. Once the entire premium subsidy burden is borne by the Centre and its release is linked to the states adhering to prescribed operational schedules — from calling bids for selection of insurance companies well ahead of the sowing season and submitting yield data within a month of harvesting — two things will happen. First, with the assurance of timely payment of subsidy and also of crop-yield data from states, the insurers will have no excuse for delaying claim settlements. Second, the pressure will now be on the states. Relieved of financial burden, they can focus on ground-level implementation and generate reliable yield data based on CCEs as well as automatic weather stations and satellite-based remote sensing technology for ���smart sampling” of fields. Subsidy on crop insurance is any day preferable to that on fertiliser, power or farm credit. All the more reason, then, for the Centre to pay 100 per cent of the subsidy on a scheme bearing the prime minister’s name.

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