Flexibility the key to winning farmers' trust

Overall, Pradhan Mantri Fasal Bima Yojana needs to factor in the diversity of the states. Over the past few years, the PMFBY has improved in many respects, depending on past experience and requests from states such as online updation and direct payments, integration of data with state portals, use of technology in loss estimation, tenant farmers’ coverage, timely settlement of grievances and universal coverage.

A. Amarender Reddy

One bad crop season wreaks havoc on crops and farm assets. Crop losses force farmers to take debt from money lenders at exorbitant rates of interest, leading to farm distress and ultimately suicide. Farmers face various types of losses at different stages of crop growth. Crop insurance against these setbacks is necessary not only to cope with sudden shocks/unexpected loss of income and also for the adoption of yield-increasing technologies.

Crop insurance

However, there is still a long way to go to have all states under the ambit of the PMFBY.

To insure against crop losses, the Union Government has been implementing Prime Minister Fasal Bima Yojana (PMFBY) with a huge premium subsidy since 2016. However, after the initial good response, some states withdrew from the PMFBY and started their own crop insurance schemes. These include Telangana, Andhra Pradesh, Bihar, Gujarat, Jharkhand and West Bengal.

Since the launch of the PMFBY, Punjab has not been a participant. Under the scheme, the area insured decreased from 55 million hectares (ha) in 2018 to 45.2 million ha in 2021. The number of insured farmers similarly decreased and now only about 3 crore are under the crop insurance cover out of 12 crore farmers in India. It shows there are problems in the implementation of the scheme in some states. However, a positive aspect is that 4-5 years after withdrawal, Telangana and Andhra Pradesh are re-enrolling for the scheme after getting assurance of universal coverage. Past experience shows that the main reasons for withdrawal are (i) more outgo as premium subsidy compared to claims received by the farmers in some states, (ii) delay in claim payments, (iii) specific needs of the states; for example, in low-risk states such as Punjab, crop loss is very rare due to floods or drought, but they face hailstorms, against which they may need insurance at the least cost, (iv) general lack of awareness about crop insurance among farmers and (iv) a laborious and complex process of determining premium levels, estimating crop loss and ultimately paying claims to the farmers.

The riskiness of crop production and the risk-bearing ability of the farmers vary significantly with the type of crops grown, irrigated and non-irrigated areas, level of commercialisation, small vs big farmers and stage of development. Any crop insurance scheme not factoring in these variations may suffer from low enrolments.

In crop insurance, the threshold yield is the basis for the payment of claims. The threshold yield of a crop is equal to the average yield multiplied by the indemnity level. Farmers’ insurance claims are accepted only if the actual yield is below the threshold yield. Under PMFBY, three levels of indemnity are applicable at 90, 80 and 70 per cent. It means that compensation will be paid to farmers only if the loss is more than 10, 20 and 30 per cent, respectively. But in states like Punjab, yield loss above 10% is rare; hence, the appropriate indemnity level should be 95%, so that even if the losses are 5%, farmers get paid. Punjab’s farmers need a ‘single peril’ insurance (to cover damage caused by hailstorms), with a premium of not beyond 1%, unlike the uniform 1.5% to 5% under PMFBY. Similarly, assured irrigated areas of paddy and wheat in other states are also very low-risk areas where farmers don’t want to pay higher premium. In contrast, in drought-prone areas such as Rayalaseema of Andhra Pradesh, Vidarbha (Maharashtra) or Thar desert (Rajasthan), or where cultivation of fruits and vegetables is risky — yield loss of 30% is common — the farmers are willing to pay higher premium for indemnity level of 30% to cover frequent losses. These types of geographical variations need to be accommodated in the PMFBY.

Tenant farmers

A major problem with PMFBY is the non-participation of tenant farmers. About 20-25 per cent of the operational area is cultivated by share-croppers/tenant farmers, but until now there is no foolproof mechanism to include them as beneficiaries. Although some states have issued tenancy certificates similar to loan eligibility cards of Andhra Pradesh, success of these initiatives is dismal. As a result, most of the tenant farmers are out of the PMFBY net.

In PMFBY, there is a need to cover additional costs incurred by farmers in unforeseen situations. For example, in case of a pest outbreak, farmers spend huge amounts on the purchase of pesticides to save crops, especially cotton, chillies and vegetables, although sometimes these operations will not result in saving the crops but instead add to the cost. There is no provision to cover these additional costs as the sum insured is limited by the scale of finance. So, situations vary significantly across geographies and crops, which have forced states to withdraw from the PMFBY and start their own crop insurance schemes tailor-made for local needs.

Of these schemes, Gujarat’s Mukhyamantri Sahay Yojana, Bihar Rajya Fasal Sahayata Yojana, Bangla Shashya Bima of West Bengal, Andhra Pradesh’s YSR free crop insurance scheme and Jharkhand Fasal Rahat Yojana are at different stages of implementation.

The schemes of Gujarat, Bihar and Andhra Pradesh cover all farmers with zero premium. In Gujarat, blocks are classified as (i) more than 60% loss with claim of Rs 25,000/ha (ii) 33-60% loss with claim of Rs 20,000/ha. Gujarat’s scheme seems simple to understand and implement.

Bihar guaranteed payment of Rs 10,000/ha if the loss is more than 20% of the threshold yield. If the damage is less than 20% of the threshold limit, farmers can get Rs 7,500 per hectare. However, the indemnity level is kept at 70%. It means farmers in Bihar also get claims if yield loss is more than 30%.

Overall, PMFBY needs to be flexible to accommodate the diversity of the states. Over the past few years, PMFBY has improved in many respects, depending on past experience and requests from states such as online updation and direct payments, integration of data with state portals, use of technology in loss estimation, tenant farmers’ coverage, timely settlement of grievances, penal interest payments to farmers for delay in claim payment and universal coverage. However, there is still a long way to go to have all states under the PMFBY’s ambit.

The author is Principal Scientist, ICAR-Central Research Institute for Dryland Agriculture, Hyderabad