Fasal Bima Yojana, Modi’s trump card to solve Bharat’s agrarian crisis
The Pradhan Mantri Fasal Bima Yojana (PMFBY) of NDA Government offering a monumental and path breaking bounty of crop insurance at a nominal premium as low as 1.5 per cent and 2 per cent of sum assured is an unprecedented and epoch making life line, ever extended to boost the farm sector and derisk the vast farming community in the country. The Union cabinet has signed on January 13, this revamped crop insurance scheme designed to mitigate risks associated with contemporary Bharateeya farming. Under this new scheme the government has substantially reduced the premium to be paid by farmers—1.5 per cent on rabi crops, 2 per cent on kharif crops and 5 per cent on commercial/horticultural crops—and reduced delays and leakages in payment of compensation through direct transfers into the bank accounts of farmers. This is expected to substantially drive up enrolment for crop insurance under the scheme.
This farmers friendly move comes at a time when the country is experiencing a protracted period of rural distress after the below average monsoon rainfalls in 2014 and 2015. It is an all time supportive measure to alleviate rural distress by derisk farming. The most crucial element of the scheme is to bring down the rate of premium to a maximum of 2 per cent of the sum insured. The rest will be paid by the State and the Central government. Currently, farmers have to pay a premium ranging from 4 to 15 per cent to insure crops. Under the previous crop insurance scheme, risks were only partially covered. The existing premium rates vary between 2.5 per cent and 3.5 per cent for kharif crops and 1.5 per cent for rabi crops—but the coverage was capped, meaning farmers could, at best, recover a fraction of their losses. Also, the premium for commercial and horticulture crops was calculated on actuarial basis, meaning premiums could be as high as 25 per cent depending on the risk factor involved.
This revamped PMFBY is to be rolled out during the kharif crop season this year. This is most optimum for the farmers till date as it provides for localised events and removes the cap. The premium rates to be paid by farmers are kept very low and the balance premium will be paid by the government to provide full insured amount to the farmers against crop loss on account of natural calamities.
There is no upper limit on government subsidy. Even if the balance premium is 90 per cent, it will be borne by the government. The government expects the scheme to help increase the insurance coverage to 50 per cent of the total crop area of 194.40 million hectares from the existing level of about 25-27 per cent crop area. This new and ambitious Crop Insurance Scheme for farmers aims to cover about 50 per cent of farmers of the country in the next two-three years. At present, around 23 per cent of total cropped area of 194 million hectares is under insurance. According to the Cabinet note on the scheme, banks have to play a big role in ensuring its success. Banks have to mandatorily credit the claim received by insurance companies into farmers bank accounts within 14 days. That apart, banks have also to ensure that all farmers who have taken crop loans against notified crops are compulsorily insured. At the same time, those who have not taken crop loans, but want to avail the benefit of crop insurance should get the same. Banks have also to ensure that crop loans are disbursed to farmers according to the guidelines laid down and ensure that funds so allocated are properly used by farmers.
The scheme entails immediate payment of 25 per cent of the due compensation; the money will go directly to bank accounts of the farmers. Going beyond the conventional methods of compensation and crop cover, the scheme provides for compensation for even loss of seed plants and post-harvest damage. It will also provide assessment for localised calamities— including hailstorms, unseasonal rains, landslides and inundation—addressing a long-standing demand of farmers. Besides, instead of relying on yield data, which is often delayed, to settle claims, it will use smartphones, remote-sensing data and even drones to assess crop damage. Moreover, hitherto, because of area-based assessments—in which the results of crop cutting experiments over a small area are used to pay claims for a larger area—farm-level assessment is not done at all. Once farm-level assessments begin, claims for losses suffered in localised calamities will get paid.
The new Crop Insurance Scheme is in line with One Nation-One Scheme theme. It incorporates the best features of all previous schemes and at the same time, all previous shortcomings/weaknesses have been removed.
According to new rules, farmers’ insurance claims have to be settled within 45 days of the risk assessment. However, often, claims are not attended to even after six months, which is a major reason why farmers don’t go for crop insurance.
There have been many crop insurance schemes in the past, but all of them have some problem or the other that is why the total crop insurance cover till now in agriculture is 23 per cent. The present, scheme will solve many such problems and perhaps for the first time after Independence, offers the lowest premium rates.
The new insurance scheme would cost the government Rs 8,800 crore over the next three years, assuming that 50 per cent of farmers are covered. At present, with 23 per cent insurance cover, the Centre spends Rs 3,100 crore a year on crop insurance. The insurance amount covered will also not be capped and so also the premium rates.
For the Centre, there would be no upper limit on the subsidy and even if the balance premium is 90 per cent, it would provide for the same.
This also means if a State Government does not fulfil its commitment of 50 per cent subsidy sharing, the Centre would step in but not allow the scheme to falter. Till now, the average premium for all foodgrain crops was as high as 15 per cent, while for horticulture crops, it was even higher.
This scheme would offer premium subsidy and would be more affordable to farmers. In the new scheme, assessment of farms for calamities such as hailstorm and unseasonal rains would be done to ensure that each individual farmer gets an insurance, even if the damage is highly localised.
Under this new scheme, claims have to be mandatorily settled within 30-45 days of damage assessment and pictures taken through smart-phones, mobiles and tabs of the crop cutting data would be considered as valid proof of loss. This would help in reducing the time for settlement of claims.
The present government has otherwise also been showing utmost concern for the overall rural distress. Therefore, the NDA Government has stepped up payouts under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Between August and December, a period of widespread drought, over 71 crore man days of work were generated under the MGNREGS, which offers 100 days of employment to at least one member of every rural family. This is substantially higher than 40.5 crore mandays generated in the same period in 2014-15, 67.4 crore in 2013-14 and 57.3 crore in 2012-13.
Bhagwati Prakash Sharma (The writer is Vice-Chancellor of Pacific University, Udaipur)