Pradhan Mantri Fasal Bima Yojana (PMFBY): Objectives, Features, Beneficiaries, and Challenges

PWOnlyIAS March 07, 2024 11:11 2508 0

According to Ministry of Agriculture and Farmers Welfare, enrolment under Pradhan Mantri Fasal Bima Yojana (PMFBY) has increased by 27 percent in financial year 2023-24 so far.

Pradhan Mantri Fasal Bima Yojana (PMFBY): Objectives, Features, Beneficiaries, and Challenges

Context: According to the Ministry of Agriculture and Farmers Welfare, enrolment under Pradhan Mantri Fasal Bima Yojana (PMFBY) has increased by 27 percent in the financial year 2023-24 so far.

Ministry also informed that in past eight years of implementation of PMFBY, nearly 57 crore farmer applications have been enrolled and over 23 crore farmer applicants received claims.

Introduction to Pradhan Mantri Fasal Bima Yojana (PMFBY)

PMFBF Full Form: Pradhan Mantri Fasal Bima Yojana
Launch: Launched in 2016, the Pradhan Mantri Fasal Bima Yojana (PMFBY) is a large-scale crop subsidy insurance scheme that was aimed to safeguard farmers.
Umbrella scheme: PMFBY scheme was designed in line with the One Nation–One Scheme and replaces three older initiatives:
- Modified National Agricultural Insurance Scheme (MNAIS),
- Weather-based Crop Insurance Scheme and
- National Agricultural Insurance Scheme (NAIS).
Key objectives of the scheme: The PM Fasal Bima Yojana operates under the ‘One Nation, One Crop, One Premium’ motto and aims to achieve the following goals:
- Offer cost-effective and extensive insurance coverage for crops, guarding against failure, damage, and losses.
- Increase the reach of crop insurance, with a primary emphasis on covering the entire cultivated area.
- Maintain stable income for farmers while promoting sustainability in agricultural production.
- Facilitate access to credit for the agriculture sector.
- Encourage the adoption of innovative and modern farming practices among farmers.
- Foster competition within the agricultural industry.
- Shield farmers from risks associated with production.
- Provide farmers with exemptions from goods and services tax (GST).
Implementing agency: The scheme is being administered by the Department of Agriculture, Cooperation and Farmers’ Welfare under the Ministry of Agriculture, along with empanelled general insurance companies.
PMFBY Portal: Farmers can access PMFBY portal by visiting portal link: http://pmfby.gov.in/.

Salient Features of the Pradhan Mantri Fasal Bima Yojana (PMFBY)

(a) Insurance Coverage Under Pradhan Mantri Fasal Bima Yojana

The Pradhan Mantri Fasal Bima Yojana offers insurance coverage specifically designed for certain crops and the risks associated with their yield.
The list of crops covered includes essential food crops like cereals, millets, and pulses, as well as oilseeds, annual commercial crops, and annual horticultural crops.
It also covers all stages of the crop production cycle. The inclusions and exclusions of insurance cover provided are as follows:
- Initial Stage – Risks during sowing, planting, and germination: When unfavourable weather conditions, such as low rainfall or adverse weather, hinder successful sowing, planting, or germination, the insured area is protected.
- Growth Stage – Risks of crop failure during growth: Insurance coverage extends to yield losses caused by uncontrollable factors like drought, dry spells, floods, inundation, pest infestations, crop diseases, landslides, natural fires, lightning, hailstorms, and cyclones.
- Harvest Stage – Risks during post-harvest: This applies to crops that require drying in bundles after harvesting. Coverage is provided for up to two weeks from harvesting and extends to losses resulting from hailstorms, cyclones, cyclonic rains, and unseasonal rains.
- Protection against Calamities: Coverage is available for loss or damage to designated insured crops caused by specific localized risks, including hailstorms, landslides, cloud bursts, and natural fires.
- Exclusions: Loss or damage to the specified insured crops due to war, nuclear risks, malicious damage, and other avoidable risks are not covered under this scheme.
The size of the insurance claim depends on the percentage of yield shortfall from the threshold yield, multiplied by the insured sum.
The insured sum is determined based on the financial scale provided to farmers, while the threshold crop yield is calculated using seven-year historical data and indemnity levels.

(b) Premiums Under Pradhan Mantri Fasal Bima Yojana

To access the insurance benefits offered by this program, farmers need to contribute a small portion of actuarial premiums.
The contribution rates differ based on the type of crops: for Kharif crops (2%), Rabi crops (1.5%), Commercial crops (5%), and Horticultural crops (5%).
However, the bulk of the actuarial premium, ranging from 95% to 98.5%, is covered jointly by both the state and central governments, with the costs shared equally on a 1:1 ratio.

Example

For instance, if a farmer has insured one hectare of land with a sum insured of Rs. 35,000, the insurance companies would typically charge an actuarial premium of Rs. 4,000. In this scenario, if the farmer cultivates Kharif crops on the insured land, their responsibility is only to contribute 2% of the actuarial premium, which amounts to Rs. 800. The remaining Rs. 1,600 is jointly covered by the state and central governments.

(c) Beneficiaries of Pradhan Mantri Fasal Bima Yojana

According to the government, under this scheme, all farmers (including sharecroppers and tenant farmers) growing notified crops in the notified areas are eligible for coverage, if they have insurable interest for the insured crops.
The eligible farmers can be broadly classified into two categories in Pradhan Mantri Fasal Bima Yojana;

Categories	Description
Loanee Farmers	All farmers who have been sanctioned loans from financial institutions (FIs) for seasonal agricultural operations (SAO). Insurance premiums to be paid by farmers are deducted from SAO crop loans. Crop loans sanctioned against other collateral securities, such as fixed deposits, gold or jewel loans and mortgage loans, which do not include insurable interest on the insurable land are not covered. All loanee farmers are required to enrol under the PMFBY.
Non-Loanee Farmers	All farmers who have opted for non-standard Kisan Credit Card (KCC) scheme-linked crop loans. All farmers who have not taken any crop loans. All loanee farmers can voluntarily enrol under the PMFBY to mitigate risk and claim insurance benefits.

(d) Insurance Companies Participating in Pradhan Mantri Fasal Bima Yojana

This Pradhan Mantri Fasal Bima Yojana was implemented by 18 insurance companies that became empanelled partners by successfully completing the L1 bidding process and are listed as follows:
- Agriculture Insurance Company
- Bajaj Allianz General Insurance Co. Ltd.
- Bharti Axa General Insurance Company Ltd.
- Cholamandalam MS General Insurance Company Ltd.
- Future Generali India Insurance Co. Ltd.
- HDFC Ergo General Insurance Co. Ltd.
- ICICI Lombard General Insurance Co. Ltd.
- IIFCO Tokio General Insurance Co. Ltd.
- National Insurance Company Ltd.
- New India Assurance Company
- Oriental Insurance Co.Ltd.
- Reliance General Insurance Co. Ltd.
- Royal Sundaram General Insurance Co. Ltd.
- SBI General Insurance Co.Ltd.
- Shriram General Insurance Co. Ltd.
- Tata AIG General Insurance Co. Ltd.
- United India Insurance Co.
- Universal Sompo General Insurance Company.

SWOT Analysis of Pradhan Mantri Fasal Bima Yojana (PMFBY)

Strengths Of Pradhan Mantri Fasal Bima Yojana

Universal coverage: The Pradhan Mantri Fasal Bima Yojana covers over 5.5 crore farmers and 22 Kharif and Rabi crops across 31 states and UTs, offering wider protection than previous schemes.
Affordable premiums: Farmers’ contributions range from 1% to 2% of the sum insured, making it accessible even for smallholder farmers.
Technology integration: Use of remote sensing data and crop cutting experiments minimizes paperwork and expedites claim settlement.
Improved claim settlement: Claim settlement ratio has increased from 42% in 2016-17 to 59% in 2022-23, indicating progress in addressing delays.
Farmer awareness: Increased outreach campaigns and farmer training programs are raising awareness about the scheme and its benefits.

Weaknesses Of Pradhan Mantri Fasal Bima Yojana

Low enrolment: Only about 40% of eligible farmers participate in the scheme, highlighting incomplete coverage and potential exclusion of vulnerable groups.
Exclusion of certain risks: Wild animal attacks and post-harvest losses are not covered, leaving farmers vulnerable to these specific risks.
Incomplete data and transparency: Limited data availability on crop yields and reasons for claim rejections create suspicion and dissatisfaction among farmers.
Operational inefficiencies: Delays in claim settlements, disinclined private insurance companies, and cumbersome grievance redressal mechanisms remain pain points.
Financial sustainability: High operational costs and potential for misuse raise concerns about the scheme’s long-term financial viability.

Opportunities Under Pradhan Mantri Fasal Bima Yojana

Expanding coverage: Including more farmers, crops, and risks like wild animal attacks can offer wider protection and enhance scheme relevance.
Promoting participation: Targeted awareness campaigns, simplified enrollment processes, and incentives for marginalized groups can boost participation.
Leveraging technology: Utilizing advanced technologies like drones and AI for yield estimation and claim assessments can improve efficiency and transparency.
Strengthening risk assessment: Collaborating with meteorological agencies and agricultural institutions to refine risk assessment models can lead to more accurate premium calculations.
Public-private partnerships: Fostering closer collaboration with private insurance companies can bring in expertise and resources to improve claim settlement rates and operational efficiency.

Challenges Associated With Pradhan Mantri Fasal Bima Yojana

Climate change: Increased frequency of extreme weather events like droughts and floods can strain the Pradhan Mantri Fasal Bima Yojana’s financial resources and pose challenges for risk assessment.
Market fluctuations: Changes in agricultural commodity prices can impact the scheme’s financial sustainability and premium affordability for farmers.
Corruption and misuse: Concerns about leakages and irregularities in claim settlements can erode trust and undermine the scheme’s effectiveness.
Farmer dissatisfaction: Continued delays, exclusions, and inadequate compensation can lead to farmer discontent and potentially reduce participation.
Policy shifts: Changes in government policies or funding priorities can disrupt the scheme’s stability and impact its long-term effectiveness.

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Frequently Asked Questions

Pradhan Mantri Fasal Bima Yojana (PMFBY) is a crop insurance scheme launched in 2016 to provide cost-effective insurance coverage to farmers against crop failure, damage, and losses.

PMFBY replaced the Modified National Agricultural Insurance Scheme (MNAIS), Weather-based Crop Insurance Scheme, and National Agricultural Insurance Scheme (NAIS).

Pradhan Mantri Fasal Bima Yojana is administered by the Department of Agriculture, Cooperation and Farmers' Welfare along with empanelled general insurance companies.

PMFBY aims to provide extensive crop insurance coverage, stabilize farmers' income, promote sustainable agriculture, facilitate credit access, encourage modern farming practices, foster competition, and protect farmers from production risks.

Pradhan Mantri Fasal Bima Yojana (PMFBY) covers various stages of the crop production cycle, including sowing, growth, harvest, and protection against calamities, for a wide range of crops.

Farmers contribute a small portion of actuarial premiums, with rates varying by crop type, while most of the premium is shared equally by the state and central governments.

All farmers growing notified crops in designated areas, including sharecroppers and tenant farmers, are eligible for coverage if they have insurable interest in the crops.

Loanee farmers are those who have taken crop loans for agricultural operations, while non-loanee farmers are those who have not taken such loans.

Yes, non-loanee farmers can voluntarily enroll in PMFBY to mitigate risk and claim insurance benefits.

Eighteen insurance companies participate in Pradhan Mantri Fasal Bima Yojana (PMFBY), including Agriculture Insurance Company, Bajaj Allianz, ICICI Lombard, and others, selected through a bidding process.

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Pradhan Mantri Fasal Bima Yojana (PMFBY): Objectives, Features, Beneficiaries, and Challenges

Introduction to Pradhan Mantri Fasal Bima Yojana (PMFBY)

Salient Features of the Pradhan Mantri Fasal Bima Yojana (PMFBY)

(a) Insurance Coverage Under Pradhan Mantri Fasal Bima Yojana

(b) Premiums Under Pradhan Mantri Fasal Bima Yojana

(c) Beneficiaries of Pradhan Mantri Fasal Bima Yojana

(d) Insurance Companies Participating in Pradhan Mantri Fasal Bima Yojana

SWOT Analysis of Pradhan Mantri Fasal Bima Yojana (PMFBY)

Strengths Of Pradhan Mantri Fasal Bima Yojana

Weaknesses Of Pradhan Mantri Fasal Bima Yojana

Opportunities Under Pradhan Mantri Fasal Bima Yojana

Challenges Associated With Pradhan Mantri Fasal Bima Yojana

Frequently Asked Questions

What is PMFBY?

Which schemes did PMFBY replace?

Who administers PMFBY scheme?

What are the key objectives of PMFBY scheme?

What does PMFBY cover?

How are insurance premiums determined?

Who is eligible for PMFBY coverage?

What are loanee and non-loanee farmers in PMFBY?

Can non-loanee farmers enroll in PMFBY voluntarily?

Which insurance companies participate in Pradhan Mantri Fasal Bima Yojana?

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