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Why the Pradhan Mantri Fasal Bima Yojana needs a complete revamp

The ambitious flagship farm insurance scheme, intended to protect farmers, is today marred by allegations of irregularities. Bhaswati Sengupta writes on why PMFBY needs a complete makeover.

By Bhaswati Sengupta
New Update

publive-image A farmer in Punjab | Photo courtesy: Wikimedia Commons

The Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in 2016 by Prime Minister Narendra Modi as an insurance service scheme for farmers for their yields. The flagship farm insurance scheme, intended to protect farmers against crop losses due to natural calamities, is today amid controversies over alleged irregularities.

According to the original vision document of the government of India, “the Pradhan Mantri Fasal Bima Yojana was launched with an aim to support production in agriculture by providing an affordable crop insurance product to ensure comprehensive risk cover for crops of farmers against all non-preventable natural risks from pre-sowing to the post-harvest stage.” The government has said that the few challenges that remained were regarding the long-term tendering, optional coverage to all farmers, an increase in the scope of risk cover and the addition of add-on covers for farmers.

The PMFBY is implemented by empanelled general insurance companies but since the onset of the scheme many farmers have levelled allegations against the government for not monitoring the implementation of the scheme and not taking action against the insurance companies who fraudulently pocket money of the farmers.

Surender Dalal, a farmer from Haryana, says that the PMFBY lags in its implementation. “We don’t get the compensation that we are supposed to get. The purpose of the Pradhan Mantri Fasal Bima Yojana was to compensate for the amount of damage that the farmer bears. If there are any water-related damages (like excessive rain or flood), there will be no compensation under this policy. If the paddy gets damaged due to water, then there will be no compensation. If the crops are damaged due to fire, then also there will be no compensation. To avail compensation, there will be an inspection. If a large farmland is affected, there will be compensation, but there will be no compensation for a small farmland. The policy comes with several criteria and rules under which compensation could or could not be paid. What is the point when the rules are so severe that the poor farmer is not compensated for the damages?”

Dalal goes on to explain how he has seen many insurance companies turn away farmers in villages as most farmers do not meet the stringent criteria laid down under the scheme. “There are very few insurance companies in the villages, and the farmers do not know their rights. For this scheme to work, the farmers should first be aware of their rights. The policy has too many rules and regulations that lead to fewer claims. Then there are so many irregularities. Both the government and the insurance companies are responsible for these irregularities.”

publive-image A farmer ploughs his farmland in Uttar Pradesh | Photo courtesy: Wikimedia Commons

The irregularities committed by private insurance companies in settling insurance claims against farmers have been one of the prime concerns of the farming community. Binoy Vishwam, a Member of Parliament and the Leader of CPI Parliamentary Party, wrote to Prime Minister Narendra Modi regarding the failing Pradhan Mantri Fasal Bima Yojana.

In his letter, he writes: “Over the past five years, both the central government and the state governments have contributed almost Rs. 1.265 lakh crores to the scheme to benefit our farmers. It is shocking that, as per the available reports, only 87,320 crores have been paid to the farmers. This staggering data throws light on the handling of the funds of the Pradhan Mantri Fasal Bima Yojana. While public sector insurance companies settled 90 per cent of farmers’ claims, private sector companies such as Bharti AXA, Reliance General Insurance, and Future General India Insurance pocketed enormous profits of nearly Rs 39,201 crores without paying farmers their rightful dues. This is a scam of a wider magnitude heralded by the corporates. It is learned that the Union Minister of Education, Dharmendra Pradhan, has already written to the Union Minister of Agriculture and Farmers’ Welfare, Narendra Singh Tomar regarding the same issue in Odisha.”

Speaking to The Probe, Binoy Vishwam said that he had demanded the Prime Minister facilitate a CAG audit on how farmers are being deprived of their rightful dues by the corporates. “I think the Pradhan Mantri Fasal Bima Yojna is not only about irregularities. It is something more. Just to call it irregularity is to minimise the gravity of the issue. It is a scam. It is a scam because the crores of rupees, which were supposed to reach the farmers, are being pocketed by corporates instead. There are 21 efficient public sector insurance companies, which are very efficient and honest but ignoring all of them, the government rushed to the private insurance companies of their choice, and they were given a free hand to run the show.”

He adds, “A CAG audit must be initiated on this issue. All the defaulting private insurance companies must be blacklisted, and the government must ensure that the implementation of the PMFBY must be entrusted to public sector companies. I was one of the first in the country to write to the Prime Minister with a sense of responsibility, and I waited for the Prime Minister to respond. Neither the Prime Minister nor Narendra Tomar, neither of them has responded on this issue so far.”

The main allegation against the scheme is that it does not realise the objectives for which it was started in the first place. According to the PMFBY website, the main objective of the scheme was to support sustainable production in the agriculture sector by way of: “Providing financial support to farmers suffering crop loss/damage arising out of unforeseen events. Stabilising the income of farmers to ensure their continuance in farming. Encouraging farmers to adopt innovative and modern agricultural practices. Ensuring credit worthiness of the farmers, crop diversification and enhancing growth and competitiveness of the agriculture sector besides protecting the farmers from production risks”.

publive-image Farmers protesting for crop insurance and other benefits in Haryana | Photo courtesy: @KisanSabha | twitter

Many farmers who have been protesting against the scheme say that the scheme was essentially designed to transfer farmers' money and funds of the government to the hands of the private insurance firms while the government and the private companies continued to pretend that the scheme was providing the rightful compensation to the farmers for their crop loss.

The government had recently said it was open to making "pro-farmer changes" to the Pradhan Mantri Fasal Bima Yojana to meet the growing challenges of climate change and rapid technological advancement. The Agriculture Secretary Manoj Ahuja said that in the World Economic Forum's Global Risk Report 2022, extreme weather conditions had been declared as the second biggest risk for the next ten years.

"The Pradhan Mantri Fasal Bima Yojana is the world's largest crop insurance scheme in terms of farmer registrations. So, it is very important to ensure that this scheme is pro-farmer and not pro-corporates. We are in the general insurance company. We have been told by Maharashtra, Bihar, and so many states that the state governments and the central governments are basically paying the premium to private companies. Previously, these premiums were paid to the government sectors. The entire business was with the government sector only. So, when it was with the government sector, whenever a natural calamity used to happen, the farmers used to get compensation from the public sector only. Now, in the case of the private sector, they are taking the premium. Due to negligence also, private companies are also keeping a huge amount of money with themselves," says Trilok Singh, General Secretary of the General Insurance Employees All India Association.

Since the launch of the scheme in 2016, several questions have been raised by agriculturists and farming experts if the PMFBY was designed to benefit corporate houses. The media has in the past reported on several stories that show how this scheme has largely benefited insurance companies.

"In our industry, crop insurance, in particular, is divided into two parts: the profitable business and the loss-making. The profitable part is being given to the private players, and they are managing it. The public sectors are left with the loss-making business."

Many farmers' organisations across the country, including the Samyukta Kisan Morcha (SKM), which led the year-long farmers agitation, have now called for a complete overhaul of the Pradhan Mantri Fasal Bima Yojana. The prime contention is that many private insurance companies have not been paying farmers for crop loss and violating the main objective of the central scheme.

publive-image A farmer in India | Photo courtesy: Special arrangement

In the PMFBY revamped operational guidelines, the government states: “Immediate intimation (within 72 hours) by the insured farmer to Insurance Company through “Crop Insurance App” or any available channel of reporting. Intimation may be given within 72 hours by farmers either through the Crop Insurance App or directly to the Insurance Company through the dedicated toll-free number, Centralised Call Centre number, concerned bank branch, local agriculture department, district officials or through the Insurance Company’s toll-free number. The first mode of intimation should be through the Crop Insurance App, centralised Toll-Free Number, followed by intimation through Insurance Company’s toll-free number for conducting the individual-level investigations. Crop loss intimation may also be forwarded through bank or district officials to Insurance Company. The concerned bank/intermediary would verify the insured details like crop insured, sum insured premium debited, and date of debit & remittance for conducting an investigation/assessment. Reporting of losses will be done primarily through the Crop Insurance App and the Centralised Toll-Free Number (once operationalised), along with other channels. Other channels will be phased out subsequently. In case the intimation is forwarded through the concerned bank branch or government officials, the Insurance Company must be notified within the next 48 hours.”

Many insurance companies have blocked insurance to farmers claiming that the farmers needed to follow the modalities mentioned in the rulebook related to information about crop loss. Farmer associations argue that it is extremely difficult for a farmer to use the app or call on phone lines or toll-free numbers that don’t work. Moreover, it is unreasonable to expect farmers to do prompt reporting using technology when a farmer loses his crop due to a natural calamity and when the rains disrupt communication lines. That apart, many farmers still do not know how to report on the app, and several of them are not technology friendly.

Meanwhile, there have been several instances where the Centre and states have locked horns with each other over the implementation of the scheme. Recently Union Minister of Agriculture and Farmers Welfare Narendra Singh Tomar severely criticised the Odisha government for blaming the Centre for holding up the instalments of the Pradhan Mantri Fasal Bima Yojana.

“The Centre has already released funds for Fasal Bima Yojana. The responsibility of floating the bids for the implementation of the scheme vests with the State government. Subsequently, the State government could have done a survey about the crop loss and demanded money,” said the Minister speaking at a public rally.

Even when both the Odisha government and the Centre had later announced measures to resolve the farmers’ complaints about crop insurance claims, many farmers in the state resorted to protests in Padampur for the non-payment of dues. The farmers have been fighting hard for crop insurance claims and drought input subsidies.

Pradhan Mantri Fasal Bima Yojana Women working in rice field | Photo courtesy: Pexels

In states like Maharashtra, it was reported that private insurance companies received large sums of premium amounts from the Centre, but they displayed their reluctance when settling farmers’ claims. In a letter to the Comptroller and Auditor General of India, the former Secretary to the government of India EAS Sarma writes: “The net effect of the scheme is to allow private businesses to profiteer at the cost of the public exchequer. The fact that the scheme has not been found to be beneficial to the farming community is corroborated by its low coverage and the steep decline in coverage over the last five years. This is despite the fact that crop insurance is compulsory for a farmer to be eligible for crop loans. On the other hand, it has resulted in a significant proportion of public funds getting diverted to the coffers of a few business houses.”

Sarma, in his letter, also spoke about how such schemes like the PMFBY were out-of-tune with the states’ own development priorities and asked the CAG to conduct a comprehensive audit of the scheme at the earliest. Chorus for an audit of the scheme has been growing even as the government has assured farmers that very soon, changes will be made to the existing scheme.

Over the years, the PMFBY has been facing multiple issues. According to the latest data released by the government, in Kharif 2022, around 19 states opted for the scheme, while during Kharif 2018, the number of states that opted for the scheme stood at 22. The government, on the other hand, has said that some states have pulled out of the scheme because they could not pay their share of the premium subsidy because of financial constraints. Not just the number of states opting for the scheme but even the number of farmers covered under the scheme has also significantly gone down over the years from 21.6 million in Kharif 2018 to 15.38 million in the latest year.

According to a September 2022 report prepared by National Rainfed Area Authority, Department of Agriculture & Farmers Welfare, Ministry of Agriculture & Farmers Welfare, the government, in its own words, admits that several gaps have been identified in the implementation of the scheme and that the scheme failed to reach the targeted insured area coverage to 50% by 2020. The study also finds that there have been several delays in claim settlements mainly due to delays in State share of premium subsidy, delays in yield estimation through CCEs and yield-related disputes between the State government and insurance companies. 

The study also notes that the farmers have not been getting information on why their applications have been rejected. The report states: “The scheme fails to adequately cover sharecroppers/tenant farmers due to process and documentation-related obstructions. Negative publicity in the media about insurance companies making huge profits has created a wrong impression among the farming community. The announcement of farm loan waiver schemes by various States has resulted in defaulting of farmers on repayment of their agriculture loans which further results in making them ineligible for coverage under the loanee farmer category of crop insurance. Some States had to invite tender again due to higher premiums quoted by participating insurance companies as well as a lack of participation by a number of insurance companies. The North Eastern States are yet to realise the full benefit of the scheme.”

The problems are many, and few solutions are currently in sight as far as the implementation of the Pradhan Mantri Fasal Bima Yojana is concerned. The government has decided to include pro-farmer add-on measures but what the scheme instead needs is a complete overhaul.