PMFBY: Farmers need bigger stake

With the recent floods in Gujarat, Rajasthan, and Assam, along with drought in other parts of the country, our farmers are once again destined to suffer this year. The droughts of 2014-15 and 2015-16 had exposed that the existing crop insurance schemes were not enough to alleviate farmers' woes. As the sums insured under National Agriculture Insurance Scheme (NAIS), modified NAIS, and Weather Based Crop Insurance Scheme (WBCIS) were too low and the compensation too meagre, the relief with many loopholes was virtually a drop in the ocean. It was none other than Prime Minister Narendra Modi, who realised the lacunas and announced a revamped Pradhan Mantri Fasal Bima Yojna (PMFBY) in kharif 2016, hoping it would be a game changer. The PMFBY raised the sums insured to realistic levels to cover the cost of cultivation for farmers. The premiums were heavily subsidised by the Centre and the states in equal proportion, with farmers paying only 2 per cent of the premium for kharif, 1.5 per cent for rabi and 5 per cent for horticulture crops. Farmers found the PMFBY attractive and consequently, in the very first kharif season of 2016, area (in hectares) and the number of farmers covered under PMFBY, both increased to 37.5 million. Significantly, it was 47 per cent higher with respect to the number of farmers, and 38 per cent higher in terms of area, over NAIS and MNAIS schemes of kharif of the drought year 2015. However, if compared to a normal kharif year, say 2013, the number of farmers opting for the scheme increased by 210 per cent in kharif 2016, and the area covered increased by 126 per cent. The sum insured on per hectare basis under the PMFBY increased by 51 per cent over kharif 2015. The number of non-loanee farmers opting PMFBY, as per the ministry's communication, also increased by about 23 per cent, driven primarily by Maharashtra. And, these indicators reflect that the PMFBY is moving at the desired pace towards the right direction. But despite the increasing coverage, the premiums, as a percentage of the sums insured has increased.

With greater competition, there is surely scope for negotiating lower premiums. But the litmus test of any crop insurance scheme is how fast it can settle the claims of farmers. It is here that the governance of the state is tested at three critical steps: First, the state has to notify the crops, make clusters of districts, determine the sums to be insured based on district level committees, and invite tenders from insurance companies; second, the state and the Centre have to pay premium to the companies providing insurance; and third, in case of crop damages, quickly assess the damages and ask companies to pay the claims of farmers. Unfortunately, in this entire process, farmers have almost no role. That's the reason why its implementation and effectiveness has fallen between the cracks. If states delay notifications, or payment of premiums, or crop cutting data, there is no way companies can pay compensation to the farmers in time. It may be noted that in any crop insurance business, companies make profits during normal times and incur losses during droughts and floods. So any meaningful comment on premiums and claims should look at a three to five-year cycle. In any case, just for FY2017, the total premium paid by the government and farmers is Rs 22,345 crore both for kharif and rabi, while the estimated claims of kharif 2016 alone will exceed Rs 10,000 crore, of which Rs 4,203 crore has been paid. Surprisingly, most of the states did not claim any amount under on-account claim for mid-season adversity, which allows 25 per cent payment for quick relief to farmers. Similarly, most states failed to provide smart phones to revenue staff to capture and upload data of crop cutting, which continues to come with an enormous delay. Now, the question is what is the future of crop insurance in addressing farmers' woes from natural calamities? The PMFBY has moved in the right direction and made substantial progress in terms of coverage, but failed in a quick dispensation of claims to farmers. The primary reason behind this failure is the lethargy and casual attitude of state agencies. If the PMFBY has to succeed, farmers must have a bigger stake in its functioning. There is an urgent need to link the insurance database with Core Banking Solution (CBS) so that when the premium is deducted from a farmer's bank account, the bank sends him a message informing him about the premium, the sum insured and the name of the insurance company. At present, several farmers may not even be aware that they are insured. It is the right time for the PM to make this flagship program farmer-centric with effective implementation.