CAG spots huge gaps in PM's Fasal Bima Yojana, other crop insurance schemes

Says over Rs 32,000-crore released to insurers from 2011-16 without verification of beneficiaries

The crop insurance continues to be a problematic area despite the Centre launching the much-touted Pradhan Mantri Fasal Bima Yojana (PMFBY) from Kharif 2016 replacing two old schemes with no or marginal increase in coverage of non-loanee farmers, lower sum insured as compared to scale of finance and delayed claim settlement which defeated the very purpose of insurance, two reports on the subject by the Comptroller and Auditor General of India (CAG) and Centre for Science and Environment (CSE) showed.

The CSE report said that insurance companies raked in a huge profit of around Rs 10,000 crore as on April 2017 due to low claim reported in relation to the premium charged. 

“The gross direct premium of General Insurance Companies grew by 32 per cent from Rs 96,376 crore in 2015-16 to Rs 1.27 lakh crore in 2016-17, nearly half of which came from crop insurance,” the CSE report said. 

The CAG report was tabled in Parliament today, while the CSE analysis was released to the public. 

The CAG report examined the crop insurance schemes – National Agriculture Insurance Scheme (NAIS), Modified NAIS and Weather Based Crop Insurance Scheme (WBCIS) implemented during 2011-12 through 2015-16, while the CSE study analysed the new PMFBY, which replaced all these schemed from Kharif 2016 onwards.

Astonishingly, many fundamental problems and issues remained almost the same in both the old crop insurance schemes and also the new PMFBY.

Infact, the CSE study showed that till April 2017, insurance companies collected a gross premium of Rs 15,891.1 crore while claims reported against it was just around Rs 5,962.1 crore, ensuring a profit of almost Rs 10,000 crore for insurance firms. 

The percentage of non-loanee farmers as compared to loanee farmers remained negligible in all the insurance schemes.

One of the big reason for low claim settlement in relation to premium collected could also be because of delay in states releasing their share of the subsidy which as per CSE analysis was just 32 per cent of the claim reported.  

Under the Pradhan Mantri Fasal Bima Yojana (PMFBY), the rule said that claims must be paid to farmers within three weeks days of yield data by insurance companies, while on ground claims made for Kharif 2016 were not fully settled.

In fact, the problem of delay in claim settlement in vis-a vis claim reported has been continuing from the old scheme as well. 

In 2014-15, data showed that 14 per cent of the claims remained unpaid when NAIS, MNAIS, weather-based crop insurance scheme (WBCIS) were in operation, the same rose to 37 per cent in 2015-16. 

The percentage of claim outstanding in relation to claims remained at around 32 per cent by the end of 2016-17, when the new PMFBY was launched.

“Claim settlement is delayed when states don’t share their portion of subsidy or don’t complete crop cutting exercises (CCE) or Centre doesn’t release its share of subsidy,” a senior official from state-run Agriculture Insurance Company (AIC) told Business Standard.

The actuarial premium rate charged by insurance firms under the PMFBY in 2016-17 as per the CSE report was on an average a high of 12.55 per cent which was much more than earlier schemes. 

This also meant that though burden on the farmer was lower under the PMFBY, it was much more on the government exchequer. 

The CAG report also pointed to the fact that a whopping sum of over Rs 32,000 crore released as premium subsidy and claims reimbursement to insurance companies under the old crop insurance scheme might not have reached the intended beneficiaries as there was no record or data of them.

The report also said that due to poor implementation of crop insurance scheme from the period 2011 to 2016, when Congress-lead UPA was in power a sum of Rs 3,622.79 crore was released to private insurers without proper verification.

The CSE report meanwhile also found that in the revamped PMFBY, the threshold yields fixed by state governments for determination of claims was much lower which lead to the lower settlement, while the CCEs were also fraught with discrepancies which made paying legitimate claims difficult.