Cash-strapped states pulled out of flagship PMFBY, says Centre

Centre willing to make additional pro-farmer changes in response to climate change

The Centre on Thursday said some states have pulled out of the flagship Pradhan Mantri Fasal Bima Yojana (PMFBY) for failure to pay their share of premium subsidy owing to financial constraints. It said it was willing to make additional pro-farmer changes to the scheme in response to the climate crisis.

“After resolution of their issues, Andhra Pradesh rejoined the scheme in July. Other states are also considering joining the scheme to provide a comprehensive cover to their farmers,” Union Agriculture Secretary Manoj Ahuja said in a statement on Thursday.

He said states have opted for a compensation model instead. Unlike PMFBY, it does not provide the same comprehensive risk cover to farmers.

The statement comes at a time when the number of states settling on PMFBY has seen a considerable decline over the years.

According to the kharif data of this year, around 19 states have opted for PMFBY, as opposed to 22 states in Kharif 2018.

The number of farmers covered has also gone down, from 21.6 million in Kharif 2018 to 15.38 million this year.

In rabi so far, the number of states preferring the scheme has further dropped to 14, according to the data referenced on the PMFBY website.

Under PMFBY, the Centre and states share the premium subsidy equitably. Commensurate with the official statement of the past six years, farmers have paid just around ~25,186 crore as premium, while they received claims amounting to ~1.25 trillion.

The share of non-loanee, marginalised, and small farmers has risen by almost 282 per cent since the initiation of the scheme in 2016, the secretary added.

Under PMFBY, the premium is determined through bidding. However, farmers have to pay a maximum of 2 per cent of sum insured for kharif crops, 1.5 per cent for rabi food and oilseed crops, and 5 per cent for commercial or horticultural crops.

The balance of the actuarial/bid premium shared by the Centre and states is 50:50; 90:10 for Northeast states.

The premium rate of crops depends upon the associated risks. The total liability of the state depends on the actuarial/bid premium, crop sum insured, area insured, and the number of crops notified by states, the government had said in a reply to Parliament earlier.

Three years after the launch in February 2020, the Union Cabinet decided to make PMFBY optional for loanee farmers and also incorporated a host of other changes to the scheme to make it farmer-friendly.

These included capping the central subsidy under the scheme for premium rates up to 30 per cent in unirrigated areas and 25 per cent in irrigated areas, placing a cut-off on states for their failure to release their share of premium subsidy.

If states don’t release their share of premium subsidy before March 31 for the kharif season and on September 30 of the subsequent years, they will not be allowed to implement the scheme.

Moreover, the new guidelines also stated that when states engage any insurance company for PMFBY, they will have to ensure it stays signed on for a minimum of three years, against the current provision of one to three years.

Meanwhile, the official statement said that in 2017, 2018, and 2019, the ratio of claims paid in several states averaged more than 100 per cent, against the gross premium collected.

These included Chhattisgarh (2017), Odisha (2017), Tamil Nadu (2018), Jharkhand (2019), which received 384 per cent, 222 per cent, 163 per cent, and 159 per cent of the claims ratio, against the gross premium.