Crop insurance flaws

PM's flagship scheme needs an urgent reboot

Prime Minister Narendra Modi has done well to respond to criticism over his government’s flagship farm insurance scheme, the Pradhan Mantri Fasal Bima Yojana (PMFBY), and ask the NITI (National Institution for Transforming India) Aayog to suggest ways to improve it. The scheme was launched in April 2016 and has been criticised for benefitting insurance companies instead of farmers by allowing them to pocket the bulk of the premium along with hefty subsidies. The total payout by way of claims has been just around one-fourth of the premium collected by the insurers. In the past, both the Centre for Science and Environment (CSE) as well as the Comptroller and Auditor General (CAG) have pointed out the lopsided accrual of gains.

Clearly, the PMFBY has a lot of room for improvement. It is also likely that if properly implemented with alterations, it can serve as the much-needed safety net for risk-prone farmers. That is because it is, in fact, the only scheme that covers all hazards in farming, ranging from prevented sowing to post-harvest losses. It would be a pity if this scheme is allowed to meet the same fate as that of many of its predecessors, which were either wound up or continue to operate without yielding any real outcome.

Possibly, the first element that requires correction is the way the scheme has been structured. Even though the scheme has been named as the PM’s scheme in its title, yet in actual functioning state governments are required to share 50 per cent of the expenditure on its implementation. Moreover, states have been asked to conduct crop-cutting experiments to assess damage. It is hardly surprising, therefore, that the states have shown only a lukewarm interest in the scheme. Many state governments tend to delay the payment of their share of costs. They also tend to avoid expenses on crop-cutting experiments and submit only visually-assessed yield-loss data. Besides, the stipulated deployment of modern technology, such as drones and smartphones, to expedite the collection and dissemination of data and speedy computation of claims has not happened to the desired extent.

Another noticeable flaw in the scheme is the involvement of banks in its execution. Farmers have little direct contact with insurance companies. Many farmers do not even receive the policy documents or receipts. The compensation money is often adjusted by the banks against farmers’ dues. The insurers, on the other hand, complain of the lack of detailed knowledge about landholdings and crop plantings by their farmer-clients. The PMFBY, moreover, is also not immune to some of the usual problems related to poor land records, corruption and ambiguity about actual land tillers. So what is the way to ensure that the huge majority of small and marginal farmers, who truly need the support of an insurance scheme, are the ones that benefit from the PMFBY? The NITI Aayog, while examining various other aspects of the programme, should perhaps consider the implications of converting it into a central scheme to enable it to meet its prime objective of hedging farmers’ production risks.