Crop insurance scheme PMFBY makes comeback, enrollments jump

Number of farmers availing of the scheme reaches all-time high of 25 mn

The Pradhan Mantri Fasal Bima Yojana (PMFBY), the marquee crop insurance scheme of the Narendra Modi government, is showing signs of revival after a years-long slump.

When the kharif season concluded recently, the number of farmers enrolled in the scheme reached an all-time high of 25 million. The share of non-loanee farmers – those who opted for the scheme voluntarily without using it as cover against a loan – jumped to almost 44.5 per cent (or 11.1 million). Total enrollments for PMFBY is at the highest since 2018, data showed.

In the previous kharif season, around 20.4 million farmers had opted for PMFBY, of which around 42 per cent were non-loanee. The increase indicates voluntary acceptance of the scheme among farmers.

The fact that 2023 had the El Nino weather pattern, when monsoon usually takes a beating, impacting the crops could be another reason for PMFBY getting more demand.

In Financial Year 2023-24 (FY24), the government hopes that by December 31, when the enrollment for the rabi season ends, around 40 million farmers will enroll in the scheme.

It also hopes that in FY24 around 57.5-60 million hectares of land will come under PMFBY compared to 49.7 million hectares in FY23.

Not only this, the actuarial premium rates for the 2023-25 insurance cycle is around 32 per cent lower than the 2022-21 cycle, leading to a savings of around Rs 10,580 crore for the government exchequer.

A number of states are considering rejoining the scheme after moving out for a variety of reasons. Andhra Pradesh has joined back and central government officials are hopeful that Telangana might return too after elections in the state. Gujarat, which left the scheme long ago due to high actuarial premium and demand for scientific method of farm yield estimation, might also return.

Among agriculturally important states, Punjab, Bihar, Gujarat and West Bengal are out of PMFBY.

The premium is determined through bidding under PMFBY. Farmers have to pay a maximum 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 actuarial, or bided premium, is shared by the Central and state governments on 50:50 basis and 90:10 in case of Northeast states.

The premium rate for crops depends on the risk associated and the total liability of a state depends on actuarial, sum insured of crops, area insured and number of crops notified by the states, the central government has told Parliament.

So what has brought about this change in scheme?

Officials said when PMFBY was made voluntary in 2019, farmers' enrollment and interest dropped as they doubted the need for crop insurance.

“Even banks did not encourage farmers to opt for the scheme and then COVID struck which further impacted the performance,” said a senior official.

As the claims ratios improved, farmers have returned to the scheme and realised that it does not lead to loss of investment.

In February 2020, more than three years after the scheme was launched, the Union Cabinet made PMFBY optional for loanee farmers as well and incorporated other changes.

Till then, the Central had spent almost Rs 50,000 crore as its share of premium subsidy under the scheme.

The decision to make PMFBY voluntary for all was part of the BJP’s 2019 election manifesto. The earlier models of crop insurance, including the National Agriculture Insurance Scheme (NAIS), run by the previous UPA government has made it mandatory for loanee farmers.

The Modi cabinet, in its February 2020, decision also incorporated some other critical changes in the scheme, including capping Central subsidy for premium rates up to 30 per cent in un-irrigated areas and 25 per cent in irrigated areas, putting 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 kharif season and September 30th of successive years then they won’t be allowed to implement the scheme.

That apart, the cabinet also decided that when states engage any insurance company for PMFBY it will have to keep it enrolled for minimum three years as against the current provision of one to three years.

Ever since the scheme was made voluntary in February 2020, data available publicly shows that both in terms area insured, states participating, sum insured and number of farmers who have opted for the scheme has shown a decline.

In Rabi 2021, around 19 states participated in the scheme, while the number was 21 in rabi 2018. The farmers covered also declined to 10 million in rabi 2021 as compared to 14.68 million in rabi 2018.

The area covered has gone down to 15.73 million hectares in rabi 2021 from 19.37 million hectares in rabi 2018.

The sum insured has also fallen during the same period.

In the kharif seasons also, there has been decline both in the number of farmers covered, area insured and sum insured.

All these seem to be a thing of the past now.