Fixing crop insurance

There are many shortcomings in the design of the PMFBY

The decision by four private insurance companies to opt out of the government’s flagship crop insurance programme — the Pradhan Mantri Fasal Bima Yojana (PMFBY) — is least surprising. The scheme, though better than most farm insurance instruments tried out with little success since the early 1970s, suffers from several inherent flaws which undermine its appeal to both insurers and farmers. While the insurance companies find it a loss-making business despite the hefty 90 per cent subsidy by the government, the farmers complain that the compensation is too meagre and comes with an inordinate time lag. The common impression that