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Pradhan Mantri Fasal Bima Yojana (PMFBY): Challenges and way

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 Pradhan Mantri Fasal Bima Yojana
(PMFBY): Challenges and way forward
Subash, S.P, Pavithra, S and Suresh Pal

ICAR-National Institute of Agricultural Economics and

Policy Research, New Delhi.
Content
 Introduction
 Chronology of crop
insurance schemes in India
 Pradhan Mantri Fasal Bima
Yojana
 Comparison with previous
schemes
 Challenges
 Conclusion
Introduction

 Risks in farming have increased due to climatic change

 Traditionally ways to mitigate risks (crop diversification,
growing stress tolerant varieties etc.) fail in extreme
weather events
 Crop insurance helps farmers to reduce risk through risk
sharing
 Prompts farmers to take up more risks in farming (risk
balancing)
 Chronology of crop insurance
schemes in India
Comprehensi Pilot Farmers
ve Crop Income
Insurance Insurance
Scheme Scheme
(CCIS): 1985 (FIIS):
to summer Summer Pradhan Mantri
2003 to Pilot Weather Based Crop Insurance Scheme
1999 (yield Fasal Bima
winter 2003– (WBCIS): Summer 2007 to summer 2013 (weather
index) Yojana (PMFBY):
04 (yield index)
Kharif 2016
index)

1985 1999–2000 2003–04 2007 2009–10 2010–11 2013–14 2015–16 2016

Pilot Modified
NAIS (MNAIS): National Crop
Winter 2010– Insurance Programme
11 to summer (NCIP) with
2013 (yield component schemes
index) of MNAIS, WBCIS and
CPIS: Winter 2013–14
to winter 2015–16
Pilot Coconut Palm Insurance
Scheme (CPIS): 2009–10 to
summer 2013 (specific crop-
based)

National Agricultural Insurance Scheme (NAIS): Winter 1999–2000 to winter 2015–16 (yield index)
Source: Compiled from Bhushan and Kumar (2017)
Pradhan Mantri Fasal Bima Yojana (PMFBY)
 Government of India launched the PMFBY in the kharif season of
2016
 Replaced the NAIS and the MNAIS
 WBCIS remains in place, though its premium rates have been
made the same as in PMFBY
 State can decide whether it wants PMFBY or WBCIS or both
 Central government budget allocation of Rs 5,500 crore (2016–
17) [revised allocation Rs. 13,240 crores]
 Planed to bring 40 % of agricultural area under PMFBY in 2017–18
 2017–18 budget -Rs 9,000 crore
Comparison with previous schemes
Features
1 Premium rate
2 Insurance unit
3 Indemnity level
4 Sum insured
5 One season-one premium
6 Insurance amount cover
7 On-account payment
8 Localized risk coverage
9 Post-harvest losses coverage
10 Prevented sowing coverage
11 Use of technology (for quicker
settlement of claims)
12 Claim liability
13 Minimum sample size for CCE
14 Monitoring of scheme
15 Insurance companies
Source: Bhushan and Kumar (2017)
NAIS (1999) MNAIS (2010) PMFBGY (2016)
Low (1.5–3.5 per cent) and High (up to 15 per cent), premium Almost equal to NAIS (1.5–5 per cent), premium
no premium subsidy for subsidy for all crops subsidy for all crops
horticulture/commercial
Village panchayat, block Village/village panchayat for major Village/village panchayat for major crops
and taluka crops
60, 80, 90 per cent 80, 90 per cent 70, 80, 90 per cent
Loan amount/value of TY/ Sanctioned credit limit/value of TY / Equal to scale of finance
150% value of AY 150% value of AY
Yes No Yes
Full Capped Full
No Yes Yes
No Hailstorm, landslide Hailstorm, landslide, inundation
No Coastal areas—for cyclonic rain All India—for cyclonic + unseasonal rain
No No Yes
No Intended Mandatory
- Government will underwrite losses Government will underwrite losses beyond 350 per
beyond 500 per cent of seasonal cent of seasonal gross premium
gross premium
Not specified Same in PMFBY and MNAIS Same in PMFBY and MNAIS
- Provision for social audit and sending Social audit provision removed completely, no
list of beneficiaries to gram beneficiary list will be sent to gram panchayat, 1–
panchayat, 1–5 per cent of 5 per cent of beneficiary to be crosschecked
beneficiary to be crosschecked
Only government Government and private both Government and private both
 ll India Total
A State-wise crop area insured under all
West Bengal
Insurance Schemes
Uttarakhand
Uttar Pradesh
Tripura

Telangana
Tamil Nadu
Crop-wise area insured under all Insurance Schemes
Sikkim
Rajasthan
 100
Punjab
90
Odisha

Nagaland 80

% of Area Insured
Mizoram 70
Meghalaya 60
Manipur
50
Maharashtra
Madhya Pradesh 40

Kerala 30 2013-14
Karnataka
Jharkhand
20 2014-15
10
Jammu & Kashmir 2015-16
Himachal Pradesh 0

Haryana
Gujarat

Chhattisgarh

Bihar
Assam
Arunachal Pradesh
Andhra Pradesh

0 20 40 60 80 100

2015-16 2014-15 2013-14 Source: Directorate of Economics and Statistics, 2016c

 Coverage and performance of PMFBY in kharif 2016
West Bengal West Bengal
West Bengal Uttarakhand
Uttarakhand
Uttarakhand Uttar Pradesh
Uttar Pradesh
Uttar Pradesh Tripura
Tripura
Tripura Telangana
Telangana
Telangana Tamil Nadu
Tamil Nadu
Tamil Nadu Rajasthan
Rajasthan
Rajasthan
Puducherry
Puducherry
Puducherry
Odisha
Odisha
Odisha
Meghalaya
Meghalaya Meghalaya
Manipur
Manipur Manipur
Maharashtra
Maharashtra Maharashtra
Madhya Pradesh
Madhya Pradesh Madhya Pradesh
Kerala
Kerala Kerala
Karnataka
Karnataka Karnataka
Jharkhand
Jharkhand Jharkhand
Himachal Pradesh
Himachal Pradesh Himachal Pradesh
Haryana
Haryana Haryana
Gujarat
Gujarat Gujarat
Goa
Goa Goa
Chhattisgarh
Chhattisgarh Chhattisgarh
Bihar
Bihar Bihar
Assam
Assam Assam
Andhra Pradesh
Andhra Pradesh Andhra Pradesh
Andaman andNicobar
Andaman andNicobar Andaman andNicobar
0.0 5000.0 10000.0 15000.0 20000.0 25000.0
0.0 20.0 40.0 60.0 80.0 100.0120.0 0.0 20.0 40.0 60.0 80.0
Kharif 2016** Sum insured (in Rs crore)
Kharif 2016** No. of farmers insured (in lakhs) Kharif 2016** Area Insured (in lakh ha)
Kharif 2015* Sum insured (in Rs crore)
Kharif 2015* No. of farmers insured (in lakhs) Kharif 2015* Area Insured (in lakh ha)

Notes: *Sum total of National Agriculture Insurance Scheme, Modified National Agriculture Insurance Scheme and Weather Based Crop Insurance
Scheme. * * Sum total of PMFBY and Revised Weather Based Crop Insurance Scheme
Source: Ministry of Agriculture and Farmers Welfare, Government of India
Pradhan Mantri Fasal Bima Yojana (PMFBY)

 30 per cent increase in the number of farmers insured (2015-

16)
 Area insured has increased by about 16 per cent (kharif
2016 compared to kharif 2015)
 Area insured per farmer has reduced by about 11per cent—
from 1.1 ha/farmer in kharif 2015 to 0.98 ha/farmer in kharif
2016
Challenges
1. Gaps in crop loss assessment
2. High actuarial premium rates
3. Inadequate or delayed claim
payment
 State-level policy
 Other implementation
Gaps in crop loss assessment

 States have to conduct

requisite number of crop S.No. Level of insurance unit Minimum sample
cutting experiments of CCEs size
(CCEs) 1 District 24
2 Taluk/Tehsil/Block 16
 Doesn’t capture the 3 Mandal/Phira/Revenue 10
scale and diversity of circle/hobli or any
other equivalent unit
crop losses
4 Village/village 4 for Major crop
 Encourages mono-crop panchayat and 8 for other
crops
 Technology??? Source: Operational Guidelines, Pradhan Mantri Fasal Bima Yojana,
Department of Agriculture, Cooperation and Farmers Welfare, Ministry of
 Efficiency of crop-cutting Agriculture and Farmer Welfare, Government of India

experiments
High actuarial premium rates

 All-India actuarial NAIS MNAIS WBCIS PMFBY

premium rate was 2011 3.3 9 9.9
approximately 12.6 per 2012 3.6 11.5 10.1
cent
2013 3.9 11.2 10.1
 Very high actuarial 2014 3.7 9.9 11.8
premium rates in some 2015 4 NA 11.6
states and regions
2016 11.6 12.55
 Madhya Pradesh -40 % Source: Compiled from Bhushan and Kumar (2017)

 Rajasthan- 80 %
 Gujarat- 40 %
 Depending on the crop
and region
Inadequate or delayed claim payment
% Claim paid

Sl. No Insurance Farmers Sum insured as % TOTAL

premium to of value of crop West Bengal

claims Uttarakhand

Uttar Pradesh

1 NAIS 3.14 35.43 Telangana

2 WBCIS 0.69 39.80 Rajasthan

3 MNAIS 0.73 49.82 Odisha

4 PMFBY 3.50 67.00 Manipur

Maharashtra

Madhya Pradesh
Source: Compiled from Aditya et al (n.d), Bhushan and Kumar (2017)
Karnataka

Himachal Pradesh

Haryana

Gujarat

Chhattisgarh

Bihar

Andhra Pradesh

0 20 40 60 80 100

Source: Compiled from Bhushan and Kumar (2017)

Conclusion

 Planning fallacy
 Existing plan of bundling it with credit wont be
sufficient to achieve the targets
 Alternative crop insurance product
 Hyper local weather forecast models
 ClimateCorp model: big data methods- climate
models, weather stations, weather radar, 10m x
10 m soil maps, and farm maps on Google Earth
References

 Aditya, K.S. Subash S.P, Praveen K.V, Bhuvana N and Akriti

Sharma. (n.d.) Can the new crop insurance scheme
address the risks of farming? (Unpublished).
 Bell, D.E., Reinhardt, F., Shelman, M. (2016) The Climate
Corporation, Harvard Business School Press, 44pp.
 Bhushan, C and Kumar, V. (2017) Pradhan Mantri Fasal Bima
Yojana: An Assessment, Centre for Science and
Environment, New Delhi.
 Appendix

 Coverage of crops: Crops will be notified by respective state governments in state notifications for rabi
and kharif
 Insurance unit: PMFBY operates on an area-based approach. An insurance unit (IU) at the
village/village-panchayat level or equivalent unit for major crops is notified in the state government
notification; for other crops the insurance unit could be of a size above the village/village panchayat.
For localized calamities and post-harvest losses, IU will be taken as the affected insured field of the
individual farmer.
 Premium rates: PMFBY fixes a uniform premium of 2 per cent of the value of sum insured to be paid by
farmers for all kharif crops, 1.5 per cent of sum insured for all rabi crops, 5 per cent of sum insured for
annual commercial and horticultural crops or actuarial rate, whichever is less. The balance premium
will be paid by the government to provide the complete insured amount to farmers against crop loss
on account of natural calamities. The subsidy is divided equally between the state and Central
government. There is no upper limit on government subsidy for actuarial premium.
 Indemnity level: PMFBY has three levels of indemnity (level of protection against a loss)—70 per cent, 80
per cent and 90 per cent corresponding to high-, moderate- and low-risk area for all notified crops by
respective state governments. This means that farmers are themselves to bear the loss of 30 per cent,
20 per cent or 10 per cent respectively.
 Threshold yield: Threshold yield of a specific crop will be calculated based on average yield of the last
seven years excluding up to two calamity years and the corresponding indemnity level.
 Sum insured: Sum insured (SI) per hectare for both a loanee and a non-loanee farmers is the same and
equal to the scale of finance (equal to cost of cultivation plus some profit)10 as decided by the District
Level Technical Committee and would be pre-declared by the State Level Coordination Committee
on Crop Insurance (SLCCCI) and notified. Sum insured for an individual farmer is equal to the scale of
finance per hectare multiplied by the area of the notified crop proposed by the farmer for insurance.

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