Non-insured insurance for the farmer

Defense with PMFBY is over

Q.The Prime Minister’s Crop Insurance Scheme (PMFBY), one of the largest crop insurance schemes in the world, came to life in February 2016. Its purpose is to protect the farmer from crop losses with insurance cover. The scheme is designed to provide subsidies to keep the premium paid by farmers to a minimum. The nominal premium was fixed at two per cent for crops grown in Kharif, 1.5 per cent for food grains and oilseeds grown in Rabi. The maximum premium to be paid by farmers for annual commercial crops does not exceed five per cent. The difference between what the farmer pays for the actual premium rates should be borne by the Center and the State. Insurance coverage is available for protection against a variety of hazards such as adverse weather conditions, pests and post-harvest losses. Crop damage is estimated area-wise. The gram panchayat area is taken as a unit for major crops.
Trailing states
Including Kharif and Rabi, more than five crore farmers were registered under PMFBY during the financial year 2017-18. Their number is almost 40 percent higher than in 2015, when the first insurance plans became available. However, there are doubts over the extent to which this is being implemented as an armory across the states. On the other hand, some states are withdrawing from the scheme. Gujarat has already dropped its claim that insurance companies are demanding an extraordinary premium of Rs 4,500 crore. In place of the central scheme of CM Vijay Rupani, the Chief Minister has set up the Kisan Sahai Yojana scheme with state funds. Rs 1700-1800 crore has been earmarked for the 2020 kharif season to include all farmers without collecting paisa premium. The Andhra Pradesh government has also launched a free crop insurance scheme. Punjab has never implemented PMFBY. Many states sent letters to the Center earlier this year saying they were withdrawing from it. The states implementing the scheme have been extremely late in paying their share of the premium. As a result, the farmer could not get insurance compensation. Insurance companies are laying the groundwork in states where all payments are in order. Information that in the 2019 season only one-third of what farmers claim is paid as insurance. The ambitious scheme introduced by the central government was watered down and eventually led to the perception that insurance companies were making more profit than farmers. Similar developments underscore the need for full support for farmers struggling with poverty in a country where agriculture is the mainstay for most families. As part of this, an appropriate policy needs to be formulated immediately to ensure proper implementation of the crop insurance scheme.
According to a study conducted by the Indian Institute of Management (IIM) in Ahmedabad under the auspices of the Union Ministry of Agriculture and Agrarian Welfare on the implementation of the crop insurance scheme in nine selected states, awareness on the scheme is very low among farmers across the country. While the West Bengal panchayat system was at the forefront of creating awareness, banks played a key role in Assam. The role of insurance agents is nominal in most states. Farmers say that the time taken for plowing work is too much and they want to reduce it. They made suggestions such as increasing compensation, transparency, adding vatille loss to livestock, and creating a greater role for the panchayat system. If compensation is paid within six weeks after the loss assessment … The key point revealed in the IIM study is that growers are willing to pay a premium of up to 10 per cent higher than what is now applicable to a PMFBY type scheme.

Changes required …
On the whole, there seems to be a need to make changes and additions to the PMFBY scheme to make them acceptable to the states, farmers and insurance companies. For this massive scheme to be effectively implemented to have an impact on the lives of the farmers – district and village level agencies should also be involved. The Center and the states should work together in the spirit of co-operative federation. The need for crop insurance is very high for the people of Telugu states. Uncertainty is high in the climate here. Climate change around the world often results in hurricanes, inequalities in rainfall, rising temperatures, and prolonged drought conditions … causing climate uncertainty. To protect farmers from these, a comprehensive, integrated, affordable crop insurance policy needs to be developed. PMFBY is a well-intentioned scheme. However it is not going to run as an armory. If this is not made more robust and implemented effectively, farmers will suffer even more in the years to come.

The challenge of assessing damage

PmInsurers believe that head insurance is not profitable. Assuming that there are more ‘bad risks’ than ‘good risks’, they say the current approach is detrimental to the industry. Failure of state governments to pay premium in a timely manner is becoming another problem. That means paying 50 percent of the premium to the insurance companies themselves … they think it will be like donating. Accurate crop damage assessment is a real challenge in crop insurance. Insurance companies should recognize crop insurance as a profitable long-term business opportunity. In order to achieve this, they need to hire expert office staff. Long-term investments in technological infrastructure such as smartphones and remote sensing devices are required for purposes such as data collection and rapid assessment of losses.

– Dr. N.V.R. Jyothi Kumar (Head of the Department of Commerce at the Central University of Mizoram)