Some facts related to Pradhan Mantri Fasal Bima Yojana (PMFBY)

As you are aware that India is an agrarian economy, it means that economy of India is dependent of mainly agriculture. The agriculture products contribute @20% of GDP of India. We know that 70% of income of Indians is generated from agriculture. India stands at second position in producing agriculture products. We are now feeding the whole world.

In the years since its independence, India has made immense progress towards food security. Indian population has tripled, and food-grain production more than quadrupled. There has been a substantial increase in available foodgrain per capita.

India has shown a steady average nationwide annual increase in the kilograms produced per hectare for some agricultural items, over the last 60 years. These gains have come mainly from India’s green revolution, improving road and power generation infrastructure, knowledge of gains and reforms. Despite these recent accomplishments, agriculture has the potential for major productivity and total output gains, because crop yields in India are still just 30% to 60% of the best sustainable crop yields achievable in the farms of developed and other developing countries.

Additionally, losses due to poor monsoons, flooding, other natural calamities, continue to afflict the Indian farmer, coupled with the burden of compounding legacy of debt.

Agricultural insurance is an effective mechanism for reducing the losses farmers suffer due to natural calamities such as floods, droughts, and outbreaks of pests and diseases. There are a number of schemes initiated by the Government to promote and protect interests of the agricultural sector-

1. Pradhan Mantri Fasal Bima Yojana;
2. Crop Insurance;
3. Livestock Insurance;
4. Weather Based Crop Insurance;
5. Unified Package Insurance Scheme (UPIS)

In this article, we discuss some facts related to PRADHAN MANTRI FASAL BIMA YOJANA

The Pradhan Mantri FasalBimaYojna was launched on 18th February 2016 by Prime Minister Shri Narendra Modi. 21 states implemented the scheme in Kharif 2016 whereas 23 states and 2 UTs have implemented the scheme in Rabi 2016-17.

Approximately 3.7 Crores farmers have been insured in the Kharif 2016 for 3.7 crore ha of land at premium of Rs 16212 crore for a sum insured of Rs 128568.94 crore as per figures available on 31.03.2017.

PMFBY provides a comprehensive insurance cover against failure of the crop thus helping in stabilising the income of the farmers. The Scheme covers all Food & Oilseeds crops and Annual Commercial/Horticultural Crops for which past yield data is available and for which requisite number of Crop Cutting Experiments (CCEs) are conductedbeing under General Crop Estimation Survey (GCES).

The scheme is implemented by empanelled general insurance companies. Selection of Implementing Agency (IA) is done by the concerned State Government through bidding. The scheme is compulsory for loanee farmers availing Crop Loan /KCC account for notified crops and voluntary for other others. The scheme is being administered by Ministry of Agriculture.

OBJECTIVES

1. To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.

2. To stabilise the income of farmers to ensure their continuance in farming.

3. To encourage farmers to adopt innovative and modern agricultural practices. 4. To ensure flow of credit to the agriculture sector.

HIGHLIGHTS OF THE SCHEME

1. There will be a uniform premium of only 2% to be paid by farmers for all Kharif crops and 1.5% for all Rabi crops. In case of annual commercial and horticultural crops, the premium to be paid by farmers will be only 5%. The premium rates to be paid by farmers are very low and balance premium will be paid by the Government to provide full insured amount to the farmers against crop loss on account of natural calamities.

2. There is no upper limit on Government subsidy. Even if balance premium is 90%, it will be borne by the Government.

3. Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.

4. The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments.

5. PMFBY is a replacement scheme of NAIS / MNAIS, there will be exemption from Service Tax liability of all the services involved in the implementation of the scheme. It is estimated that the new scheme will ensure about 75-80 per cent of subsidy for the farmers in insurance premium. Collection of premiums under the scheme is exempted from the applicability of Goods & Service Tax (GST).

FARMERS TO BE COVERED

All farmers including sharecroppers and tenant farmers growing notified crops in a notified area during the season who have insurable interest in the crop are eligible.

COMPULSORY COVERAGE

• All farmers who have been sanctioned Seasonal Agricultural Operations (SAO) loans from Financial Institutions (FIs) (i.e., loanee farmers) for the notified crop(s) season would be covered compulsorily. This provision shall override any decision taken by FIs including PACS exempting farmers from compulsory coverage of loanee farmers.
• However non-standard KCC /crop loans as defined and as per prevailing practices of the concerned Banks/ Govt. regulator shall not be covered compulsorily. However bank branches may facilitate such farmers for enrolment as non-loanee farmers.
• Merely, sanctioning of crop loan against other collateral securities including fixed deposits, gold/jewel loans, mortgage loans etc. without having insurable interest of the farmer on the insurable land and notified crops shall not be covered under the Scheme. Voluntary coverage: Voluntary coverage may be obtained by all farmers not covered above, including Crop KCC/ Crop Loan Account holders whose credit limit is not renewed.

UNIT OF INSURANCE

The Scheme shall be implemented on an ‘Area Approach basis’, i.e., Defined Areas for each notified crop for widespread calamities with the assumption that all the insured farmers, in a Unit of Insurance, to be defined as “Notified Area” for a crop, face similar risk exposures, incur to a large extent, identical cost of production per hectare, earn comparable farm income per hectare, and experience similar extent of crop loss due to the operation of an insured peril, in the notified area. Defined Area (i.e., unit area of insurance) is Village/Village Panchayat level by whatsoever name these areas may be called for major crops and for other crops it may be a unit of size above the level of Village/Village Panchayat. In due course of time, the Unit of Insurance can be a Geo-Fenced/Geo-mapped region having homogenous Risk Profile for the notified crop.

For Risks of Localized calamities and Post-Harvest losses on account of defined peril, the Unit of Insurance for loss assessment shall be the affected insured field of the individual farmer.

COVERAGE OF CROPS

Food crops (Cereals, Millets and Pulses), Oilseeds, Annual Commercial / Annual Horticultural crops. In addition for perennial crops, pilots for coverage can be taken for those perennial horticultural crops for which standard methodology for yield estimation is available.

Risks covered under the scheme following stages of the crop risks leading to crop loss are covered under the Scheme. Addition of new risks by the State Govt other than the one mentioned below, by the State Govt. is not permitted.

• Prevented Sowing/Planting/Germination Risk: Insured area is prevented from sowing/ planting/ germination due to deficit rainfall or adverse seasonal/weather conditions.
• Standing Crop (Sowing to Harvesting): Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, viz., Drought, Dry spell, Flood, Inundation, widespread Pests and Disease attack, Landslides, Fire due to natural causes, Lightening, Storm, Hailstorm and Cyclone.
• Post-Harvest Losses: Coverage is available only upto a maximum period of two weeks from harvesting, for those crops which are required to be dried in cut and spread / small bundled condition in the field after harvesting against specific perils of Hailstorm, Cyclone, Cyclonic rains and Unseasonal rains.
• Localized Calamities: Loss/damage to notified insured crops resulting from occurrence of identified localized risks of Hailstorm, Landslide, Inundation, Cloud burst and Natural fire due to lightening affecting isolated farms in the notified area.
• Add-on coverage for crop loss due to attack by wild animals: The States may consider providing addon coverage for crop loss due to attack by wild animals wherever the risk is perceived to be substantial and is identifiable. Detailed protocol and procedure for evaluation of bids will be issued separately by GOI in consultation with Ministry of Environment and Forest and GIC Re. The add- on coverage will be optional for the farmers and applicable notional premium will be borne by the farmer, however the State Govts may consider providing additional subsidy on this coverage, wherever notified. The actuarial premium rates for add-on coverage should be sought in the bid itself from the Insurance Companies, however the add-on actuarial premium rate will be considered separately and shall not form part of evaluation.
• General Exclusions: Losses arising out of war and nuclear risks, malicious damage and other preventable risks shall be excluded.
• State Govts. / UTs, in consultation with SLCCCI, can exclude any of the aforesaid perils listed above which is not prevailing in their State/UT.
• Yield loss damage for localised calamities and post harvest losses will be assessed on the basis of individual insured farm level and hence lodging of loss information by farmer/designated agencies is essential. For remaining risks losses are due to widespread calamities. Hence lodging of information for claims by insured farmers / designated agencies for such wise spread calamities is not essential. Claims will be calculated based on the loss assessment report/average yield submitted by concerned State Govt.

MAJOR CONTRIBUTORS FOR SUCCESSFUL IMPLEMENTATION

1. Increase in Public & Private partnership.
2. Adoption of technology with continues improvement.
3. Use of Smart Phones.
4. Geo Coding of experimental fields.
5. OTP for verification, confirmation & identification.
6. Instant photo & video uploading to data repository.
7. Central portal for all data sets.
8. Weekly Video Conference for status updates at all levels.
9. Incentive to field level staff.
10. Direct monitoring at PMO level.
11. Appointment of CEO for PMFBY.
12. Adoption of technology leads to transparency & improvement in services.

PLEASE NOTE THAT:

Based on Actuarial Premium Rate (APR), the rate of insurance paid by the farmer is governed by a slab mentioned in PMFBY guidelines which is mentioned below.

Rest of premium the premium us shared between state and central Govt. on 50 : 50 basis as subsidy Season Crop Maximum Insurance charges payable by farmer (% of Sum Insured) Kharif All food grain and oil seeds (all cereals, millets, pulses and oil seeds crop) 2% of Sum Insured or Actuarial rate, whichever is less Rabi All food grain and oil seeds (all cereals, millets, pulses and oil seeds crop) 1.5% of Sum Insured or Actuarial rate, whichever is less Kharif and Rabi Annual Commercial and horticulture crops 5% of Sum Insured or Actuarial rate, whichever is less.

FREQUENTLY ASKED QUESTIONS

Q1: What is Insurance?

Ans: Insurance is a tool to protect you against a small probability of a large unexpected loss. It is a technique of providing people a means to transfer and share risk where losses suffered by few are met from the funds accumulated through small contributions made by many who are exposed to similar risks. Insurance is not a tool to make money but a tool to help compensate an individual or business for unexpected losses that might otherwise cause a financial disaster.

Q2: What is Crop Insurance?

Ans: Crop insurance is a means of protecting the agriculturist against financial losses due to uncertainties that may arise from crop failures/losses arising from named or all unforeseen perils beyond their control.

Q3. Objective of PMFBY?

Ans: Pradhan Mantri FasalBima Yojana (PMFBY) aims at supporting sustainable production in agriculture sector by way of - a) providing financial support to farmers suffering crop loss/damage arising out of unforeseen events b) stabilizing the income of farmers to ensure their continuance in farming c) encouraging farmers to adopt innovative and modern agricultural practices d) ensuring flow of credit to the agriculture sector; which will contribute to food security, crop diversification and enhancing growth and competitiveness of agriculture sector besides protecting farmers from production risks.

Q4: What is Weather based Crop Insurance?

Ans: Weather Based Crop Insurance aims to mitigate the hardship of the insured farmers against the likelihood of financial loss on account of anticipated crop loss resulting from incidence of adverse conditions of weather parameters like rainfall, temperature, frost, humidity etc.

Q5. How many Coverage of Crops?

Ans: 1) Food crops (Cereals, Millets and Pulses), 2) Oilseeds, 3) Annual Commercial / Annual Horticultural crops

Q6. What are Sum Insured /Coverage Limit?

Ans: 1. Sum Insured per hectare for both loanee and non-loanee farmers will be same and equal to the Scale of Finance as decided by the District Level Technical Committee, and would be pre-declared by SLCCCI and notified. No other calculation of Scale of Finance will be applicable. Sum Insured for individual farmer is equal to the Scale of Finance per hectare multiplied by area of the notified crop proposed by the farmer for insurance. ‘Area under cultivation’ shall always be expressed in ‘hectare’. 2. Sum insured for irrigated and un-irrigated areas may be separate

Q7. Last date for Crop Insurance Kharif Season

Ans: 10 August 2016

Q8. What is Premium Rates and Premium Subsidy?

Ans: 1. The Actuarial Premium Rate (APR) would be charged under PMFBY by implementing agency (IA). The rate of Insurance Charges payable by the farmer will be as per the following table:

Q9. How many companies providing Crop Insurance?

Ans:

• Agriculture Insurance Company
• Cholamandalam MS General Insurance Company
• Reliance General Insurance Co. Ltd.
• Bajaj Allianz
• Future Generali India Insurance Co. Ltd.
• HDFC ERGO General Insurance Co. Ltd.
• IFFCO Tokio General Insurance Co. Ltd.
• Universal Sompo General Insurance Company
• ICICI Lombard General Insurance Co. Ltd.
• Tata AIG General Insurance Co. Ltd.
• SBI General Insurance
• United India Insurance Co.

Q10. What types of Risks to be covered & exclusions?

Ans. RISKS: Following risks leading to crop loss are to be covered under the scheme:-

1. YIELD LOSSES (standing crops, on notified area basis):
2. Comprehensive risk insurance is provided to cover yield losses due to non-preventable risks, such as;

• Natural Fire and Lightning
• Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.
• Flood, Inundation and Landslide
• Drought, Dry spells
• Pests/ Diseases etc.

3. PREVENTED SOWING (on notified area basis):- In cases where majority of the insured farmers of a notified area, having intent to sow/plant and incurred expenditure for the purpose, are prevented from sowing/planting the insured crop due to adverse weather conditions, shall be eligible for indemnity claims upto a maximum of 25% of the sum-insured.
4. POST-HARVEST LOSSES (individual farm basis): Coverage is available upto a maximum period of 14 days from harvesting for those crops which are kept in “cut & spread” condition to dry in the field after harvesting, against specific perils of cyclone / cyclonic rains, unseasonal rains throughout the country.
5. LOCALISED CALAMITIES (individual farm basis): Loss / damage resulting from occurrence of identified localized risks i.e. hailstorm, landslide, and Inundation affecting isolated farms in the notified area.
6. EXCLUSIONS: Risks and Losses arising out of following perils shall be excluded:- War & kindred perils, nuclear risks, riots, malicious damage, theft, act of enmity, grazed and/or destroyed by domestic and/or wild animals, In case of Post–Harvest losses the harvested crop bundled and heaped at a place before threshing, other preventable risks.

DISCLAIMER: The article presented here is only for sharing information with readers. Do consult with insurance advisors for more understanding and clarity.