Fasal Bima cover set to widen as more states join

Several states including Bihar and Nagaland have initiated discussions with the Union agriculture ministry to join the Prandhan Mantri Fasal Bima Yojana (PMFBY), a move that will further expand the coverage of the highly subsidised crop insurance scheme.

Sources told FE while Jharkhand and Telangana earlier decided to join the scheme, Bihar, which had earlier exited the scheme citing ‘hist cost of premium subsidy,’ has also evinced interest in rejoining it.

In FY24, enrollment under the PMFBY crossed a record 40 million, and it is projected to increase significantly in the current fiscal. Punjab had earlier agreed to roll out crop insurance for cotton only.

“The farmer enrolment in the current fiscal would increase sharply because of the state rejoining the scheme and more farmers realising the shield it provides from crop loss or damage arising out of unforeseen weather events,” an official said.

The official said the crop insurance scheme is gradually moving towards a subscription-based model rather than a loan-based scheme. “More than 42% of farmers who are enrolled under the crop insurance are those who had not availed loans from the banks,” the official said.

In terms of area, coverage of heavily subsidised crop insurance scheme last fiscal has crossed 61 million hectare in, which is an increase of around 21% from the 2022-23.

Since the launch of PMFBY in 2016, Rs 32,440 crore were paid by farmers as their share of premium against which claims of around Rs. 1.63 trillion have been paid to them.

“For every 100 rupees of premium paid by farmers, they have received about Rs. 500 as claims,” the agriculture ministry had stated in a note.

The PMFBY which was launched in 2016, is currently implemented in 22 states and UTs. Farmers pay a fixed premium of just 1.5% of the sum insured for rabi crops and 2% for kharif crops, while it is 5% for cash crops.

The balance premium is equally shared between the Centre and states. For North-Eastern states, the premium is split in a 9:1 ratio between the Centre and states. Participation in PMFBY is optional for farmers.

Several states including Andhra Pradesh, Maharashtra, Odisha, Meghalaya, and Puducherry have opted for the universalisation of the crop insurance scheme, wherein the state government bears the cost of farmers’ premiums.

According to official data, cumulatively since its launch, the claim-premium ratio, which was 99.5% in 2018-19, declined to 67.6% in 2021-22. In FY23, the ratio was 78.2%.

For PMFBY, the finance ministry has allocated Rs 15,000 crore for FY25, while the revised estimate for FY24 stands at Rs 14,600 crore. Several insurance companies, both in the public and private sectors, are implementing the crop insurance scheme. The PMFBY is the third largest insurance scheme globally in terms of premium and shields farmers from crop losses or damage arising out of unforeseen events.