In an overhaul of its flagship crop insurance scheme Pradhan Mantri Fasal Bima Yojana (PMFBY), the Centre on Wednesday put ceilings of 30% and 25% on premiums against sum insured for its subsidy to be available for non-irrigated and irrigated areas respectively, made enrolment of loanee farmers voluntary and extended the contract period for insurers to three years from one year. The moves are aimed at addressing the challenges in implementation of the scheme, and making it more pragmatic. As higher premium rates are necessary to sustain insurance companies’ interest in the country’s 151 water-stressed districts, a separate scheme was under preparation for these areas, the government said after a Cabinet meeting. The revamped scheme will be effective from Kharif 2020.
Under PMFBY, launched in 2016, farmers pay 1.5% of sum insured for rabi crops and 2% for kharif while it is 5% for cash crops. The balance premium is split equally between the Centre and states. As there is no upper limit on the premium, it has skyrocketed in many areas – premiums for crops exceeded 30% in as many as 53 districts in Kharif 2018 – the scheme has put a heavy onus on the Central exchequer. Any premium above 30% will now have to be picked up by the states, if the scheme is to be run in such areas.
The Cabinet also approved Swachh Bharat Mission (Gramin) Phase-II to be implemented from 2020-21 to 2024-25 with a total outlay of Rs 1,40,881 crore, of which Rs 52,497 crore will be allocated from the budget of ‘drinking water and sanitation’ while the balance will be dovetailed from the funds being released under 15th Finance Commission, MGNREGS and revenue generation models particularly for solid and liquid waste management. In a separate decision, subsidy on loans given to the dairy sector was increased from 2% to 2.5%, a move that could benefit 95 lakh farmers in over 50,000 villages.
The Cabinet also approved Rs 6,865 crore scheme to be spent for setting up of 10,000 new farmer produce organisations by FY24 and support their growth till FY28.
Less than a week before US President Donald Trump’s scheduled visit to India, the Cabinet on Wednesday also cleared a proposal to sign an initial agreement with the US on intellectual property rights (IPRs). The US has long been critical of India’s IPR regime, even though New Delhi has consistently maintained that its policies are fully compliant with the WTO standards. The US has retained India on its priority watch list in its annual Special 301 report and has been seeking more commitment from the country on securing the rights of patents holder, among others.
The Centre was under pressure to make necessary changes in PM Fasal Bima Yojana after Andhra Pradesh, West Bengal and Bihar decided to exit the scheme citing high costs and the need to customise it based on geographical diversities. So, the Cabinet has now allowed states the flexibility to select varied additional risk covers, with or without opting for the base PMFBY cover. State-specific alternative risk mitigation programmes are being evolved.
The BJP had promised to make PMFBY optional for loanee farmers too in its 2019 general election manifesto.
In kharif 2018, farmers insured under PMFBY stood at 3.93 crore, 62% of which were loanee farmers.
Among other modifications, the Centre said defaulting states won’t be allowed to implement the scheme in subsequent seasons in case of considerable delay in release of requisite premium subsidy to concerned insurance companies beyond a prescribed time limit. In September 2018, it had tweaked the PMFBY guidelines to address the issue of delays in claims settlement by making insurers liable to pay 12% interest for payments made after the deadlines set for different crop cycles. States were also asked to pay 12% interest for the delay in release of their share of premium beyond three months from the cut-off dates.
As a result of these steps, a significant improvement was noticed in claims settlements in 2018-19 crop year, that coincided with Parliamentary elections. However, the payouts seem to have slowed down thereafter.