Currently, there is no cap on premium quoted by insurance companies and during last kharif season, the lowest bid was exorbitantly high at 60% (of sum insured) for one crop in a district.
The government has deferred the proposed changes in flagship crop insurance scheme — Pradhan Mantri Fasal Bima Yojana (PMFBY) — to the next kharif season as it wants the scheme to be foolproof amid criticism of its imposition on loanee farmers and not compensating the beneficiaries in time. The delay in rolling out the necessary changes in the guidelines is also said to be from an apprehension that there could be a sharp decline in coverage if PMFBY is made optional.
Out of 3.38 crore farmers who availed crop insurance in kharif 2018, 64% were loanee farmers while their share was 60% (out of 2.09 crore) in rabi 2018. In many states, banks force farmers to go for crop insurance if they want to take crop loan as it secures them from any credit default.
Apart from making it voluntary, which was also a promise in BJP’s 2019 election manifesto, the Centre has proposed two other major changes in the PMFBY — capping insurance premium and creating a pool from which claims will be settled. Agriculture minister Narendra Singh Tomar was non-committal when asked about the timeline of the changes. However, official sources said that it could be made effective from kharif 2020.
Currently, there is no cap on premium quoted by insurance companies and during last kharif season, the lowest bid was exorbitantly high at 60% (of sum insured) for one crop in a district. The government plans to cap it at 25-30% of sum insured, sources said, adding companies will have to quote below that. If no company participates in the premium bidding process, that crop may be taken off from the insurance list for that district, the sources said.
The government has also proposed to create a pool or trust of the premium money collected by the Centre, states and farmers, which were so far given to the insurance companies. Whenever there will be claims made by farmers, it will be settled from the money drawn from the pool, an official said. The fund collected may be managed by a public insurance company, he said.