Kharif 2021: Clouds over Fasal Bima as states miss deadlines

July 26, 2021 4:45 AM

The Centre normally accedes to the requests of the states if the insurance companies give their consent for the extension of enrollment date.

The balance premium is split equally between the Centre and states. Many states have demanded their share of the premium subsidy be capped at 30%.The balance premium is split equally between the Centre and states. Many states have demanded their share of the premium subsidy be capped at 30%.

By Prabhudatta Mishra

The roll-out of the government’s flagship crop insurance scheme, Pradhan Mantri Fasal Bimal Yojana (PMFBY) for the Kharif 2021 season, is shrouded in uncertainty as many states have opted out of the scheme and others are apparently failing to stick to the timelines despite being given several extensions.

Already, Gujarat, Andhra Pradesh, Telangana, Jharkhand, West Bengal and Bihar exited the scheme citing the cost of the premium subsidy to be bore by them. Madhya Pradesh and Tamil Nadu are said to have not finalised the premium until July 25, while as per PMFBY guidelines, premium rates should have been fixed by April. The Centre has extended the deadline for Chhattisgarh and Maharashtra to complete the enrolment of farmers – to July 31 and July 23, respectively. Uttarakhand and Jammu and Kashmir may be given time late July 31 for completing the enrolment.

Sowing was at about of the 67% of the normal kharif as on July 23.

Under PMFBY, premium to be paid by farmers is fixed at 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 split equally between the Centre and states. Many states have demanded their share of the premium subsidy be capped at 30%.

The Centre normally accedes to the requests of the states if the insurance companies give their consent for the extension of enrollment date.

“Since most of the states last year awarded the insurance companies three-year contract with fixed premium, there was no reason for delay in meeting cut-off dates,” a senior government official said. However, states like Maharashtra and Rajasthan insisted on having a different plan that caused some delays, the sources said, adding, all those states who had sought extension of enrolment date cited Covid-related difficulties as the reason for not meeting the deadline.

Some states have been planning to launch their own schemes in the pattern of West Bengal and Bihar, while some others have been discussing plans to waive off share of premium paid by farmers. Such changes have become a regular feature that contribute to the delay in meeting deadlines, said a senior executive of an insurance company requesting anonymity.

In Chhattisgarh, over 42 lakh applications have been received for enrolment as on July 25. In the last kharif season, a total of over 44 lakh applications were received. In Maharashtra, where enrolment is to continue until July 23, insurance companies have received over 75 lakh applications under PMFBY as on July 25, as against a total of 1.08 crore during last kharif season. Applications are always higher than the number of farmers as same farmers with multiple land holdings apply separately for each land.

Earlier this month, the Centre wrote to the state governments seeking their views on including the so-called ‘Beed formula’ as an option under PMFBY amid several states developing cold feet on the scheme. The Centre in February last year had changed the guidelines and allowed states option of three-year contract with insurers on the premium charged in crop insurance. States also can continue with the existing system of inviting bids for premium every year, as per the guidelines.

Under the ‘Beed formula’, also known as the 80-110 plan, the insurer’s potential losses are circumscribed – the firm won’t have to entertain claims above 110% of the gross premium. The insurer will refund the premium surplus (gross premium minus claims) exceeding 20% of gross premium to the state government. Of course, the state government has to bear the cost of any claims above 110% of the premium collected to insulate the insurer from losses, but such higher level of claims rarely occur, so the states reckon the formula in effect reduces their cost to run the scheme.

In case the claims reach 60% of premium collected under the 80-110 plan, the insurance company will have to refund 20% to the state government and if the claims are 70%, the refund to state will be 10%. In case of claims above 80%, the state will not get any refund.

While Punjab never implemented the crop insurance scheme, Bihar and West Bengal have their own schemes under which farmers do not pay any premium, but they receive a fixed amount of compensation in case of crop failure.

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