Revamped crop insurance scheme from 2023-24 season | The Financial Express

Revamped crop insurance scheme from 2023-24 season

Higher cap on premium on the cards, premium to be decided by competitive bidding

Revamped crop insurance scheme from 2023-24 season
To revamp the PMFBY, the agriculture ministry had set up three expert panels, of which two groups have already submitted their reports.

The government is considering a slew of proposals to revamp the Pradhan Mantri Fasal Bima Yojana (PMFBY) from crop year 2023-24, following a sharp drop in claims to premium ratio, rise in premium rates pushing subsidy liability of the government.

Sources told FE that consultations with all the stakeholders are currently in progress and the revamped PMFBY will help widen the crop insurance cover for farmers.

Among the likely changes are a higher claim-premium cap of 130% from 110% now — a move aimed at infusing fresh life into the scheme. Under this model, the insurance companies would have to pay the claims between 60-130% of the gross premium. If the claims are below 60% of gross premium, the insurers will pay the excess premium amount collected to the government and for claims exceeding 130% of premium the government would compensate the companies.

Also, premiums may be decided via competitive bidding by insurance companies to make the scheme more market-oriented.

According to an analysis by the working group, since the scheme’s 2016 launch, the PMFBY premium has increased by more than six times, raising the subsidy liability of the government.

Also Read: Claims under crop insurance scheme plunges

In 2018-19, against the premium payment of Rs 29,607 crore (for both kharif and rabi seasons) to 18 companies empanelled by the Centre, the farmers’ claims were Rs 28,512 crore (claim ratio of 99%). ‘

The ratio has been on a decline since then. In 2019-20, the claim ratio dropped to 85.5% and in the pandemic year of 2020-21, it fell further to 61.6%. The final estimate for 2021-22 will vary from the preliminary one once all the claims are assessed, but the crash in claims ratio will still be substantial.

To revamp the PMFBY, the agriculture ministry had set up three expert panels, of which two groups have already submitted their reports.

The ministry had entrusted with the National Rainfed Area Authority to carry out crop sustainability study in identified 50 districts where around half of the claims under the PMFBY areeing reported. The authority’s report is expected soon.

The ratio has been on a decline since then. In 2019-20, the claim ratio dropped to 85.5% and in the pandemic year of 2020-21, it fell further to 61.6%. The final estimate for 2021-22 will vary from the preliminary one once all the claims are assessed, but the crash in claims ratio will still be substantial.

Under the heavily subsidised PMFBY, the premium paid by farmers is fixed at 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. But in the case of north-eastern states, the premium is split between the Centre and states in a 9:1 ratio.

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Another panel has recommended targeted premium subsidies for small farmers, empowering the Centre to levy penalty on states for any delay in subsidy settlements and extensive use of remote sensing data for crop yield assessment.

According to the agriculture ministry estimates, there are around 140 million farmer families in the country. Enrolment under PMFBY has not crossed 20 million in the last three years

Under the revised guidelines for the scheme issued for kharif 2020, the central government had stipulated that any state failing to pay its share of premiums would be disqualified from implementing it from the next season. The government made adoption of PMFBY voluntary for farmers from mandatory earlier.

Sources said that around 18 insurers were empanelled for implementation of PMFBY during 2019-20 and 2022-23 of which eight companies exited the scheme. “Competitive bidding on premium is virtually non-existent,” an official said.

The scheme is currently being implemented in 21 states/union territories. The Punjab government hasn’t adopted PMFBY.

States such as Andhra Pradesh, Telangana, Bihar, Jharkhand, West Bengal and Gujarat had dropped out of the scheme because of the high costs. However, Andhra Pradesh rejoined PMFBY from kharif 2022 after the Centre agreed to the state government’s proposal of universalising the scheme for all farmers.

A parliamentary panel last year had stated that the delays in settlement of claims are mainly due to reasons like delayed transmission of yield data, late release of states’ share in premium subsidy and yield data, yield related disputes between insurance companies and states, non-receipt of account details of some farmers for transfer of claims.

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