The government is restructuring the Pradhan Mantri Fasal Bima Yojana (PMFBY) through measures including use of artificial intelligence (AI)-based technologies for timely assessment of crop yield data for prompt claims settlement and introduction of competitive bidding for premium quotes from insurers.
Sources told FE that while the contours of changes in the PMFBY are still being worked out by the agriculture and finance ministries prior to the preparation of a Cabinet note, it is likely that the revised scheme would be launched from the kharif season 2023.
Since 2016, PMFBY premium has increased by more than six-fold, which has led to an increase in subsidy liability of the government. “Because of the lack of competitive bidding, some of the existing insurers are charging higher premiums,” an official said.
Sources said that out of 18 general insurance companies, including 13 private firms, shortlisted through a tendering process to implement the crop insurance scheme during 2019-20 -2022-23 period, only 10 currently remain in the fray. Key insurers including state-run Agriculture Insurance Company, Cholamandalam MS General Insurance Company, HDFC ERGO General Insurance Co and Tata AIG General Insurance Company, are currently implementing the crop insurance scheme.
The claim-premium ratio, which was 98.9% in 2018-19, has declined to 43.1% in 2021-22, although claims for the last fiscal are still being settled. The gross premium collected has been around Rs 30,000 crore since 2018-19. The government is aiming to increase annual gross premium to around Rs 40,000 crore.
Under the new 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 companies would refund the premium amount to the government and claims exceeding 130% of premium the government would compensate the companies.
The official said by adoption of AI-based technologies for crop yield assessment, delay in settlement of payment of claims would be reduced, which is expected to attract more players into the scheme’s implementation.
Some of the technologies that are being introduced to assess crop yield data include weather information and network data systems (winds), yield-estimation systems based on technology and collection of real-time observations (Yes-tech) and photographs of crops (Cropic) for reducing delay in claim settlement. The standard operating procedure for introduction of these technologies would be issued soon.
In a major change in the policy in early 2020, the crop insurance scheme was made optional for the farmers, while earlier farmers who used to avail loans compulsorily had to take crop insurance.
Meanwhile, Punjab, which has not adopted the scheme launched in 2016, is in discussion with the agriculture ministry to launch the scheme from kharif 2023 in the state.
Telangana, Bihar, Jharkhand and Gujarat, which had dropped out of the crop insurance scheme citing the high cost of premium, have initiated discussion with the Centre to roll out the PMFBY by next year. According to an agriculture ministry official, many states opted out of the scheme because of fiscal constraints.
In July, the Andhra Pradesh government announced its decision to re-join the PMFBY, effective kharif 2022.
The premium to be paid by farmers under the crop insurance scheme 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 among the Centre and states, which implies they bear most of the premium under the scheme. In the case of the northeastern states, the premium is split between the Centre and states in a 9:1 ratio.
Currently 19 states and Union territories are implementing the crop insurance scheme. In the last six years, Rs 25,186 crore have been paid by farmers as the premium, wherein Rs 1.26 trillion have been paid to the farmers against their claims as on October 31, 2022, according to an agriculture ministry statement on Thursday.