Unsettled Fasal Bima claims: Not just insurers, defaulting states also at fault

September 02, 2021 6:15 AM

Gujarat, Telangana, Jharkhand, West Bengal and Bihar also exited the scheme, citing the cost of the premium subsidy to be borne by them. Many states have demanded their share of subsidy be capped at 30%.

The ministry earlier informed the committee that no penalty had been imposed on any state government, even though as per the revised guidelines of 2018-19 state are required to pay interest at 12% for delay in release of its share of subsidy beyond three months of prescribed cut off date.The ministry earlier informed the committee that no penalty had been imposed on any state government, even though as per the revised guidelines of 2018-19 state are required to pay interest at 12% for delay in release of its share of subsidy beyond three months of prescribed cut off date.

By Prabhudatta Mishra

Insurers are often blamed for delayed release of crop insurance amounts to farmers, but the fault also seems to lie with the state governments which default on paying their share of the subsidy on premium.

According to data gathered by FE, claims worth `2,287 crore remained unpaid to farmers as on August 16 under the Pradhan Mantri Fasal Bima Yojana (PMFBY), but states were yet to release their premium share of `1,879 crore. Gujarat, Telangana and Jharkhand were the largest defaulters, making up for over 90% of the dues.

Also, most of the states are yet to finalise last season’s yield data, the key parameter to endorse farmers’ claims, even as this year’s summer harvest has started tricking in.

Considering that as many as over 80% of crop insurance beneficiaries are small and marginal farmers having less than 2 hectares, such delays in payment of premium subsidy and piling up of claims require immediate policy action, analysts said. Ironically, the parliamentary standing committee on agriculture recently suggested that provisions under the scheme guidelines to penalise defaulting states be done away with.

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. For the north-east region, the share of subsidy is 90:10 between the Centre and state.

According the committee’s report tabled in Parliament on August 10, the agriculture ministry has been advised to return the premium paid by farmers with interest within a fixed time-frame “since delay in settlement of claims defeat the very purpose of the scheme and farmers ultimately suffer”.

The committee also said it was convinced of the reasons cited for the delay in claims settlement by insurers and recommended that the ministry “suitably modify” the guidelines that prescribe states delaying the release of subsidy beyond stipulated timelines can’t participate in upcoming seasons. The modification is needed “so that states do not withdraw from the scheme”, it said.

The ministry earlier informed the committee that no penalty had been imposed on any state government, even though as per the revised guidelines of 2018-19 state are required to pay interest at 12% for delay in release of its share of subsidy beyond three months of prescribed cut off date.

The Andhra Pradesh government in May had paid `1,820 crore to over 15 lakh farmers, who suffered crop loss in kharif 2020, under the YSR Free Crop Insurance scheme. Andhra Pradesh is one of the six states that quit the PMFBY scheme and do not have any pending liability of premium subsidy.

Gujarat, Telangana, Jharkhand, West Bengal and Bihar also exited the scheme, citing the cost of the premium subsidy to be borne by them. Many states have demanded their share of subsidy be capped at 30%.

The Union government last month informed Parliament that it did not have any plan to take over the entire amount of premium subsidy as states have a major role in implementation of the scheme, including selection of crops, areas, risks and insurance companies.

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