The Centre's expenditure on subsidising the premium paid by farmers for crop insurance will likely see a 125% jump to Rs 7,000 crore in the next financial year...
The Centre’s expenditure on subsidising the premium paid by farmers for crop insurance will likely see a 125% jump to Rs 7,000 crore in the next financial year, thanks to the newly launched crop insurance programme, the Pradhan Mantri Fasal Bima Yojana (PMFBY). A steeper hike in allocation under PMFBY would be seen in 2017-18 as it would take a few months to put in place the requisite infrastructure for assessment of crop losses before rolling out the programme on a pan-India basis.
Under PMFBY, the premia paid by farmers would be capped at 2% of the insured value for the more rain-dependent kharif crop and 1.5% for the rabi season, compared with 3.5-8% under the two existing schemes. In the case of horticultural crops, farmers’ premium burden will be 5% of the sum assured or 50% of the total premium.
Sources told FE that while the estimated cost to the government to run the crop insurance scheme is Rs 3,100 crore for FY16, the allocation would need to be much higher under PMFBY next year as the scheme not only would bring more farmers under its ambit but also entail higher subsidises per premium value.
“With the premium falling to as low as 1.5% of the sum insured under the PMFBY in the rabi season, farmers would be hugely interested in opting for the new crop insurance scheme,” said T Haque, former chairman, Commission for Agricultural Costs and Prices.
Only 20 million of an estimated 140 million farmers in the country — earning for a population four to five times as many — had crop insurance cover in 2014-15, even as the facility was just against the cost of cultivation and barely provided any income protection. According to agriculture ministry data, most of the farmers who took crop insurance were in Rajasthan, Bihar, Uttar Pradesh, Maharashtra, Karnataka and Andhra Pradesh. In terms of the value of the farm output, the current schemes — the Modified National Agricultural Insurance Scheme and the Weather-based Crop Insurance Scheme — fare even more dismally, with a coverage of just 5.5%.
The new scheme, sources said, would ensure that farmers get the full sum insured without any reduction or hassles from the 11 designated insurance companies if natural calamities ravage their crops. Also, the crop insurance coverage would rise from 45 million hectares or 23% of the area under cultivation now to 50% of the crop area by FY19.
The cost of the premium subsidy will be shared equally between the Centre and states.
Another benefit to farmers is that losses incurred by them at any stage of the farming activity — from the sowing to the post-harvest season ? would be covered under the new scheme. Currently, only post-harvest losses can be offset by the insurance facility under the two existing schemes. Also, even those farmers who haven’t taken bank loans will be eligible for insurance cover under PMFBY.
For dealing with delays in settlement of compensation, the new crop insurance policy proposes immediate payment of 25% of the sum insured to farmers for crop damage and use of latest technologies ? drones, smartphones, mobile apps and satellite imaginary ? to assess crop damage in the shortest possible time.
Currently, the government-owned Agriculture Insurance Company of India (AICI) and 10 other private sector companies offer crop insurance products to farmers. AICI has the largest share of the market at 65%. The new scheme would cover tenancy farmers who take up farming in land not owned by them. The Centre would ask the state government to provide tenancy certificates to eligible farmers.