The defaults in settlement of crop insurance claims by states under the highly subsidised Pradhan Mantri Fasal Bima Yojana (PMFBY) has exceeded Rs 6,450 crore in the five years through FY25, the agriculture ministry told Parliament on Friday.
Andhra Pradesh (Rs 2565 crore), Rajasthan (Rs 1525 crore), Madhya Pradesh (Rs 1468 crore), Tamil Nadu (Rs 124 crore) and Uttar Pradesh (Rs 121 crore) have been the major defaulter.
Escrow accounts and tech mandates
To reduce delays in claim settlement, the ministry has made it mandatory for states to open escrow accounts for deposit of their premium share in advance from the current kharif season (2025-26).
In addition, the ministry has made a provision of a 12% penalty on delay in payment of claims by insurance companies, which is automatically calculated on the national crop insurance portal.
For ensuring robust crop yield assessment, the ministry has asked states to ensure at least 50% weightage is given to yield derived by Yes-Tech, a technology-based crop yield estimates system.
“Delinking of central government share of premium subsidy from that of state governments has been implemented so that farmers can get proportionate claims relating to the Central Government share,” according to an official note.
Farmer participation rises
Under PMFBY aims at providing comprehensive risk coverage from pre-sowing to post-harvest stages of crops, farmers pay a fixed premium of 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 with the exception of north-eastern states where the premium is split in a 9:1 ratio between the Centre and states.
Currently crop insurance is being implemented across 23 states and union territories. In terms of premium payment, the Centre, states and farmers have had a share of 40%, 48% and 12% respectively since the launch of the scheme.
Meanwhile, the number of farmers enrolled has increased from 3.17 crore in 2022-23 to 4.19 crore in 2024-25, an increase of 32%.
“The number of farmers enrolled in 2024-25 under the scheme is at its highest since inception of the scheme,” according to an official statement.
Out of the total farmers enrolled under PMFBY in 2024-25, 6.5%, 17.6% and 48% are tenant, marginal and loanee farmers categories respectively.
Over Rs 1.78 lakh crore has been paid to farmers under PMFBY between its 2016 launch and FY24 as compensation which was five times of total premiums of Rs 35,666 crore paid by them under the scheme.
“For every Rs 100 of premium paid by the farmers, they have received nearly Rs 500 as claims,” according to an official note.
The bulk of the financial burden of the insurance cover is borne by the state and central government.
Over 100 crops notified the crop insurance covers incidents including inundation, landslide, cyclone, hailstorm, drought and post-harvest losses.
Currently fourteen out of the 20 empanelled insurance companies, both in the public and private sector are implementing the scheme. The centre has incurred Rs 15,864 crore under PMFBY as per the revised estimate of FY25.